Today (30/7/2018) I attended the Annual General Meeting of RedstoneConnect Plc (REDS) which was promptly renamed Smartspace Software Plc at the meeting.
Although there were only a few ordinary shareholders present, this proved to be an informative meeting. It was chaired by new Chairman Guy van Zwanenberg. With former CEO Mark Braund having departed recently after major disposals leaving the company to focus on the remaining software business, the new CEO is Frank Beechinor who was the former Chairman. Frank is also Chairman of DotDigital which I also own shares in (a lot more than in RedstoneConnect which has had a mixed history – the focus on software alone makes it more attractive to me and I fully supported the disposals).
I asked whether Frank’s appointment was a permanent one. The answer was effectively “yes” as he is committed to it for 2 or 3 years. This is despite the fact that he promised his wife that he would not take another full-time job back in 2011 (he is only aged 54 according to Companies House though). He is apparently involved with 5 businesses and is stepping back from 3 of them, but remaining Chairman of DotDigital. He hopes to develop the company into a business with a market cap of £300 to £400 million in a few years.
The disposals meant the company now has substantial cash after paying off some debt but they are clearly not going to use it on share buy-backs in the short term. They are looking for acquisitions and would only return cash to shareholders if they don’t use it within the next couple of years. Acquisition will be focused on three areas: 1) Complementary to existing activities where they may pay 1 to 1.5 times revenue; 2) Analytics and 3) Visitor management solutions where their existing offering is quite weak. At present they have too large a focus on big deals (which can be lumpy) and are keen to move into the low-end, entry-level where sales can be automated web-based ones.
They have reduced staff down from 360 to 67 and now only have three buildings – in Luton, Mildenhall and Bristol with no “head office”. There are no overseas offices and they are likely to use partners to expand there.
It’s difficult to determine likely financial forecasts (Cantor have recently issued a positive note on them) – it rather depends on the success of any acquisitions, how much they pay for them, and controlling the overheads. But there are apparently no tax issues from the disposals.
The New Name
I spoke to Frank Beechinor before the AGM and advised him that I thought the new name was a bad choice. This is because I did a search of the UK/Euro trade mark register and found over 500 possible conflicting registrations – although some may be in different “classes” of goods and can be ignored. If you also use Google to search the internet for “smartspace” there are lots of matches. There is even a company listed at Companies House named “Smartspace Software Ltd”. So I think it is very likely they will get a lawyer’s letter sooner or later asking them to desist from trade mark infringement and even registering the change of name at Companies House might be difficult. Here’s a quick lesson in branding and trade mark law taken from my book “Beware the Zombies” (currently under revision):
Brand names for products or companies should be unique What are the key things to remember when inventing a new name? These are:
- It should be memorable.
- It should have the right, positive connotations with the product/service.
- It should be legally capable of being protected by appropriate trademark registrations.
- It should be usable as an Internet domain name in the chosen form(s).
- It should be unique, original, and not confusing with any existing trademark or brand name, and particularly not with competing or potentially competitive products.
A product or company name that cannot be registered as a trademark should never be considered. Registration of trademarks is relatively low cost and gives you much stronger legal protection (and easier enforcement of your legal rights) than an unregistered mark. Even more to the point, if you infringe someone else’s mark they can pursue a very simple and low cost legal action to force you to stop using the name – the result being that all your web site, sales literature, etc, will need revising and reissuing.
You should apply to register trademarks in all the main legal jurisdictions in which you are likely to trade. There are some differences between the different jurisdictions as to what is legally possible to register, and also as to what would be seen as a conflict with existing registrations, but the following is a good starting point:
- Do not use a purely descriptive or superlative mark.
- Make sure it is unique, distinctive and is not similar, even phonetically, with existing registered marks. You can search the main trademark registers on-line to do some basic checking.
- Try to think up something new and original, which is more difficult than you may imagine. Anyone new to the game of brand name creation tends to come up with the same old names that have already been thought of and previously used. Like “Smartspace”!
- Note that you can sometimes take a name that is already in use on other types of goods (trademark registers are based around “classes” of goods). But you need to take care with names that are in widespread use on more than one type of product.
- Do not fall in love with your chosen name before you have had it thoroughly researched by a trademark lawyer.
So often I have seen start-up ventures select a name which they think is original—but often it is some half-remembered echo of an existing product name or has been used before because it is so obviously appropriate. They name the business after it, start using it in sales literature and with prospective customers, and yet it turns out to be legally very questionable. You need to come up with several possible names before you go through the full legal search and registration procedure.
You probably also need to check that the chosen name is not already in use as an unregistered trademark (searching the internet can help here) and is not already in use as a corporate name (you can search company name registers also).
One of the big issues is that you will also want to protect the product name as a domain name on the internet, under the “.com” suffix, under any of the common national suffixes such as “.co.uk”, and also possibly with other newer suffixes as “.biz”. Finding a name that is free in all those domains and the relevant trademark registers and is not already in use as an unregistered trademark or corporate name is exceedingly difficult! Note that www.smart-space.com is already in use by another business so endless confusion will undoubtedly result.
Finally don’t start using a new trademark until you are sure it can be registered and is protectable. Having to change the name after a few months of usage will destroy your investment in marketing, product literature, web site design and other activities.
The resolution to change the name of RedstoneConnect to Smartspace Software was of course voted through. The directors said they had committed to change the name and had consulted legal advisors on it and might consider changing it again if necessary. I had offered some advice on the subject from my past experience in this field of inventing and registering marks but it was too late to reconsider in essence.
When I look at investing in small listed or unlisted companies, this is one area I look at because it tells you whether they have got the basics right. Hence my comments on “GB Group” naming in a previous post, and my dislike of “Tungsten” for the name of another AIM company. Unmemorable and unprotectable in both cases.
Registered trade marks are low cost and important to ensure brand recognition and legal protection but few people realize how important they are. The importance of branding is another very key area on which many books have been written but technology companies are often inept in this area.
So I just hope the directors of Smartspace Software have not fallen in love with the new name, or if they do choose to change it again that they do it properly next time.
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )