Investments enable companies to expand, hire new talent, build new production lines, establish fresh distribution channels, conduct more research and development and pursue other opportunities too numerous to list. There is no surprise that investors look at these opportunities as a means to gain a return on their outlay. Companies spend hours networking and polishing a pitch to achieve a nod from an individual or firm that their idea is worth the risk.
An investor will pen a check to a company for many reasons. And even though, by many measures, 80-90% of early-stage company value rests in intangible assets, it is rare that the driving reason behind the investment is a company’s intellectual property (IP).
But as rare as it is for IP to be the basis for an investment, it is always considered. Imagine a real estate investor looking to fund a land development project. Even when the market is robust, the land perfectly positioned and demand high, a fundamental question is, “Do you have a deed to the land?”
Such considerations are especially true with tech companies. Investors look well beyond IP in making their decision to give venture funds but the presence or absence of IP is a heavy factor in whether an investor engages or passes. Failing to address and protect IP is a mistake that can easily sink any investment pitch.
Getting IP Right—Right From the Start
All companies, but startups in particular, must pay attention to IP at the earliest opportunity. They need to know what IP rights are required to succeed and how to secure those rights using a strategy for gaining those objectives.
IP protection comes in many flavors, and each tactic protects a different aspect of products and services.
- Trade secrets find their value in keeping important information confidential.
- Patents protect inventions that are often new technical solutions.
- Copyright and design rights protect original creative content
- Trademarks (and designs) protect and help build your brand.
IP rights gained through these vehicles enable inventors and creators to transform their intellectual outputs into tradeable commercial assets. IP rights create options to negotiate business deals or to prevent third parties from using an invention or creative work without authorization. In that way, they help the business create and maintain a competitive advantage. And a competitive advantage attracts investors.
Having an IP Strategy Is Essential to Success
Investors routinely look at a company’s business plan. They want to work with entrepreneurs who have an IP strategy integrated into that plan and recognize that IP is an investment in the future of the business. Understanding the competition is a big part of this equation.
Investors are looking for an awareness of how a company’s IP strategy fits into the market relative to existing and potential competitors. For example, the pharmaceutical industry is heavily engaged in patent filings. Conversely, software is largely…
