‘Will you be addressing a meaningful problem?’
‘Is your business model financially sustainable?’
‘Have you developed a unique value proposition?’
‘Is your concept scalable?’
These are among the most common questions encountered by entrepreneurs seeking to persuade investors of their business’s market fit and long-term sustainability.
However, many entrepreneurs often forget to prepare for another routine and fundamental line of inquiry from prospective investors: Have you secured your IP assets? Is your product or service proprietary? What prevents competitors from replicating your offering?
Will an investor even look your way?
The process of developing an idea into a successful business is complex, challenging and expensive. It’s unsurprising that all serious venture capitalists understand the importance of IP in valuing a business. Indeed, businesses that boast the appropriate IP protections are more likely to maintain a competitive advantage and less likely to attract risk. Investors already inherently accept a great deal of risk funding startups – particularly in light of the fact that 90% of startups fail according to Fortune.
Show investors that ‘you got this’.
Venture capitalists don’t want to miss out on investing in what could be a lucrative business, but they need to have confidence that the investment is worthwhile at the outset. As an entrepreneur, you can increase their chances of a strong return on investment by demonstrating you have reinforced the overall distinctiveness of your brand (e.g. registering trade marks), considered additional revenue streams (e.g. licensing your technology) and prevented competitors from replicating your unique offering (e.g. obtaining a patent).
Seek legal protection for your intellectual property early, and you’ll considerably increase your chances of raising outside venture capital. In fact, a Berkeley study revealed that although only 40% of startups held patents, 80% of those that received investment deals owned patents.
Oops, I’m already knee-deep in my business and I haven’t protected any of my IP!
Of course, all is not lost if you didn’t consider protecting your IP when you embarked on your start up journey: it’s never too late to shore up your IP. Keep in mind however that you’re competing with other start ups that have registered their IP at the outset, and neglecting to do so yourself will reduce your business’s bargaining power and potentially deter investors from buying in altogether.
Securing your IP not only protects the company from the many uncertainties of a dynamic and global marketplace, but by extension, protects the investments made by prospective investors. As you prepare to raise funds, ensure you maximise your company’s value and appeal by securing and protecting your IP assets early on.
With a 2015 report by Ocean Tomo establishing that intellectual property can constitute more than 80% of a single company’s value, formally protected IP will continue to be a significant consideration when the question is posed: ‘How attractive is your business?’
We advise start ups and established businesses alike on aspects of their intellectual property that should be strategically protected. Contact us to talk more about your business’s needs.