Protecting IP Early in Company’s Formation Could Influence A Company’s Ability to Attract Investment

If a startup company wants to become an established, successful business, the company needs to carefully manage all of its resources, both tangible and intangible, in the same manner as an established, successful business – focusing meticulously on maximizing the return on every expenditure. If the company is founded on proprietary technology, carefully planning an intellectual property (IP) strategy as part of the business plan is critical. A well-managed and organized IP portfolio is attractive to potential investors at all stages of a business’s development and can be used to secure financing.

IP rights are commercially valuable business assets that early-stage businesses should seriously consider investing in to remain competitive in the marketplace, and viable with investors. Taking proactive steps to secure these rights and build an IP portfolio will provide significant benefit to the company by increasing the value and credibility of the company, while gaining a competitive advantage over other companies in the field. The advice of an experienced IP attorney is a key strategic asset to an early-stage company during the development of an IP portfolio. Although some early-stage companies may view hiring a patent attorney as prohibitively expensive, the quality of your IP rights will impact your business valuation and ability to obtain funding.

A good IP strategy allows the business to recognize the IP assets it owns and provides a strategy to protect, optimize and monetize these assets. For example, the addition of a patent, or patent application, to an early-stage company’s IP portfolio makes the company an eye-catching investment opportunity to investors. Pending patent applications can also be used by investors to assess whether the early-stage company will effectively be able to deter potential competition and can distinguish that company from other less confident business ventures. Although IP is certainly not a requirement, some investors will not even consider an early-stage company that lacks protection for its IP portfolio.

When it comes to seeking investment from outside sources, investors start to obtain the basics about your company through your business plan. The business plan contains all of the relevant details about your business and one of the most beneficial aspects of a business plan is the incorporation of an IP strategy. Companies often do not even realize that they develop IP in the normal course of business, such as logos, taglines, customer lists, IP domains, formulas, and algorithms. It should also be noted that not all IP assets require an investment of money, such as the initial establishment of trademarks, trade secrets and copyrights. Knowing what to protect and when, can both save money and strengthen your IP portfolio. Specifically, your business plan should identify any IP assets that the company already possesses, or is in the process of procuring, and should indicate the status of each IP asset in the company’s portfolio. A thorough understanding of what IP assets are owned by the company and implementing practices and procedures to keep these assets safe will signal to investors that you are on top of your IP, and that any potential investment will, at least in part, be protected by your IP.

Your IP strategy may also include due diligence of your competitors’ IP assets. This is also valuable to potential investors, as they will want to know the research you have done on your competitors’ IP strategies and portfolios, and how you plan to keep up-to-date on developments.

In conclusion, companies need to carefully plan their IP strategy as well as their business strategy at the early stages of development. While an early-stage company may not have sufficient funding to achieve everything that they would like to at the early stage of development, there are some aspects of the IP strategy that do not cost any money, and only require organization and focus.



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