Many late-stage startups and tech firms with new product line ups are often caught up thinking how to raise funds for their business. While post-pandemic world has seen a surge in new Techpreneurs, the competition has also become immensely sophisticated. So much so that raising capital and attracting venture capitalists (VCs) has become an artform. The technology and circular economy industries need not just rely on traditional returns and assets but on defining uniquely valuable opportunities of tomorrow; today.
At Nicomedia IP Legal Associates our team of expert legal counsels work with multi-industry firms and capital investors. The following will describe key takeaways from the industry specialists on what makes a good IP strategy .
“While investors are always looking for business value propositions and quinquennial returns for an early-stage SME it is the late stage and established firms that have it difficult because investors already know a lot about your reputation and wants to see more.“
How to craft an IP Strategy?
Any serious VC firm or a seasoned investor understands that future of businesses is intangible assets. The sheer importance of intellectual property rights as a term investment is a key peg in valuing a business and firms that recognize their IP value are en route to maintaining a sustainable competitive advantage.
While investors are always looking for business value propositions and quinquennial returns for an early-stage SME it is the late stage and established firms that have it difficult because investors already know a lot about your reputation and wants to see more. Therefore, a late-stage investor particularly is keen on monetising on your existing business values from unique innovations and creative verticals so that they can keep their investment secure.
From our experience, they typically assess an IP using the following criteria’s:
1. Risk Frameworks:
Before describing your IP strategy, an investor seeks to study how will you enact infringement protections on your existing innovations, inventions, and brand utilities such a patent, trademark etc. Therefore, any VC firm or funding partners wants to know how are you managing risks on existing portfolios; so, they can capitalise on it.
For example, is you market development plan based off on circumferencing, that is legally suing competitors and brands that copy you to own the market? Or will your IP strategy be built on expansion by strategic partnerships, patent pooling and licensing your IP to other companies?
Secondly, an investor is extremely interested in who is on your team to mitigate these IP risks. Do you have a competitive and reputable team of counsels to execute your IP strategy or a team of IPR litigants who can scrutinise proceedings, advancements and support you in litigation context.
Finally, in order to manage risks the internationalisation of your brand matters. How do you hedge those? A VC and an investor need to be assured about your international rights and how your brand is relevant and better than foreign markets. Can you brand meet competitive benchmarks or would it get consumed by foreign players. You will have to prove them that your innovations or inventions meets the IP risk security parameters to safeguard your firm and their investments in foreign markets.
2. Market Fitment:
What makes a great IP strategy is knowing that intangible assets are independent to your regular business operations. In our experience, It is the only investment that works even when you are out of business or cross-selling your business rights. A seasoned investors therefore is keen to understand what makes your IP strategy a right fit? Is your brand IP the right asset to your investor’s capital growth needs, even when your traditional ROIs get diluted? Why is your firm viable to existing markets and superior to future competitions?
“What makes a great IP strategy is knowing that intangible assets are independent to your regular business operations.”
Questions such as these are more important to financiers that can define future of their capital .For example, what is the ratio of copyrights to trade dress for your FMCG category? Or will the strategic partnerships in your patent pools last for 5years?
Secondly, a sound IP strategy defines mechanisms of leverage, in case of accusation of infringements. Often shrewd competitors or unfair practices activists accuse brands of wrong to malign their products or innovations. Therefore, a secure IP strategy is one that not just grants your brand protection from bad PR but also create opportunities to scale up your intangible assets against the tangible ones in face of ill-repute.
For example, cross-license is great mechanism that enhances value, creates knowledge transfer for your brand to gain competitive access while simultaneously avoid cross-litigation.
Hence, VC firms and investors want to know where your IP strategy fits in dynamics of worst-case market scenarios. Does your brand have a plan to leverage your IP in the face of a competition.
3. Corporate Governance Policies:
It is on the inside that counts, something that is relevant even with IP strategy financing. While it is critical for you to own your IP and brand rights, but to attract capital for your business the IP strategy must accommodate existing contractual obligations of your firm such as ESOPs with employees, procurement of third-party technology or inventors in-residence. According to expert counsels at Nicomedia IP, this makes your IP framework more transparent and helps define your financing needs better.
- Corporate Policies:
Secondly, internal documentation and dossier processes must be backed by set of well-defined protocols and firm policies. In our experience, these document procedures and policies on privacy and non-disclosure rights, helps build more credibility for the firm as well as prevent your IP portfolio from any unfair disclosures that can compromise your investors and IP ownerships, in the long-term.
4. Strength of your brand:
An investor is seeking to know the consistency in your brand IP portfolio, what is the strength of your brand rights and how often does your brand succeed or fail in application due diligence. Therefore, it is vital to showcase your IP strategy that strikes an adequate balance between, Filing strength-to- IP Auditing.
“…investors and VC firms are more interested in your IP strategy, if they can clearly see the commitment to scrutiny and due diligence..”
This balance should be comprehensive and should elaborate upon strengths and weakness of your IP application procedures in the past, extensibility of its monetisation and future market returns it would enjoy.
Above all, investors and VC firms are more interested in your IP strategy, if they can clearly see the commitment to scrutiny and due diligence you invest as a company that ultimately builds strength and value of your IP.
Are Ready to Finance Your IP Strategy?
In terms of intangible assets financing, a key difference between un-funded versus well-funded business lies in realistic goals and market-ready strategy. While, in case of a lack of an IP strategy, opportunities of market exposure are not high enough for an un-funded firm, whereas a well- funded firm has high risk of market exposure that can artificially inflate its valuation, exposing your business or invention portfolio to more litigation, hostile takeovers and additional risk mitigation burdens; that pins you to fail sooner or later.
Therefore, before financing your business or invention it is important you build a sound IP strategy that can outlast your business’s lifetime. Because, executing an IP strategy in modern trade world is a key factor in determining your start-up’s overall funding in the future.
If you would like to build a great value for your investors, finance your brand, or create an IP portfolio. Get in touch with us so that our expert legal counsels can enable you to be market-ready.
Book your first-free consultation now.