What do investors look for in a start-up’s IP assets?

In the dynamic world of start-ups, venture capital or VC funds (discussed in this article) play a key role in supporting innovation and growth. When they evaluate a start-up, one of the key factors they consider is the portfolio of intellectual property assets the start-up owns and the strategic management of the same.

 But what are these investors really looking for when examining a start-up’s IP strategy? Let’s dig deeper to understand their expectations and what drives them to invest.

Protection of Innovations and Attraction of Investments:

First, let us assume that venture capital funds understand the intrinsic value of intellectual property for a start-up. This includes patents, trademarks, copyrights and trade secrets. They know that a sound IP strategy not only protects innovations and brand identity, but can also create a sustainable competitive advantage in the market. When evaluating a start-up, VCs look for signs that demonstrate an awareness of the importance of IP protection.

One of the main objectives of VC funds is to finance start-ups that show significant potential for growth and success in the market. A solid IP strategy is a crucial indicator of this potential. Investors are more inclined to fund start-ups with a solid IP portfolio and a well-delineated Innovation Plan because they are aware that industrial property rights, if the result of sound decisions, almost always lead to a competitive advantage for the target start-up. In addition, a sound IP strategy can attract investment due to the monetisation opportunities offered through licensing or direct sales.

Development of an Organised Intellectual Property Strategy:

Venture capital funds value start-ups that have a clear, well-structured IP strategy. This means identifying innovative assets by listing all the innovations developed by the company, including know-how and brands, and prioritising protection as IP protection can be overly expensive and end up clipping the wings, as well as the cash, of start-ups, especially early-stage ones. A start-up that demonstrates an organised IP strategy also shows a predisposition to manage and protect its key assets without diverting resources from other uses.

Seeking Priority, Freedom Implementation and Risk Mitigation:

Venture capital funds are aware of the legal risks that can arise from a poorly managed IP strategy. Therefore, they look for start-ups that have verified that the IP assets they boast are indeed their own to ensure that they do not infringe the IP rights of others. All too often, start-ups enter the market using – unknowingly – already registered trademarks, with disastrous consequences: the need for rebranding, litigation and reputational damage.

A start-up that demonstrates that it has mitigated legal risks through thorough research on its IP portfolio is more attractive to investors, as this reduces the potential for costly litigation.

Monitoring and Continuous Protection of Intellectual Property:

Another key aspect that VCs take into account is the start-up’s protection strategy for its ‘family jewels’. A virtuous start-up should, within its means, enhance its IP portfolio by actively monitoring and protecting its IP over time. This includes regularly monitoring the market for potential infringements and taking the necessary actions to enforce its rights. A start-up that demonstrates an ongoing commitment to the protection of its IP indicates to investors a level of responsibility and care that is critical to long-term success.

Team Training and Legal Advice:

Finally, venture capital funds value start-ups that understand the importance of IP and have a properly trained and informed team on this topic. In addition, consulting an IP lawyer can help start-ups navigate the complex legal landscape and develop effective IP strategies.

In conclusion, to attract the financial backing of venture capital funds, a start-up needs to demonstrate that it has a sound, organised and well-structured IP strategy. Investors look for signs of awareness of the value of IP, protection of innovations, mitigation of legal risks, continuous monitoring and team training. A start-up that meets these expectations will be more attractive to investors and have a better chance of obtaining the financial backing it needs to grow and succeed in the market.