Building a strong IP portfolio puts you in a better investment position
In this article, Andrew White, Partner and UK & European patent attorney at intellectual property firm, Mathys & Squire discusses how building a strong Intellectual Property (IP) portfolio puts you in a better position to secure business investment when you need it and why linking your IP strategy to your business goals - including investment plans - is crucial for making it all come together effortlessly.
Here’s why a sound IP portfolio will help to impress your investors:
1) IP is often your greatest asset
There’s a reason an investor loves a protected company - because IP has no limits. Unlike physical assets, there’s no fixed value, and this type of intangible asset can increase in value indefinitely. Investing in a startup that has already has its IP protected means that as the company grows, so too does the value of its IP (its brands, designs, innovations, etc.), and that IP can even contribute to its growth by seeing off the competition and ensuring its spot in the marketplace. Legal protection, though costly, can actually add to the profitability of your company.
We’re not saying it’s easy, but once you get a handle on the value of your IP, you can use it just like any other asset you own - including as a tool for securing investment.
2) Your prospective investor knows you’re serious
You can have the greatest idea since Apple invented the iPod... but if you can’t protect it, an investor is not likely to take you seriously. Building a strong IP portfolio puts you in a better position to secure business investment when you need it.
Importantly, linking your IP strategy to your business goals - including investment plans - is crucial for making it all come together effortlessly. If you’ve already taken the time to get your IP, then you’re sending one big message to your future investors: that you take your business seriously and will invest your own time and money.
3) It gives you a competitive edge
If you’re serious about your business, then you need to be serious about your IP. What investors want is solid assurance that your ideas are protected before they sign on the dotted line. If you’re trying to impress an investor, then you need to make your offer as attractive as possible.
A good IP portfolio can help with this by both effectively warning off any competitors and protecting your ideas (and, therefore, your income) and by protecting both your current and future revenue streams. This gives your business a competitive edge however you look at it.
4) Investors know IP equals profits
Recouping the costs of securing your IP should be easy if your idea is sound. Just like other assets, your IP can be sold on, or licensed to, others creating an income stream. Even if you keep them to yourself, the IP will ensure you have a unique offering that other people can’t capitalise on. Either way, securing IP protection is a win-win situation that investors will recognise.
As we’ve said before, matching your IP strategy to your business goals is vital and this includes how you intend to scale your business geographically. If you have plans to conquer the world, make sure your IP protection is global. Clever startups know that protecting their IP in the most important countries early on ensures they have the rights covered for launch. This also means you have the basis to scale up quickly, which is a plus point for any investor.
How do I value my IP?
While patents, copyright, trade marks and designs have no physical characteristics, their value can be immense and should be seen as an asset to the business. Despite this, it’s hard to attribute a specific value to them. An investor may look at how much it cost you to secure those IP assets, how much a competitor may pay to obtain similar assets, and/or the expected future earnings of these assets.
A robust approach needs to be used when undertaking an IP valuation - which can include the business model, the defensibility of the IP, and the data surrounding it. For investment however, you must justify any figure you’ve put on your IP with your rationale. For this reason, it’s often useful to work with an IP advisor to help compile this information accurately.