IP strategy for early-stage startups to increase growth

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It was recently announced that total venture capital (VC) funding for London’s tech companies rose by an unprecedented 87% last year to reach $9.7bn, over double that raised in Berlin and triple that raised in Paris. 

The UK is now the fastest growing tech ecosystem in Europe, and the UK tech sector recently overtook the US for foreign investment per capita. The surge was primarily fuelled by investments in fin-tech, AI and clean energy.

While this will no doubt be good news to many readers, in such fast-growing sectors, establishing a carefully thought out and commercially sensitive intellectual property (IP) strategy is key. Not only will this avoid costly mistakes occurring down the line (often only being spotted at the 11th hour before a deal or investment is about to go through), but an effective IP strategy should add value to a business and help drive revenue – whether it be through locking in supply chains or keeping competitors ‘off the grass’.

Startups should be developing an IP strategy from the outset – but that doesn’t have to be costly

At Mathys & Squire LLP we work with businesses of all sizes, from the smallest of startups to the largest of multinationals. Over the years, we have helped build IP portfolios for companies that we have seen make the transition from startup to SME and beyond, and have frequently received testimonials from those clients telling us that the IP portfolios that we helped to build for them were a large driver in the value of investment or sale that was achieved for their business.

Developing an IP strategy from the outset doesn’t have to be expensive. We know from our experience of working with startups that cash is tight, and quite often it can be hard to justify spending money on patent applications before any seed investment has been raised, for example.

However, developing an IP strategy at an early stage can be as simple as identifying aspects of the business/technology that are being developed and assessing, commercially, how important they are to the business (in effect, how they relate to the business’ ‘USP’). Once we have performed this exercise, the outcome may be as simple as “we want to keep this stuff secret until we have raised sufficient investment to file a patent application” and/or “we are happy to tell other people about this aspect of our business now to generate interest and to secure investment, but want to keep this bit secret”.

Often, many startups are caught in the dilemma of what to keep secret and what to tell investors/the wider world – scared of giving everything away, but excited to tell the wider world what they are working on. By having a carefully thought out plan, these competing interests can be balanced to help ensure that a startup’s key assets in the form of IP are not lost by inadvertent disclosure in an attempt to raise investment and get the business off the ground. Trying to fix these problems later down the line - such as after some early success and/or when further investors come on board - when the horse has already bolted, can instead prove far more costly than if a conscious decision regarding an IP strategy had been made from the outset.

Investors will want to see a coherent IP strategy in place before investing

By developing a coherent IP strategy from the beginning, investors can be reassured that the management team has made conscious decisions about where the business is going and can feel confident that the investment that they are going to make remains secure. They will also understand if you can explain how their investment is going to be used to further build and expand on your IP portfolio – they like to see where their money will be going and why. No investor is going to want to invest in a business if the key IP for the business has been given away.

A commercially sensitive IP strategy adds value and increases investment

The figures above relating to VC investment in London’s tech sector are fantastic news, indeed. However, for many of the businesses involved, a key driver of the value of the investment (and in turn, the value of their business) will be their IP. An important distinction here is that the IP has to be commercially-relevant. If the IP (for example, in the form of patents) is commercially focussed, it can provide much more ‘bang for its buck’. It can be tailored to perform many different functions – whether that be locking-in a supply chain, or simply keeping competitors ‘off the grass’. Many startups we work with are surprised at how strategically IP, and in particular patents, can be used to help achieve commercial objectives for their businesses.

The team at Mathys & Squire has years of real-world, commercial experience in creating such IP strategies and can really help to increase the growth and value of such businesses by making their IP work harder for them.