3 Reasons for Early-Stage Companies to Prepare Their IP

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Managing Intellectual property (IP) is not only confusing if you are a new company, but can also be intimidating. You have ideas in front of you, but how do you know what is patentable? Should you just defensively publish? Trademark or copyright? If you are going to succeed and move forward, then you must pay attention and address these questions.

Why? Because the sooner you, as an early-stage company, address IP-related matters, the better prepared you will be when potential investors show interest. Don’t wait until a capital partner is knocking at your door – it’s too late then, you won’t have time to pull it together and the investor will turn away from an unprepared company.

Capital providers look for companies who have strong IP assets because that is where the true value often lies. You are asking capital partners to take a risk on your start-up. Mitigate that risk and become more a more attractive investment by showing them you have established and protected IP. To potential investors, patents are a signal of quality that facilitates access to financing and helps startups overcome the liabilities of newness (Haeussler et. al.).

If you are an early-stage business, wondering whether it is worth your time to get your IP in order, consider the following:

Over 80% of your value can be in your IP. Most businesses have over 80% value in their IP (Juetten 6) and startup companies have even more: approximately 90% of an emerging business’ value is in its intellectual property.

Solid IP can weaken or exclude competition. Everything from copyrights, trademarks, patents, and trade secrets are considered intangible assets. All businesses need to protect their IP, especially early-stage companies. This will help weaken or exclude your competition.

Established and protected IP attracts investors. Capital providers perform a significant amount of due diligence when considering investing in an early-stage company. They want to make sure you own your IP and have freedom to operate in your market without the risk of litigation.

Protecting your intellectual property, sooner rather than later, increases your visibility and attractiveness to potential funders.

Haeussler, Carolin, et al. “To Be Financed or Not…The Role of Patents for Venture Capital Financing”. Discussion Paper No. 253. Governance and the Efficiency of Economic Systems (GESY). 2009. Web. October 12, 2015. http://www.sfbtr15.de/uploads/media/253.pdf.

Juetten, Mary. “IP 101: Why Startups should Care about IP from Day One”. Presentation. Phoenix StartupWeek. Web. October 12, 2015. http://www.slideshare.net/Traklight/345pmfeb26ip101mary-juettenaxosoft.