Your startup is more than just the products or services it sells. Its most valuable assets are intangible assets, primarily in the form of intellectual property.
Your IP is in every part of your startup – from product development to product design, from marketing and sales to manufacturing. And if you’re trying to raise capital, it’s critical to make sure your IP is always due diligence ready.
In this article, we’ll discuss the two key management tools, the IP audit and the IP strategy, that will keep your startup IP due diligence ready.
An IP Audit is an inventory of your IP assets. It includes what they are, their protection status, where and how you’re using them, any legal issues, such as infringement, and action steps to correct any issues. It also includes all documents related to your IP such as work for hire, employment and licensing agreements.
But an IP audit is more than just an inventory. It’s a management tool that not only helps you make sure your rights are secure, it also helps you discover new ways to capitalize on them, and make better strategic decisions when it comes to leveraging them to generate new income opportunities.
In 2014, the UK conducted an IP Audit study of small and mid size business. The results showed over 40% of the companies identified new business opportunities, one-third reported increasing their revenues, and about 20% reported securing new financing as a result of the IP Audit.
A second and just as important tool is an IP strategy. Your IP strategy details how you’ll convert the investment in your IP into profits. There are many ways you can leverage your IP investment. Producing and selling products is one option. Licensing out rights to generate revenues from non-competitive products or markets is a second option. A third option is licensing in or acquiring IP rights to enhance your company’s core IP, product sales or market recognition.
The IP strategy also details how you’re managing your IP assets, such as what your internal procedures are to protect them and make sure they stay intact, as well as how you’ll handle any third-party threats to it, such as infringements or competitors.
Raising capital is the lifeblood of every start-up. Keeping your business IP due diligence ready means you’re prepared for investors when they are considering investing in your startup. Well documented IP assets combined with an effective IP strategy is a signal to investors about the quality of your startup and its management team. IP assets strengthen your likelihood of obtaining financing from investors because they give you a sustainable competitive advantage which translates into higher expected returns. It helps investors determine the value of your startup and the potential ROI on their investment.
But if your IP isn’t organized and inventoried, and you don’t have an IP strategy they can easily review, investors will wind up bypassing your startup in favor of a one that is IP due diligence ready.