Intellectual property is the lifeblood of your startup. A recent MIT study on the characteristics of successful startups found startups with IP are more successful than those without IP. In particular, it noted that startups wits trademarks’ success is five times higher, and those with patents are 35 times higher.
Other research studies also confirm that startups with IP are more attractive to investors, tend to grow faster, and have more revenue options, higher valuations, and better exit opportunities.
Many of these startups’ strategies focus on managing and making money with their intellectual property. Since your startup has little or no revenues, your IP is the most significant part of your startup value. Investors favor startups with solid IP and a strategy to capitalize on it in many ways. They’re more likely to invest because even if your startup fails, if the IP has value, it can be sold in the marketplace.
You’re spending lots of time creating business plans and presentations to raise capital. But are you answering the three essential investor questions – what is your IP, why it sets you apart, and how does it keep your competitors at bay? Your IP strategy must be aligned with your business goals. More importantly, it must communicate to investors how you will use your IP to grow your startup strategically.
For example, if you’re making and selling a product directly to consumers, is your trademark equally or more important than a patent? Does your patent put up a competitive barrier? Can you license your patent in other ways to generate other revenues?
Suppose you don’t address these questions in your startup strategy. In that case, you wind up moving in a direction that misses a big part of your startup value and, worse, risks being perceived by investors as a commodity provider competing on price.
Please keep in mind investors are looking to maximize their returns. They evaluate whether your startup and its IP assets give an advantage over your competitors and, more importantly, whether it’s a sustainable advantage and scaleable.
Significant investment funds like Blackrock have been moving into the IP funding business in the last ten years. They’re investing in IP assets because the value of these assets can be established. They look for startups with IP assets close to being market ready, which makes investing in it much more attractive and lower risk. One example is a California fitness gadget startup that received $300 million in financing.
It doesn’t matter what type of startup you are – product, service, or technology – your most valuable assets are your intellectual property. Your IP is the most significant part of your startup value. It increases the likelihood of getting funding from investors or lenders because it gives you a sustainable competitive advantage, a greater chance of market success, and higher investor returns. Your long-term profitability and eventual exit from your startup depend on your ability to protect, manage and use it to propel your startup into the marketplace.
Rand Brenner is an IP professional whose passion is helping inventors, startups, and businesses of all sizes use licensing to turn their IP into income-producing products, services, and technologies. His decades of experience run the gamut from medical devices to food technology to consumer products. He’s licensed some of the biggest Hollywood entertainment blockbusters including the Batman Movies (1 and 2), and the number one kid’s action TV show, the Mighty Morphin Power Rangers. Rand speaks about licensing and is a featured speaker at investment conferences, trade shows, colleges, and startup events. His first book, Hidden Wealth: The Money Making Power of Licensing was released in 2019 and is available on Amazon.com. He’s also a published writer with articles appearing in several prestigious trade magazine including The Licensing Journal, Intellectual Property Magazine, and License India. Rand also mentors at the Cal State Fullerton School of Business and Economics and is a judge for their startup business plan competitions.