Tell a good IP story and investors are interested in funding your start-up. Tell them the same old “we've got a great product and no competition” and they'll probably walk away.
Your intellectual property is directly linked to the future success and revenues of your start-up. You've got little or no revenue, large research and development expenses, and few tangible assets. Your start-ups' primary and most valuable asset is its IP –patents, trade secrets, trademarks, or copyrights. It's also an asset that can whether market disturbances and hold its value, unlike physical assets which can quickly lose their value. In fact, the value of your IP increases over time, depending on its market appeal and the strategies you implement to leverage its value, such as licensing.
IP is also the difference between success and failure in raising more capital. The importance of IP to startup funding is supported by a recent white paper from the World Intellectual Property Organization (“WIPO”). Its findings concluded that IP is now an essential element in obtaining venture funding. Most sophisticated investors simply don't invest unless they see a uniquely valuable opportunity. Start-ups with protected IP are more likely to maintain a sustainable competitive advantage, reduce financial risks, and raise outside funding.
Your IP story tells why IP is integral to your business strategy, and how it's used to capitalize on your market opportunities. It tells investors how you'll maximize their investment by strategically managing and using your IP. More importantly, it tells investors why your IP sets your start-up apart from the competition, and the specific actions you'll take to make sure your IP assets are managed to their full money-making potential.
Telling your IP story builds confidence with investors. Your IP story must show investors how your intellectual property is aligned with your business strategy, and how you'll use it to grow and expand, such as:
- Giving your start-up a unique competitive advantage to secure a market and gain significant market share;
- Generating significant licensing revenue, both within your primary markets and in ancillary markets;
- Gaining a stronger negotiating position and better contracts with suppliers, customers, and partners.
Before you can tell your IP story, you must know what you have, otherwise, you wind up telling only part of the story. It's not just patents, trademarks, and copyrights. Your IP assets go well beyond the technology that gets baked into your products to include branding, know-how, trade secrets, and more. Sometimes these other parts are more valuable than your core IP. One example is GE's patented diamond processing technology. The most valuable part was the production process trade secrets, in which GE continued to get companies interested in licensing it long after the patents expired.
The best way to figure out all your IP assets is through an IP Audit. It's basically an inventory of your IP, but it's also a critical management tool to help you manage and use your IP to its full potential (click here to get the special report on how to do an IP Audit).
Today's investors are looking for start-ups with a compelling IP story. They want to know where your IP fits into the market relative to existing and potential competitors. More important they want to know how you'll leverage it to get them the highest return on their investment. But if you're not telling your IP story as part of your start-up story, you're likely flying under the investor radar.
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.