How Startups Can Position Their IP Portfolios to Attract Investors

When startups seek investment, discussions often center on market size, traction, or revenue models. Intellectual property (IP) typically is much lower on the agenda. But this is a mistake; a robust IP strategy can boost valuation and reassure investors that your products and services are unique, defensible, and valuable. And beyond the negotiating table, strong IP can help you carve out a market niche and maintain your competitive edge. By clearly articulating how your IP assets fit into your industry’s landscape and underpin your business goals, you can increase their perceived value in the eyes of potential investors.

Identify which types of IP you have

Startups typically have more than one type of IP protection covering their assets, including patents, trademarks, copyrights, and/or trade secrets. Investors will want to know about all forms of IP you own and how those assets cover your core products and services. Keep detailed records of granted rights and pending applications, along with all relevant ownership documentation (more on that below). You can enhance your credibility with investors by demonstrating a firm grasp of the IP assets within your portfolio, their status, their scope, and their potential limitations.

Balance quality and quantity 

High-quality patents and trade secrets are essential for protecting the core features of your products and services, but a large number of IP assets can provide a wider scope of coverage. A well-rounded portfolio signals to investors that you take a comprehensive approach to protect your innovations. A single issued patent cannot always cover your evolving technology, but a patent family pending at the patent office can give your startup flexibility and protection as you continue to innovate. Investors look favorably on startups with layers of patent protection, including both broad and narrowly tailored claims protecting the innovation. They also tend to look favorably on startups with portfolios that include multiple types of IP protection — such as a combination of patents, trademarks, and trade secrets — thus ensuring broader market coverage.

Think globally

Because IP rights are territorial, expanding into Europe, Asia, or other regions requires a strategic filing plan for each market. But building an international patent portfolio can be prohibitively expensive for startups. The best approach is to focus on key markets that align with your business strategy and growth potential. Demonstrating that you’ve carefully selected regions for protection and enforcement will reassure investors of your global growth strategy while ensuring efficient resource allocation. 

Nail down ownership and assignments 

By default, patents belong to the inventors named in them. To make sure that your company – not your employees – owns the IP assets, verify that IP has been properly assigned to the company. The technical details of your innovation may be over the heads of potential investors, but they will certainly understand the importance of a clear chain of title. The due diligence process for investment requires investors to scrutinize your IP’s ownership, and any uncertainties or disputes can lower investor confidence. Common chain of title issues that might arise include missing or improperly drafted assignment agreements, conflicting claims of ownership, and gaps in transfer documentation. You can avoid these issues by properly assigning and recording your IP rights.

Emphasize freedom to operate  

Patents give their owners the right to exclude others from the inventions claimed in them; they are not necessarily a green light to begin making, using, selling, and importing those inventions. That’s why you should complete a freedom to operate (FTO) analysis that can identify potential blocking patents and other risks prior to seeking investment. An FTO analysis shows investors that you’ve done your due diligence to identify potential legal hurdles and minimize the risk of patent infringement suits. Similarly, conducting a patent landscape analysis can provide a bird’s-eye view of the market and help you identify areas for growth.

Plan for enforcement and defense

Patents give their owners the right to exclude others. Accordingly, you should have procedures in place to monitor your competitors’ activities (including patent filings) and a plan to assert your patents against infringers if necessary. This shows investors that you are prepared to defend your assets and safeguard your market niche.

Align IP with your business strategy

Seeking IP protection is not only a legal necessity in staking your claim in the market; it also supports your company’s business plans. When seeking investment, highlight how your IP assets fit into your larger business strategy, including product timelines, fundraising efforts, expansion into new markets, and licensing opportunities. Investors are more likely to support a company that can demonstrate a connection between its IP assets and its long-term goals. When choosing investment partners, also consider whether their values align with yours and whether they are likely to support your mission.

Bottom line

A defensible, well-structured IP portfolio will help you stand out from the crowd. Not only can it secure your competitive edge, it can also boost your credibility and perceived value in the eyes of investors. While developing an IP portfolio often requires a great deal of time and expense, it can pay off later by opening the door to more lucrative investments, partnerships, and mergers or acquisitions.