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Preparing your business for investment, why IP is the key

September 10, 2019, By

Most businesses require third party investment at some point. In fact, the majority of start-ups are “bootstrapped” from inception and this can significantly limit their potential to hire new staff, increase growth or expand into untapped markets. Fortunately, there are people out there with cash to splash who are desperately looking for the next big thing. But, before they sign on the dotted line they’ll want to do their research and satisfy themselves that their money will be well spent.

So, let’s take a moment to put ourselves into the shoes of the investor… they’re probably going to be quite nice shoes so this shouldn’t be an unpleasant experience.

Obviously, you’re going to be looking for a viable business plan, nowadays this rarely means a business which is making an overall profit, but you’ll want something with potential. It will need a viable product, supported by a strong brand. It will need to be properly owned by the entity which wants your money and it will need the ability to offer its customer something nobody else has.

Most businesses will claim to tick all of these boxes but there’s only one thing that can turn this claim into a fact, and that’s intellectual property.

IP is your greatest commercial asset, it’s widely accepted to make up 80% of a company’s value and for good reason. IP is the legal basis on which your product can be defined, whether it’s the inventive step in a patent, the unique copyright in software code, the novel shape of your design or the confidential recipe of your secret sauce. But IP needs work, some rights need to be registered in order to properly exist whilst others need to be properly managed in order to be enforceable. And, even if your particular product isn’t unique, your brand almost certainly will be. Protecting this with a trade mark registration is a must and exactly the kind of thing that can be show to an investor as clear and unequivocal proof of ownership (I’m not just saying this but the certificates look lovely).

Correct possession is also vital, one of the most frequent mistakes made by start-ups is to assume that everything they pay for is theirs, in fact, areas such as copyright law pay very little attention to this theory. Freelancers and contractors often create original works under instruction but, without a written copyright assignment they can still assert rights over the work for many years to come. This is exactly the kind of thing that investors worry about and it’s a sure-fire way of putting a serious dent in even the most conservative of valuations.

Fortunately, with proper management and advice, protecting your IP doesn’t have to be difficult, or even particularly expensive. In fact, you may even enjoy it.

To speak to one of our intellectual specialists about how best to prepare your business for investment, please email [email protected] or call 020 7288 6003.

Written by Will Miles, Solicitor

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