How do you create an investor-ready intellectual property (IP) approach to help you secure that all-important funding? We asked Charlotte Crowhurst, patent attorney at leading European IP firm, Potter Clarkson.
As businesses focus on growth in the post-pandemic world, innovation is vital. Being able to turn good ideas into a commercial success – at scale – can have a transformational impact on the wider economy. Scientists and engineers have been front and centre in providing solutions to the health crisis, but they will also play an essential role in the economic recovery.
Of course, even the most ground-breaking invention requires investment to become a viable market proposition. Yet, the road to securing funding is not always straightforward or clear, with various hurdles to overcome before winning the trust and backing of investors. Securing funding is fiercely competitive territory, as investors apply a forensic approach to identifying the risks and opportunities with each investment target.
Intellectual property alone will not likely secure funding, but a weak IP position could significantly impact on valuation – by as much as 70% – or even see an investor walk away altogether. What’s more, for return-hungry investors, new research shows that SMEs with intellectual property rights generate 68% higher revenues per employee than those who don’t.
For ambitious, high growth SMEs to put themselves in the strongest position to attract and secure funding, there are five key ingredients that make up an investor-ready IP approach:
This is the number one deal breaker. Make sure there are no grey areas on ownership of IP. Any grey areas surrounding who ‘owns’ IP will signal alarm bells for a potential investor.
Understanding what IP your business may have and what you might be able to protect is not always obvious. It is always worth seeking professional advice early on to determine which IP rights you might be able to secure.
Robust processes and procedures are also important. Create an IP register and keep it up to date monthly so that opportunities are not overlooked. Do not underestimate the importance of robust processes and procedures.
Understanding what IP you need to protect isn’t always obvious.
Put yourself in an investor’s shoes – they are focused on whether you can provide a return on their investment. They are looking for clarity in your approach – a strategically sound business plan, where it is easy to see how the IP rights will help to achieve the commercial objectives.
>> Need more information on filing a chemistry patent. Read our blog on chemistry patent filing.
A growing business can be all-consuming, but a sound IP approach takes into consideration the wider marketplace in which your business is operating and any potential third-party rights.
Knowing when to act is critical to a sound IP approach. Knowing which steps to take and when to take them can have a critical impact on the strength of your IP position.
The end goal
Ultimately, the end goal with IP due diligence is to instil confidence and build trust with a potential investor. While investors are prepared to take on varying degrees of risk, SMEs will always need to show an IP approach that doesn’t signal alarm bells.
Put simply, those SMEs who are clear on these five areas will reduce the chances of IP being the reason an investor walks away.
>> To read more on ensuring your IP is investor-ready, visit the Potter Clarkson website here.
Edited by Eoin Redahan. You can find more of his work here.