The Importance of Securing Intellectual Property when Seeking Angel Investors or Venture Capital

The Importance of Securing Intellectual Property when Seeking Angel Investors or Venture Capital.

It is important not only in private business to protect your name, trademarks, methods, trade secrets, designs and patents etc, but when it comes to dealing with investors/shareholders and other stakeholders its is absolutely crucial. In many cases, an early stage, or start-up company has not managed to achieve much security over these aspects, so part of any sensible capital raising program should allow for such IP (Intellectual Property) registration and protection programs.

As some IP protection tools require financial resources that a start-up company may not necessarily have, the company management might adopt a 2 stage IP strategy, which consists of using as much as possible of the “free of charge” protection tools available to them, such as copyright and secrecy and of making a cost benefit analysis in respect to the finances available at the time in relation to trademark and patent protection.

So initially, the company management might choose to protect their know-how by enforcing non-disclosure agreements with future employees, clients, initial shareholders and partners before any information is exchanged. All company documents in the pre or early IP stages of business development should have a confidentiality notice. Furthermore a copyright notice should be placed on all documents, software and web pages produced by the company. Finally the registration of the company’s products' trademarks should remain next on your list of next things to do.

In being aware of intellectual property issues for your business, you should also takes care to integrate intellectual property into your business plan.

If the company simply adopts a defensive strategy in relation to intellectual property protection, because they don’t think that their competitors are going to copy the company's products or methods, they may be in for quite a shock. At least if you have intellectual property protection, you will have grounds to assert your rights over same should a potential competitor attempt to copy your products, designs, logos, methods and patents etc.

In summary, it’s all about staging! Whilst limited IP might be in place at the early stages, it is imperative that you make allowances for IP moving forward, allowing for your capital requirements and budget to include adequate allowances for securing, protecting, insuring and enforcing your IP. Some of your initial capital might be used for securing the basics, like trademarks, domain names etc, as well as allowing some initial funding to design or create your proposed IP and conduct patent research etc.

It is always best to procure the services of an Intellectual Property professional moving forward. You don’t need to spend a fortune at the start, initial shareholders and stakeholders in your business will understand, that there is risk, and in many cases the first few shareholders are usually friends, family or close business associates, but their prospective rewards should be reflected in the leverage they should benefit from for getting involved at concept stage.

Initial external investors on the other hand, will at least want to know that you have a plan in place to research and protect your IP and mid stage investors, including venture capitalists etc would definitely expect your business to have some significant IP secured and protected before exposing themselves to such an investment.

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