Part 5 – Investment and IP: what might investors want to know and how to be pitch-ready
So far in this series we’ve talked about the role intellectual property (IP) plays in business, reasons to protect it, and the different forms of protection that exist.
If your business has grown to the point of needing a serious injection of funds to sustain or accelerate momentum, chances are you will be thinking about investment.
So let’s turn our attention to investment and IP. What might investors want to know, and how can you be pitch-ready for IP-related questions?
Be credible by being prepared
Raising capital to support a hungry, growing business can represent an exciting milestone for your company or organisation. Whether you are tapping venture capital, private equity or angel investors, pitching doesn’t need to produce ‘Dragon’s Den’ style anxiety.
Raising capital to finance expansion and growth can be exciting and anxiety-inducing, sometimes both at the same time.
Whether you are planning to get in front of venture capitalists, angel investors, private equity funds or the public with a crowd-funding initiative, being well prepared is crucial. In simple terms this means delivering a pitch that grabs the attention and interest of your potential investors, and that provides clear answers to questions of strategic importance.
In addition to all the usual suspects, such as who’s on your team, what customer problem you’re solving, why your value proposition is a winner, and how large the market is, investors are also likely to look for evidence of intellectual property smarts.
Being well-prepared, rehearsing and knowing what you’re talking about, will go a long way toward connecting with your audience with credibility and authenticity.
Do you have a good grasp of the role IP plays in your business and how that translates in a commercial or competitive context? Is there a solid IP strategy in place and is it being effectively managed? What steps have been taken, or are being taken to mitigate potential risks of infringement?
Being well-rehearsed not only in the terminology of your intellectual property, but what form and function it has in your business, will go a long way toward building credibility with your audience.
A check-list to get you started
Set out below is a check-list of IP-related questions that investors might probe. Some are obvious – others less so. Bear in mind that not all investors will show interest in the detail, but most will want assurance that you’re on top of your IP position. It’s better to err on the side of thorough preparation than to wing it.
When it comes to explaining or responding to questions about your intellectual property, school up by running through the check-list provided in this article. Not all investors will want to know the detail, but all it takes is one.
- Is your IP strategy commercially or legally-driven? Technology or product-directed?
- Where do you see the opportunities for commercial exploitation of your IP? For example, is it licensing, franchising or sale? Or is it in protecting the value of your product in market and a growth strategy driven by continuous innovation?
- What IP is owned and used, and who owns it? Remember to include registered and unregistered IP rights here. In some businesses, customer or supplier contracts may be as or more valuable than registered rights.
- What protection is in place already and where (i.e. which countries, jurisdictions, or classes)?
- What is the status of your registered IP? Granted, pending, under examination, not yet examined?
- Has any IP been acquired or licensed in? Why?
- Is there an effective process in place for capturing and controlling your IP and managing your IP portfolio?
- Have any risks of infringement – by your business on the rights of others, or by others on your rights – been identified? What steps are being taken to avoid, mitigate or prosecute them?
- How does your IP position stack up against your competitors’? Have you established freedom to operate in the markets which you want to be in?
- What level of investment has there been in IP protection to date; what level is expected in future?
- What’s the (technology) life-cycle of your product or service category?
- Has the business’ IP been formally valued? If so, by who, and what method?
Make the connection
Don’t risk winging it. Demonstrate that you take your business seriously and help your potential investors understand why they might want to as well.
Be mindful when pitching that investors are typically looking for authenticity and a compelling believable story. Help them see the connection between IP and your competitive or commercial advantage by tying your answers back to how it drives value (and ultimately returns) in your business. This is far more likely to resonate than a humdrum of legal or technical soundbites.
Bottom line: when you get in front of potential investors know your stuff, but more importantly, know why it’s important to your audience and be clear in how you articulate it.
Ceri Wells is a founding partner of national intellectual property law experts James & Wells. He has been involved in patent drafting, litigation, trade mark ownership, unfair competition and copyright matters for around 30 years and specialises in working with start-up companies, venture capitalists and seed-funding organisations to encourage and commercialise NZ innovation. For more info visit www.jaws.co.nz or email Ceri at firstname.lastname@example.org