What are the best methods for assessing a startup's intellectual property during due diligence?

Before seeking funding, it's vital to understand your intellectual property (IP) portfolio. Identify your IP assets, assess their strength and uniqueness, review documentation, and evaluate their market potential. Mitigate IP infringement risks and estimate their value. Consider how you'll monetize your IP, consult with legal experts if needed, and regularly update your IP strategy. Effective communication of your IP strategy to potential investors is key to showcasing the value of your IP portfolio in securing funding.

Assessing a startup's intellectual property is best supported by an IP attorney experienced in your industry. While it's common knowledge patents, trademarks, copyright and trade secrets all protect certain types of IP, there may be hidden value in what your company actually owns, or plans for commercialization. An experienced IP attorney can help identify what is immediately protectable, as well as surface what additional IP asset value may be generated from the business plans. Because investors want to know what's special about your startup, existing IP and surfacing additional IP value can be a key signal for capturing interest.

Disclosing your invention to the investor for fund raising versus keeping it confidential and protecting it from theft- there is a tight rope an inventor/founder has to walk here. NDAs are not water tight. It is therefore a good idea to not rely on NDA as a form of protection. Secure your IP- be it patents, trade secrets, designs etc. under the relevant statute. Keep all your paperwork in order before approaching investors. Not only will your IP be protected, they will be impressed that you are IP savvy and proactive as well.

Pre-funding IP evaluations prepare you for the likely questions investors will ask. Investors won't necessarily expect you to have a fully filed IP portfolio, because it can be more costly than unfunded startups can manage. They will however expect you to have begun the process of understanding your IP position, and filed on what is affordable. In some cases, that may be trademark or a provisional patent application. In any case, other IP topics are important with regards to IP rights to innovations, how IP is protected in founder or early team contracts, if IP is protected in any pilot or partnership endeavors, etc. Investors want to be sure they're investing in a diligent and wise startup, so a proper IP plan can help win that confidence.

The go-to moats for many startups are commonly network effects or high switching costs. These may be 'nice to haves' for a promising venture but do not communicate a comprehensive IP strategy, or necessarily a strong moat. Investors want to know how you will protect their investment and grow it. Similarly, you should be able to communicate how you will protect the company IP and how you will use it for commercial advantage. IP is implied in a variety of intangible assets incl. expected value of innovations, brand value of name slogan logo, importance of trade secrets, etc. Each IP asset that can be valuable deserves to be surfaced, considered, incorporated into the IP strategy and communicated to investors as part of your overall plan.

Always seek help from a IP professional if you have any doubt as to how to resolve an IP issue. IP rights are territorial in nature and could be governed differently in different part of the world. So, it's best to seek professional help before you seal any deal which is affecting your IP rights - it could be your most important assets in the future and you don't want to lose it.

An IP attorney experienced in your field, with experience in due diligence is ideal support. Especially with the many transactional, legal and business planning considerations that can make the process complicated or exhaust bandwidth. Lean on expertise where it counts and your startup can make it through challenging milestones successfully and into the commercial opportunities it was designed for.

Investors need to be watchful of startups claiming to be deep-tech. In my experience investors need to keep a deep tech advisor on board to advice them on which startup actually is tech intensive and which is not. ML/AI algorithms which are algorithm heavy, do not have patents and cannot disclose their algorithms to the investors. In such cases, ascertaining the true IP of the company is a difficult task. A deep tech advisor with domain specific knowledge can give a one-pager thereby making themselves the hidden advantage the investor can have.