Answering the IP question

When you’re pitching your new idea to investors, angels, or VCs, they’ll often ask the same question. “What intellectual property (IP) do you have?” or “What’s your IP position?”

The key to answering is to not panic. It’s also to not rush out and apply for a patent so you can say “it’s patent pending”. Telling potential investors that you’ve already spent thousands of dollars without really understanding why probably won’t impress them. Really.

Some investors do want a company to protect IP with a patent. Some think it’s a waste of money at the early stage. There’s no hard and fast rule. So do you file or not? Like everything else in your business plan, proving you’ve thought about the issues – and have a clear, confident strategy – will put you ahead when it comes to tricky questions.

De-risking the investment

Your potential investor is excited, but they’re asking questions. What’s your IP plan? Are there any big risks they need to know about? How likely is it that a competitor will just copy you? Or sue you? With IP a number of common things can go wrong. These apply to companies in the digital space and those selling physical goods.

Want to assure investors that they won’t be throwing their money away? Start by showing you have these three issues covered:

1. Ownership

Can you prove that everything you sell and use for marketing was created by your company and is owned by your company? 

Do you have documents that show ownership or right to use:

  • All copyright? This includes images, source code, designs, brands, logos?
  • Contributions from founders that are no longer with you?
  • Contributions from friends or free / sponsored work?

2. Existing rights

Have you checked that your name / product name / product is not infringing on existing rights?

This includes checking that you can use your name / trade mark in the countries you wish to expand into and checks that your competitors don’t have patents / domain names / other IP in your area.

3. Competitive advantage

When discussing what will set you apart from competitors, what will stop them copying you? Have you protected this advantage? Do you plan to? If not, what will you do instead?

Protection could be with patents, design registrations, domain names, strong confidentiality agreements, trade mark registrations, or having another plan. Be prepared to explain your strategy and why it is the best for your business.

When answering the “What’s your IP position?” question, show you’ve thought about intellectual property, your competitive advantage, and have made certain to avoid accidentally giving away all your IP. Then you’ll be in a strong position. IP-wise at least. The rest of your business is up to you (and your future investors)!