Start-Up valuations are very important for a variety of situations and scenarios over a new venture growth’s path: decisions over funding-exit, key employees’ remuneration, Merger & Acquisitions, etc.
Product, solution and team, execution related factors are fundamental in Start-Up valuations.
A Start-Up’s Intellectual Property (IP) position and strategy have a relevant impact on these factors (i.e. because IP grants the new venture market monopoly with respect to a superior product/feature or mitigates operational risks) and consequently in the Start-Up’s ability to capitalise on its innovations and in its potential for growth.
Thus, IP valuations are key to reflect the actual value and opportunity that the Start-Up brings to investors.
Patents but also trademarks:
For Start-Ups in sectors like biotech, advanced materials or in other R&D intensive sectors, patents are very important short & long term for their market position and growth strategy.
Patents will not only allow the Start-Up’s market exclusivity for its product-IP exploitation but also secure its Freedom to Operate (FTO). Besides, patents can offer, if needed, future pivoting options towards other markets opportunities (imagine a patent related to a technical concept that can be applied into different product ranges or applications).
Brands/trademarks will also play an important role in the Start-Up differentiation in respect to competitors and in protecting its Good-will. They will contribute to FTO and helping itineration (i.e. the A-Z Amazon logo).
In the case of non-proprietary software based Start-Ups, they will need to go through a proper open-source code-clearance.
Like any other Start Up, they will need to additionally check on their intangible assets exploitation and ownership related potential encumbrances that they may have entered into with founders, employees, suppliers, collaborators or industrial partners.
There are multiple available options to secure proprietary Software’s copyrights, but it is also important to take into account that in the digital world, new processes involving connected devices, machines and software, that provide the conjunct with a superior performance, are potentially patentable. Thus, Start Ups with technological capabilities to develop new and better State of the art software-algorithm based solutions involving i.e. sensors, camera-images, robots, etc., can leverage on these IP assets to improve their market position and also gain access to new partnerships and business opportunities in connected or even unrelated markets.
As a Start-up grows and aims at going public or to an acquisition, FTO could be then a major issue, especially when competing with long-term established competitors. Thus, a robust IP and patent portfolio will be relevant to adequately managing operational/IP related risks when entering into new territories or markets.
Locking the Start-Up’s most valuable Trade Secrets (technical but also non-technical or organizational knowledge like talent, market, prices, competitors, clients, investors, etc.) is key to execution and to ensure the long-term new venture’s viability.
Thus, the Start-Ups’ IP valuation, provided by its specific IP strategy (options and decisions taken over protection, flexibility and use of the IP modalities available, which are better suited to specific products features, business model, sector, territories) will provide a real measure of the overall Start UP value and growth potential.
To request further information to set your venture’s appropriate IP strategy and/or perform an IP valuation, you can contact us at firstname.lastname@example.org.
Article by Josep Maria Pujals.