Your startup is ready for investments, but it may not be as ready as you think. In the growing startup environment, it is important for companies to keep in mind their intellectual property due diligence. Maintaining a strong IP strategy from the beginning is beneficial for startups looking to obtain investors later down the road as due diligence is an important part of moving forward with a deal. In terms of IP due diligence, an IP inventory, IP strategy, IP ownership, and risk are all evaluated. An investor would rather have the answers to their questions regarding a company’s intellectual property before they make an investment.

The first aspect of IP due diligence is maintaining an IP inventory. Sometimes called an IP Audit, an inventory is a record of all the intellectual property assets belonging to the company. There are many questions and details that should be accounted for when assessing the intellectual property assets of the company. Do the rights belong to the company? What is the status of the rights? Where is the IP being used? How are they being used? Were there any licensing agreements or arrangements involved with your company’s IP? Were consultants used in the development of any of the projects regarding IP? Have all IP rights been assigned to the company? Are there any ensuing infringement cases involving the startup’s IP? These are just a few questions that will help a startup begin the due diligence process for a better, smoother deal with an investor. Being able to answer these questions and maintain a strong record of the company’s IP from the beginning, will ensure that the records are detailed and organized for a later time.

There is a high risk involved in not keeping an accurate reflection of the company’s IP. It is not just for investment purposes, but also for the company’s internal needs. If a company is involved in a lawsuit at some point, having the IP record will be useful for determining what belongs to the company. Trade secrets have a high risk of impending litigation to occur because of the rapid movement of consultants and employees between companies. An IP inventory will help protect these trade secrets as the company already has established a process on determining the rights, ownership of the rights, where and how they are being used, and more. A company would benefit from having that IP inventory paired with a strong trade secret policy. These two in combination would allow a court to more easily determine who should get what in trial.

Another IP aspect of due diligence is IP strategy. Now that a company has compiled an accurate, thorough record of their IP assets, they will now be able to establish an IP strategy. An IP strategy is simply how a company plans to use their IP in order to make a profit and policies regarding IP. IP can be patents, copyrights, trademarks, or trade secrets. A company like Coca-Cola has used their trademark on the name, colors, and bottle shape to connect with a product. The product then has advertising, slogans, and memories attached. The IP strategy they used has made them millions of dollars. A startup company should adapt an IP strategy that corresponds to their IP audit and market the product or service accordingly. Companies utilize IP for a reason and they should put it to good work. Establishing a strategy is a part of due diligence as an investor will want to know how the company is doing in terms of profits. The IP strategy will be attractive to investors as they will know which direction the company is going. Or, if for example, an active investor came along, they could analyze the IP strategy to determine if it is being used as maximally as possible.

An IP audit and an IP strategy are steps that a startup can take from the beginning to ensure that an investor is aware of the workings of the company and be more attractive to many investors. It is part of the due diligence a startup should be doing. There is one last thing to keep in mind, though: IP policy. A company might consider adopting IP policies to optimize their use of IP. Policies could include enforcement, acquisition, licensing, and an update type policy. Enforcement would mean the company is actively aware of any infringers and pursues a claim in order to be considered the sole owner of the IP. Acquisition policies would include acquiring relevant IP from others in order to boost that specific IP portfolio niche. It would allow the company to be a strong competitor against others. Licensing policies could be stringent or loose, depending on what the company plans to do with their IP. They may choose to license more frequently as part of their IP strategy. One last policy could potentially be an “update” policy, meaning the company stays on top of their IP and if anyone creates a new IP right, they update.

These questions and strategies will help a startup begin due diligence for their company that will make them more attractive to investors. After all, when an investor invests in a startup, they really are taking a risk and investing in the IP.