Michael D. Moberly August 12, 2009
Many companies want to attract investors. For IP and intangible asset intensive companies however, there are particular strategies that company management teams should execute to elevate their ‘attractivity’.
Its important to know at the outset that surveys and studies (Howery, etc.) consistently find that investors are more likely to be attracted to companies that have sustained track records of integrated strategies to (1.) identify, (2.) assess, (3.) monitor, (4.) safeguard, and (5.) utilize their intangible assets and IP effectively.
A plausible reason why investors are giving increased weight (scrutiny) to these factors is because they understand (as economic fact) perhaps better than most, the reality that intangible assets and IP are the dominant drivers of most company’s value, sources of revenue, sustainability, competitive advantage, and growth.
Therefore, investing in company’s that have no, or insufficient, or un-enforced strategies (practices) to sustain control, use, ownership, and monitor the value of their IP and/or intangible assets will, at minimum, constitute a cautionary flag insofar as pursuing the investment is concerned. In addition, both the value and usability of IP and intangible assets can be quite fragile, especially when effective safeguards have not been in place and routine (asset) monitoring has not occurred. If management teams dismiss the importance of these strategies and pass on developing and executing them, the probability risks will materialize and push the investment beyond acceptable (risk) thresholds will surely elevate, making the company much less attractive to a mutually beneficial investment.
Similarly, its not likely that investor confidence in the protectability and usability of a company’s IP and intangibles will elevate solely because a company has proof of IP ownership. Routinely, management teams naively portray conventional IP protections, i.e., patents, trademarks, and/or copyrights as synonymous with an asset protection strategy, (1.) the assets are/have been adequately protected from their inception, and (2.) post-investment usability of the assets is assured. The reality is, in this consistently competitive, highly predatorial, and winner-take-all global business environment, neither are assured solely because a patent has been issued.
Generally, investors are experienced enough to recognize that, standing alone, conventional IP protections, while necessary, do not supplant a well conceived, executed, and enforced strategy, i.e., a comprehensive set of policies, practices, and procedures. When management teams make such mis-assumptions, investors are apt to (a.) abandon the prospective investment altogether, or (b.) ratchet-up the due diligence and asset assessments to leverage the risks for better terms. Regardless, managerial oversight of these issues, or worse, negligence, will likely manifest itself as a frustrating and disheartening experience for the company in terms of attracting investment.