Questions Investors Should Ask In Venture Forums

My experiences as an observer and participant of venture forums…is that they are fast paced and highly charged ‘electric’ events wherein management teams of a growing array of RBSU’s (research based startups) university-based spinoffs, and early stage companies, most all of which are rich in – dependent upon IA’s (intangible assets) give impassioned ‘elevator pitches’ to prospective investors whose expertise and inclination – receptivity to invest – don’t invest have evolved to become increasingly narrow and specialized, as perhaps it should.

The usual format for the venture forums I have attended…are that pitches are limited to 3-5 minutes wherein a spokesperson, usually an officer of the company, explains the companies’ mission, key-competitive aspects of their innovation, additional research-trials necessary, fiscal projections, business model, why investment is warranted, and how – for what any capital will be applied, should an investor deem it a worthy risk.

Should (when) ‘pitches’ are well received…the company spokesperson will likely then be peppered with questions from prospective investors, or their representatives, one of which is invariably ‘what’s your IP position’

What’s your IP position?, is often one of the questions a prospective investor poses…the sequence of which may vary.  Of the numerous venture forums I have attended, the most consistent answers to, in my judgment,  a much over-rated, misunderstood, yet seemingly obligatory question are one of the following…

  • has a patent application has been filed (provisional).
  • a patent is pending, or
  • a patent has been issued.

Through my lens as an intangible asset strategist and risk specialist…the importance attached to achieving formal/official IP (intellectual property) status for one’s innovation has been inflated.  But, the consistency which prospective investors ask and entrepreneurs prepare for the IP position question, collectively suggest both parties assume conventional IP, patents particularly, are requisites to securing investment capital necessary to proceed with their work and company mission.

Readers should not be surprised to learn that I hold a somewhat different perspective…after all, there are other equally, if not more, relevant factors for any innovation – company being considered for an infusion of capital, which I believe prospective investors are obliged to sort out as being integral to their ‘invest – don’t invest’ decisions.

True, IP position-status (issuance) does provide investors with the necessary (obligatory) legal standing and options…for recourse should the invested enterprise fail, not meet its projections, or the IP enforcements, i.e., patents, trademarks, copyrights, etc., succumb to infringement, misappropriation, theft, or are otherwise challenged within the typical 3 – 5 year exit strategy plan most investors demand.

Still, there is an element of mere (legal) symbolism that attaches…to issued intellectual properties due to the persistent undermining actions taken by the globally aggressive, predatorial, legacy free, and winner-take-all initiatives directed to entrepreneurial – startup communities, but yes, patents and other forms of intellectual property are obligatory to engage WTO countries and/or are signatories to TRIPS.

This translates to proprietary intangible assets…in the form of intellectual, structural, and relationship capital, with persistent challenges and their vulnerability – probability – criticality to intangible asset (IP) infringement, theft, and/or counterfeiting make RBSU’s IP position little more than legal symbolism.

Should companies elect to pursue other strategies to...safeguard their proprietary – competitive advantage producing intangible assets, i.e., a relevant – appropriate variation of trade secrecy for example, those legal portals for bringing action against the inevitable infringers, thieves, and counterfeiters in locales where a company’s most valuable assets are in play carry some ambiguity.

Through my lens, conventional IP has less relevance as a legal – economic safety net…than startup management teams and prospective investors should assume. Too, what’s required to mount and engage in a legal action against alleged infringers – misappropriators, be assured their will be significant costs, time, and public – consumer reaction regardless of its legal credibility which some companies may deem prohibitive.

Therefore, the prudency of undertaking legal action when there are ‘coulda, shoulda, woulda’ issues present…parties are obliged to acknowledge patents and most other forms of IP, no longer serve as…

  • standalone deterrents, or
  • reliable prognostications of innovation value.

The more relevant venture forum questions…which I urge prospective investors – venture capitalists to use is re-phrase the ‘IP position’ question, for example, rather than merely asking ‘what’s your IP position’ assuming it is an important criterion, perhaps a more relevant and telling question would be…

  • has the proprietary know how, i.e., intellectual, structural, and relationship capital
  • that underlie the startups’ innovation and serve as the cornerstone to the IP on which an investment would be made,
  • premised, been adequately safeguarded from its inception!

Today, with increasing certainty, ineffectively safeguarded intangible assets (IP) will quickly hemorrhage in value, competitive advantage, and elevate investor’s vulnerability to costly, time consuming, and momentum stifling challenges and exit strategy headaches, ala risk!

Michael D. Moberly May 9, 2016 St. Louis [email protected] ‘Business Intangible Asset Blog’ where attention span really matters’!

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