Getting your IP in the Mind of an Investor

Investors are not mythical creatures, but are like you and I - human. Believe it or not, they  actually want to invest in your business and be part of the story. They also want to generate income, gain appreciation, and - simply put - multiply their investment. Though it's easy to say that it's mostly on the entrepreneur (the Investee) to not falter on the delivery of their pitch, but what’s truly important is understanding, before seeking funds, the investor-investee relationship and the investor’s mindset, including their risk tolerances, capital, styles, preferences, and time frames. This is key to obtaining funding and building a successful partnership, which enables entrepreneurs to scale, innovate and change the entire landscape of markets, especially in the intangibles economy where intellectual capital (including IP) has emerged as the leading asset class (see here and here). 

Here's our top 7 take-aways:

1. Investors understand IP and the importance of IP as an asset class (here, here and here). This means understanding and communicating your IP strategy and your value creators to the investor, along with your business model. It also meanings being able to demonstrate how you seek to protect your revenue stream, early on. Contact us for more information.

2. Know your pitch inside out, and work on the delivery of the message. This means being able to communicate your IP strategy, the market conditions, your financial projections, consumer interest, your startup costs as well as long-term vision and plan. Founders may not always be the best communicators, so it may be worth getting some coaching and revisiting the business plan (here and here).  Contact us for more coaching details. 

3. Understand the investors investment thesis, which “refers to a reasoned argument for a particular investment strategy, backed up by research and analysis.” This is what supports an investment decision, “also referred to as capital budgeting decisions, which involves determining where and how much capital should be allocated to generate maximum returns. This could involve purchasing new equipment, investing in research and development, buying property, or expanding into new markets.”

4. Know the funding stage in which you are, such as:  For more details check out our chapter titled What’s the Big Idea? The Crossroads Between Investment and IP, appearing in Intellectual Property Management for Start-ups, as well as these articles (here and here).

   1. Pre-seed funding stage

   2. Seed funding stage

   3. Series A funding

   4. Series B funding

   5. Series C funding

   6. Series D funding and beyond

   7. Mezzanine funding and bridge loans

   8. IPO

5. Interview and select your investor (and personality) with care.  Though Canada's venture capital (VC) investors remained cautious in 2023 in the face of a global market correction in the industry (BDC, May 2024), there’s still a lot of money out there, so entrepreneurs can be selective. There are also generous grants and incentives in Canada. Contact us for more information.

6. Do not overvalue your business or its intellectual property as this may lead to a series of problems, such as: 

   1. putting-off investors,

   2. Make it difficult to value future stock option plans, if required to attract talent;

   3. leading to unrealistic expectations. If you value your company too highly, then you and your team may begin to expect too much from the business.

   4. Making it more difficult to raise money in the future. If you value your company too highly during your Series A round, then future investors may be turned off by the high valuation. This could lead to you having to raise money at a lower valuation, which could have a negative impact on your business.

7. Investors, including venture capital, can have a significant impact on the business that extends far beyond funding (Tyebjee, 1984). It's not simply a transactional relationship, but one that needs to be fostered. 

Need more information?  Contact us.