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Benefits of protecting IP: investor perspective

by EUROCROWD on 03.01.2024

Many entrepreneurs know that patents can be used to increase the value of the company with investors. But many do not realise, that this does not only apply to patents. When raising capital via professional crowdfunding service providers or other investors, entrepreneurs need to understand that investors typically view the protection of intellectual property (IP) as a critical aspect when evaluating potential investment opportunities.  IP holds significant importance from an investor's perspective. Here's a broader look at IP from the investors' viewpoint:

Asset Value and Valuation: Intellectual property, such as patents, trademarks, and copyrights, represents valuable assets for a business. Properly protected IP can significantly enhance the overall value of a company, influencing its valuation during investment rounds.

Competitive Advantage: Strong IP protection helps businesses stand out in the market by differentiating their products or services from competitors. Investors appreciate companies with a unique value proposition and a competitive edge. IP protection facilitates market expansion, especially in international markets. Investors may be more interested in companies that have secured their IP rights on a European or even global level, as it indicates a commitment to long-term growth and market reach.

Long-Term Sustainability: IP is integral to a company's sustainability. Investors seek businesses with a well-protected and sustainable business model, where IP plays a role in securing the company's future. Even without investors, a business’s competitive positioning often hinges on its ability to protect its intellectual property.

Barriers to Entry: Investors recognize that a robust IP portfolio creates barriers to entry for potential competitors. This is particularly crucial in industries where innovation is a key driver, as it helps protect the invested company's market share.

Risk Mitigation: Well-protected IP reduces the risk of legal challenges from competitors, which could disrupt business operations or incur legal expenses. Investors prefer companies with a clear and strong IP position, minimizing the potential for costly disputes. This also includes intangible assets as any form of IP counts toward the value of a business.

IP Enforcement and Defence: Investors assess a company’s capability to enforce its IP rights and defend against potential infringements. A proactive approach to IP enforcement demonstrates the company's commitment to protecting its interests.

Innovation and Research & Development (R&D): IP protection encourages businesses to invest in research and development, knowing that their innovations will be safeguarded. Investors are more inclined to support companies that demonstrate a commitment to continuous innovation.

Brand Reputation: Trademarks and copyrights contribute to brand protection. A positive and protected brand reputation enhances consumer trust and loyalty, influencing investor confidence in the company's long-term viability.

Revenue Generation: IP rights provide opportunities for licensing agreements, allowing businesses to generate additional revenue by permitting others to use their protected assets. This revenue stream can be attractive to investors seeking diverse income sources.

Exit Strategies: For investors looking for profitable exit strategies, a strong IP portfolio can be a key factor. Acquiring companies or investors seeking partnerships may find businesses with robust IP portfolios more appealing and strategically valuable.

A well-managed and strategically leveraged IP portfolio signals to investors that the company is proactive in protecting its assets. This boosts overall investor confidence in the business. Robust IP protection signals a commitment to innovation, risk management, and long-term success, making the investment proposition more compelling for potential backers. Investors recognize that intellectual property is not just a legal consideration but a strategic asset that can significantly impact the success and growth trajectory of a company. Therefore, a comprehensive understanding of a company's IP landscape is a crucial aspect of the investment decision-making process.

Disclaimer: The content provided by EUROCROWD in this post is intended for general informational purposes only. This information is not intended to constitute legal advice or provide bespoke solutions to specific problems. EUROCROWD endeavours to offer guidance to help individuals and businesses protect their intellectual property (IP). However, readers are expressly advised that the information presented should not be considered a substitute for professional advice or legal counsel. While we strive to ensure the accuracy and timeliness of the information shared, laws and regulations may change, and the content may not reflect the most current legal standards or interpretations. Your first step might be to visit EUIPO - Ideas Powered for Business: The European Union Intellectual Property Office (EUIPO) offers a platform called Ideas Powered for Business. It provides tools and resources for businesses to manage and protect their IP