Why Do Investors Like to Fund Intellectual Property?

Whether you have a small business startup or a large established company, intellectual property is an important legal and financial asset. Substantial intellectual property portfolios are very attractive to investors. Here is a look at why that is the case.

How do you find investors to fund your intellectual property?

The cost of securing intellectual property rights can be expensive. Once you add production and marketing costs to that expense, you could discover that you do not have enough funds to launch your idea. So, you need investment. But how do you find investors to fund your intellectual property?

Two options are private equity investors and venture capital investors. Private equity involves investors funding established private companies to enable them to grow, while venture capitalists focus more on funding emerging businesses or new technologies. Check out this PE vs VC explanation for a more detailed look at the difference between private equity and venture capital. Another option you have to fund your intellectual property is via crowdfunding. The internet has made it possible for businesses of all sizes to raise money online through crowdfunding platforms like Indiegogo and Kickstarter. Now you know how to begin funding your idea, check out the reasons why investors like to finance intellectual property.

There Is No Limit on the Value of Intellectual Property

If an investor owns a factory, its value is pretty much fixed. It will require maintenance, repairs, machine renewals, and all manner of other costs. So, if anything, it is likely to depreciate in the future. Intellectual property, on the other hand, is not a physical asset. Instead, it protects whatever there is in a company, such as its brands, designs, and so on. That means the value of intellectual property can increase indefinitely, which is a big reason why investors like to fund it. Take trademarks as an example. Trademarks protect a brand. According to Forbes, Apple’s brand value is around $168 billion and has been significantly increasing each year over the last decade.

Operational Risks Become Reduced

Intellectual property rights protect elements like your brand, product design, and innovation. By having intellectual property rights in major markets, a company can scale quickly and extensively. That is a good reason for investors to like intellectual property so much. By gaining intellectual property rights, your company can protect your brand name and other elements in countries around the world. Having that protection in place reduces potential operational risks.

Conversely, if you do not have intellectual property rights, you run the risk of infringing on another company’s rights. That can end in expensive lawsuits. Also, if you do not have intellectual property rights for your brand, it can be extremely costly to change your brand name in different countries. Protect your intellectual property as early as possible. Once you have protection, investors are much more likely to fund your project.

Intellectual Property Can Be Leveraged

Like other property, you can sell intellectual property in various ways. The more money that is invested in intellectual property, the more likely it is that you can recoup those investments. Licensing is one option. A business model that revolves around licensing a brand or a technology can be very lucrative. Licensing is not restricted to big businesses. It can also be very profitable for startups because there are little costs involved. Another advantage of intellectual property is it can be used as collateral so that you can obtain further investment easily.

Intellectual Property Is a Great Marketing Tool

Intellectual property can also work as a marketing tool. For instance, using the registered trademark symbol on your brand name informs the public that you believe in your product and do not want competitors to rip it off. The registered trademark symbol makes your audience see your company as a reputable mainstream brand. Marketing statements that tell the public your product has a patent-pending is another way of using intellectual property as a marketing tool. That is because the statement is showing an audience how innovative the product is. Using such messages in your marketing can increase audience retention and sales.

Intellectual Property Rights Make Your Investment Proposal More Attractive

Investors find it difficult to take a company seriously if it does not protect its brand and innovations. They need to know you believe in your product before they can believe in it. So, you must get intellectual property rights if you want to attract investors. If you do get investment, but you do not protect your intellectual property, it can put investors in a tricky situation. For example, an investor will not be happy if a competitor infringes on your products and sells them for rock-bottom prices. By protecting your intellectual property, you are also protecting your investor’s interests.