Authors: Matthew Wahlrab and Craig Rochester
Companies’ intellectual property (IP) needs depend in large part on their growth stage. For pre-seed and seed stage startups, their focus is on securing funding and accelerating product development. Ready to conquer the world with their MVP and perhaps early traction, each startup begins to face the “good problems to have.” The initial “good problems” are delivering successful deployments, growing sales, then scaling up to meet demand, managing cash flow issues, hiring and training to meet demand, and driving predictable growth. Good problems to have don’t always feel all that great. Every entrepreneur has experienced one or more of the following growth hurdles:
- “If we can’t deliver this solution, we risk ruining our reputation,not completing the contract and not getting paid for our work.”
- “We’ve closed enough deals to keep busy, but in order to grow we
have to find the time to source more deals.”
- “We have more work than we can actually do. We have to hire!”
- “Who is going to train all of our new people?!”
- “Our Accounts Payable is huge, but we’re broke!”
What isn’t as well known is how each of these issues is underpinned by gaps in the company’s IP sophistication. These gaps are completely understandable. For promising companies focused on solving the immediate problem at hand, things like documenting know-how seem like a luxury when early customers think Net30 means Net Whenever.
As a company matures through its growth stages, its types of IP and protection needs evolve in parallel. In fact, successful progression from stage to stage hinges on a company’s ability to increase its level of IP sophistication to navigate predictable growth challenges. In addition, much like other aspects of growing and evolving a business, putting the right IP pieces in place during the earlier stages of your company’s growth will serve it well in the long run. The key is rightsizing the investment in your company’s know-how early, to avoid growing pains like the ones above. Below, we’ll sketch a high-level overview of how companies’ IP centers shift across growth stages, from pre-seed to total market domination.
Focus
“As a company matures
through its growth stages,
its types of IP and protection
needs evolve in parallel.”
The early days: Where does IP live in pre-seed/seed companies?
At the pre-seed/seed stage, companies’ early operations generate vast quantities of IP. Early on, ideas of what the market wants, critical features that need to be present in the MVP, who the customers may be, and lists of early potential partners live in the founding team’s minds. In a small startup with little market validation, any idea is practically as good as the next and the intense periods of development are easily shared across a team that is likely to have fewer than 6 people.
In these early days, it’s this founding team’s drive, vision, and innate ingenuity that investors will need to see, appreciate, and want to harness. However, recognizing the leaps and bounds happening in your founding team’s brains as valuable IP is a tough task, as is effectively documenting this thinking in a format that can be compellingly presented to non-technical investor and early adopter audiences.
So what do you need to make these early-stage intangible assets more tangible? Product development write-ups and an investor deck with a well-formed narrative about your product’s unique differentiators are valuable resources to develop. They communicate the nature of the problem being solved, elements of the solution, and paint the early picture of who will buy this solution. These forms of IP help the founding team rally around a mission and help potential early adopters know they are speaking with a team dedicated to resolving their pain point(s).
Next, gaining a memorandum of understanding (MoU) or letter of intent (LoI) from early adopters is important in signaling to the wider world that your market is willing to pay for your solution to their pain point(s). While MoUs and LoIs are important intangible assets in their own right, managing the IP in the agreement also pays dividends in the long term.
For example, a shrewd company will see the MoU as an opportunity to secure a commitment from the early adopter to announce the agreement in a Press Release (IP), collaborate on a Case Study (IP) once the pilot is complete, and secure the ability to use their logo (more IP) and a testimonial (still more IP) on marketing collateral (yes… more IP). For a founding team, the time spent on the MoU can become an instruction set for the first efforts a hired CMO may work on. These documents serve as social proof to prospective clients in the future and help build urgency in the minds of investors who are looking to invest in a team with traction. In addition to validating that customers are buying into your innovation, managing IP in the MoU sets the stage for growth and demonstrates to investors that you are already positioning your company to scale.
Overall, identifying the sparks of ingenuity that constitute your valuable IP and working them into tangible, presentable, and shareable assets is vital to communicating your company’s value and in gaining the attention and (financial) support it needs to grow.
From early-stage to high-growth: How IP evolves
In broad strokes, we might describe a company’s IP growth arc as shifting from 1) IP value mainly living in the pre-seed/seed intangible ideas we explored above; to 2) IP value existing mostly in the underlying technology; to 3) IP investments in marketing and branding strategy and implementation to fuel company book value and growth.
Naturally, these tectonic shifts in a company’s business and IP strategy happen gradually, with plenty of nuances at each twist and turn of the way. Yet with a growth mindset, the evolution does not have to be as painful as it is for most businesses. For our high-level purposes, we’ll now look at how these IP maturations play out at the high-growth stage and beyond.
Growing towards winning the market: How does IP look now?
To illustrate the key IP maturation shift from ideas-as-IP to marketing- -as-IP, let’s take Apple as an example. In general, we see that expenditure on R&D and product development is frontloaded at the start of Apple’s trajectory.
Over time, this investment shifted into skyrocketing marketing, advertising, and branding expenditures. The reason for this is that, as the company’s technical differentiation gradually subsided, it had to identify new ways to outstrip its competitors. So its focus on dominance morphed from the technical side to the marketing side: solidifying consumer loyalty with a highly enticing customer experience, leveraging its technology to incrementally reduce customer acquisition costs, increasing the duration for which customers remain customers, and finding ways of extracting more dollars per loyal, long-term consumer. It’s this type of ingenuity that transforms mature companies into behemoths — although Apple’s success level is exceptionally rare, of course.
That said, companies that have invested in laying the groundwork for 4 From early-stage to high-growth: How IP evolves Growing towards winning the market: How does IP look now? 5 evolving their well-protected IP in this way — as well as building a solid, symbiotic relationship with their market — have the highest chance of successfully predicting viable S-curves to pursue.
This IP flexibility and market awareness opens up opportunities for mutually beneficial partnerships, collaboration deals, joint ventures, mergers and acquisitions, and so on. It provides the insights needed to safely mature your company model to reduce time-to-market, with the key shift being moving from a fully in-house approach to product building to being in a position to purchase technologies that already exist elsewhere in the market. It also allows you to diversify your business and enter promising — but potentially higher-risk — market areas without investing vast amounts of your own capital. You can gain access with reduced risk, combine your proprietary information with that of other players, gain the lay of the land more efficiently, and plan and execute far more mature and wide-potential product roadmaps. In short, you can chart a path to winning your market, on your terms
Identifying, protecting, and evolving
your IP assets:
How Rapid Alpha can help
With each new client we take on, our primary focus is addressing their IP needs in relation to their growth stage.
For startup teams working flat out to meet technology delivery deadlines, we’re a low-cost solution enabling them to identify, document, and strategize around their IP at the same time as it’s being created. Rapidly familiarizing ourselves with your niche, our team is able to flag valuable IP as it’s generated, supporting your company to capture, solidify, and evolve its IP as you build a competitive position from which to enter the market.
At a fraction of the expense of hiring a full-time employee or outside legal counsel to monitor your IP developments, Rapid Alpha provides a full team — with business, technical, and legal IP expertise — to act as that angel on your founding team’s shoulder, guiding a smart IP strategy right from the early days.
Interested in leveraging our services? We’ll be glad to hear from you — contact us below.