Written by: Keegan Caldwell

In recent years, intangible assets—predominantly intellectual property (IP)—comprise 90% of S&P 500 companies’ total value. As technology and innovation continue to take exponential leaps forward, IP has become a key driver of company valuations. So, whether you’re a startup founder dreaming of a lucrative acquisition or an established firm eyeing an IPO, your IP assets will likely be among your most valuable bargaining chips. 

Through years of guiding companies through this process, I’ve encountered a recurring set of three questions that, when answered correctly, can significantly impact the outcome of an exit strategy:

1. When should I start building my IP portfolio?

The short answer is simple: as early as possible. Building a robust IP portfolio is a process that should begin the moment you have an idea or invention. Waiting too long to protect your IP can result in lost opportunities and even diminished value.

So, here’s the longer answer: A recent study revealed that startups with patents and trademarks are 10 times more likely to successfully secure funding and reach their acquisition or IPO goals. This underscores the importance of early IP protection in securing a competitive advantage and attracting investment.

However, starting early doesn’t mean filing patents indiscriminately. Every element you protect must add tangible value to your company and align with your exit plans—whether immediately or through a clear roadmap for the future. 

2. What should go in my IP portfolio?

A strong IP portfolio should contain a mix of assets that work together to protect your business and create value. The four primary types of intellectual property you should consider are patents, trademarks, copyrights, and trade secrets. Each plays a unique role in guarding your innovations and brand.

Patents

According to PitchBook, the median acquisition exit value for patent companies per year is 154.9% higher than for non-patent companies. Patents protect your innovations and provide an incredibly valuable, time-limited monopoly that can be incredibly valuable. For instance, with projected sales of $27.2 billion by the end of this year, Merck & Co.’s cancer treatment drug, pembrolizumab—currently sold under the brand name Keytruda—accounts for 40% of the company’s pharmaceutical sales. Under the protection of its patent, estimates suggest that by 2028, the drug would reach $33.7 billion in sales. However, Keytruda is scheduled to lose its patent protection in 2028, and that loss of exclusivity means that, instead, its sales are projected to decline by at least 19%. 

That brings me to a brief note on the importance of avoiding what we call “patent cliffs,” an unfortunate scenario where many of a company’s patents expire around the same time. To mitigate this risk, companies should stagger their patent filings and continuously invest in R&D to maintain a pipeline of innovations, ensuring a steady stream of new patents to replace those nearing expiration.

Trademarks and Copyrights

Trademarks protect your brand identity, including your company name, logo, and product names. They’re crucial for building brand recognition and customer loyalty, which can significantly impact your company’s valuation. 

And copyrights, while often overlooked, can be vital for software companies, content creators, and businesses with unique marketing materials. Copyrights can provide long-term value and revenue streams. For example, consider Disney’s continued profit from Mickey Mouse nearly a century after his creation.

Trade Secrets

While trade secrets don’t offer the same legal protections as patents, they can provide a competitive edge that lasts indefinitely if properly maintained. Good examples of this are Coca-Cola’s secret formula and Google’s search algorithm—these trade secrets have been instrumental in maintaining market dominance.

The key is to build a portfolio that comprehensively protects your business model and innovations. This might mean focusing heavily on patents if you’re a biotech startup or prioritizing trademarks and trade secrets if you’re a consumer brand. The right mix will depend on your industry, business strategy, and target acquirers or investors. 

3. How do I present an IP portfolio to receive the most funding?

Presenting your IP portfolio effectively requires telling a compelling story that demonstrates not just the technical merits of your IP, but its strategic value and market potential. 

Start by clearly articulating how your IP portfolio supports your current revenue streams and future growth plans. Use concrete examples to show how your patents have been or could be commercialized. For instance, if you’re a software company, demonstrate how your IP protects key features that drive user adoption or create barriers to entry for competitors.

Always leverage data and analytics. A patent landscape analysis—also known as “patent mapping”—is a process of analyzing and visualizing patent data to demonstrate your technological competitiveness in key areas. It can be particularly compelling to see how your IP portfolio stacks up against other industry leaders. 

And, if you’ve had success in licensing your IP or defending it against infringement, highlight these wins—they’re strong indicators of your IP’s value and your ability to monetize it.

Looking Ahead

Remember, investors and acquirers are looking for potential as much as current value. A strong pipeline of new patent applications or plans for expanding trademark protection into new markets can demonstrate ongoing innovation and growth potential, making your company an even more attractive investment or acquisition target.

Whether you’re a startup founder looking towards your first big exit or an established company preparing for the next phase of growth, investing time and resources in your IP strategy can pay significant dividends. And, by addressing these key questions, you’ll be better positioned to emerge with a stronger, more valuable exit-ready company.

This publication is distributed with the understanding that the author, publisher, and distributor of this publication and/or any linked publication are not rendering legal, accounting, or other professional advice or opinions on specific facts or matters and, accordingly, assume no liability whatsoever in connection with its use. Pursuant to applicable rules of professional conduct, portions of this publication may constitute Attorney Advertising. The choice of a lawyer is an important decision and should not be based solely upon advertisements.

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