Describing Intellectual Property in Your Business Plan

Describing Intellectual Property in Your Business Plan

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Most companies that are worthy of raising venture capital have proprietary Intellectual Property (IP). In fact, the quality of the IP and the management team are often the two most important aspects of a venture capitalist’s investment decision. The challenge that many ventures face, however, is that most investors will not sign non-disclosure agreements (NDAs), and NDAs are critical to maintaining the proprietary nature of the IP. This article details the appropriate strategy for addressing proprietary IP in your business plan in order to attract investor attention while retaining the confidentiality of your inventions.” />

Describing Intellectual Property in Your Business Plan

Most companies that are worthy of raising venture capital have proprietary Intellectual Property (IP). In fact, the quality of the IP and the management team are often the two most important aspects of a venture capitalist’s investment decision. The challenge that many ventures face, however, is that most investors will not sign non-disclosure agreements (NDAs), and NDAs are critical to maintaining the proprietary nature of the IP. This article details the appropriate strategy for addressing proprietary IP in your business plan in order to attract investor attention while retaining the confidentiality of your inventions.

Focus on the Benefits of and Applications of the IP: The business plan should not discuss the confidential aspects of the IP. Rather, the plan should discuss the benefits of the IP. Remember that even the most amazing of technologies will not excite investors unless it has tangible benefits to customers.

The business plan first needs to discuss the products and services into which the IP will be integrated. It then must detail the benefits that these products and services have to customers and differentiate them from competitive products. When applicable, it is helpful to include non-confidential drawings and backup materials of the products and services in the Appendix.

Focus on Customer Needs and the Relevant Market Size: The business plan must also discuss how the benefits of the IP fulfill a large customer need. To accomplish this, the plan needs to detail customer wants and needs and prove that the company’s offerings specifically meet these needs.

Secondly, the plan needs to discuss the marketplace in which the IP is offered and the size of this marketplace. Critical to this analysis is determining the relevant market size. The relevant market size equals a company’s sales if it were to capture 100% of its specific niche of the market. For example, a medical device’s market size would not be the trillion dollar healthcare market, but rather the sales of all competing medical devices.

Focus on Competition and Competitive Differentiation: Your business plan must also prove that your IP is better than competitive inventions. In identifying competitors, note that listing no or few competitors has a negative connotation. It implies that there may not be a large enough customer need to support the company’s products and/or services. On the other hand, should there be too many competitors, then the market may be too saturated to support the profitability of a new entrant. The answer — any company that also serves the customer needs that you serve should be considered a competitor.

The business plan should detail both the positive and negative aspects of competitors’ IP and products/services and validate that your offerings are either superior in general, or are superior in serving a specific customer niche.

Prove that you can Execute on the Opportunity: As importantly as proving the quality of the IP and that a vast market exists for its applications, the business plan most prove that the company can successfully execute on the opportunity.

The plan should detail the company’s past accomplishments, including descriptions and dates when prior funding rounds were received, products and services were launched, revenue milestones were reached, key partnerships were executed, etc.

When a company is a complete start-up, and no milestones have been accomplished, the plan should focus on past accomplishments of the management team as an indicator of the company’s ability to execute successfully.

Results: Getting Investors to Sign the NDA: If you are able to convince the prospective investor that the IP is integrated into a product/service which yields real customer benefits in a large market, then the investor will take the quality of the invention for granted when reviewing the plan. Later, during the due diligence process, the investor will review the actual technology. At this point, a discussion regarding signing an NDA would be appropriate.

Since its inception, Growthink Business Plans has developed over 200 business plans. Growthink clients have collectively raised over $750 million in financing, launched numerous new product and service lines and gained competitive advantage and market share. Growthink has become the firm of choice for venture capital firms, angel investors, corporations and entrepreneurs in the know. For more information please visit http://www.growthink.com

article source: adzines.com

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About Granger Whitelaw

Granger Whitelaw founded the Rocket Racing League along with partner, Peter Diamandis in 2005. See more information at http://www.grangerwhitelaw.com/blog and http://grangerwhitelaw.brandyourself.com View all posts by Granger Whitelaw

11 responses to “Describing Intellectual Property in Your Business Plan

  • Sussi

    Intellectual property is in fact very important than any ordinary person could ever imagine and also it is true that in fact, the quality of the IP and the management team are often the two most important aspects of a venture capitalist’s investment decision. Business is very complex and some of the things are hard to understand but eventually those things that are always encountered will be slowly becoming manageable.

  • Milan

    Intellectual property is just your assets as what I have understood on the article and correct me if I am wrong. It makes me glad to know that the business plan should not discuss the confidential aspects of the IP. Rather, the plan should discuss the benefits of the IP. Benefits should always be remembered and should be always considered because that is your main point after all.

  • Glejan

    Intellectual property is important as what I have mentioned here and I have learned that the quality of the IP and the management team are often the two most important aspects of a venture capitalist’s investment decision. Business is very complicated and risky and plans and proper study of the things must be done must be always prepared. I thank you for posting this one to us.

  • Emmy

    Such a good example “For example, a medical device’s market size would not be the trillion dollar healthcare market, but rather the sales of all competing medical devices” I appreciate much of this and speaking of sales, the first thing you must do is to have profit and then start to plan more and aim more.

  • Rosella

    Intellectual property on business plan is really important as what have been said here. I want to read all of the articles inside your website but I don’t have much time. Anyway I will just read those who I can afford to read. I am much glad that I found your website because it filled with many articles not just about business but also to some aspects and different angles of life. I think I will be inspired to write with this and I like to write just like this one and hopefully then have many audiences.

  • Mikan

    Intellectual property protection is critical to fostering innovation. Without protection of ideas, businesses would not reap the full benefits of their inventions and would focus less on research and development. Similarly, artist would not be fully compensated for their creations and cultural vitality would suffer as a result.

  • Jeresy

    I will take this as a good advice from you ” On the other hand, should there be too many competitors, then the market may be too saturated to support the profitability of a new entrant”, it is necessary that you will know how many competitors will you have because as many competitors you have the lesser the chance you will have a successful business and that is plain simple logic and it’s just a common sense but if you took it for granted and you don’t think of it clearly it will affect you big and keep that in mind.

  • Zoro

    Intellectual property (IP) is the property of your mind or proprietary knowledge and can be an invention, a trade mark, a design or the practical application of your idea. Having a reasonable knowledge of IP helps you to understand how you can incorporate IP into your business planning and strategy, and enable you to establish a relationship between IP and your chosen profession.

  • Shandia

    Discussing Intellectual property in business plan is quite impressive and I am thankful that I have learned things here though it is not many but it is still educational. Making business plan in business is just a simple and old school strategy in any business but it is still good and it is still can be use in our modern world. I still don’t have business and a big business but someday if I will have one I will of course use this kind of strategy. Great to read this one.

  • Shanks

    I just want to share something the difference between physical property and intellectual property that I’ve learned this from my professor in one of my business class, physical property is a type of ‘tangible’ property that can be moved or physically sold or secured; intellectual property is a type of ‘intangible’ property that exist as a concept.

  • Karden

    Intellectual property in business plan is quite a hard to explain one. I am agree to some of your points but I think there are some several factors that may affect some of it. The plan should always focus always on winning on the things and aspects that the company have won. Some plans can’t be successful sometimes but that is normal and in order for us to make up something for that is to focus on winning and that is being positive.

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