Intellectual properties are the bread and butter of startups. A good IP can do one of two things: ensure your company has a solid foundation as a product or service or put your company in a position to be bought for a large sum of money. For example, late in 2017, Amazon bought Blink, a security camera company.
The mammoth retailer wasn’t interested in the cameras; it was interested in the chipset that allowed the cameras to run off of a lithium battery for nearly two years. The technology could, in theory, be integrated into Amazon’s Echo platform. Amazon paid about $90 million for what boils down to a chipset. Let’s look at how you can get your IP ready for investors or to sell to other companies, and how to keep it safe in the meantime.
Angels and VCs
If you have ever watched Shark Tank or Dragon’s Den, one of the biggest questions the VCs ask is whether the presenters have a patent or copyright for their idea. Forbes said in 2015 that intangible assets — such as IPs — account for about 90 percent of an early-stage company’s value.
VCs will want to know how your IP — be it invention or service — fits into the current marketplace. A company needs to own its employees’ inventions, writing, and other intellectual property if it is going to make a profit off of it, and that is highly important to investors.
They must also factor in how well you have done your due diligence, as a patent lawsuit could cost about $500,000 if brought to trial, and trade secrets suits cost between $300,000 and $500,000.
Why is this important? The Waymo v. Uber suit regarding technology used in self-driving cars. It ended in a major settlement worth more than $200 million. The main contention was that an employee of Google stole trade secrets, a type of IP, that Uber then tried to use. This brings us to how to ensure your IP is safe and secure.
Google alleged that Anthony Levandowski, a former engineer for Waymo, Google’s self-driving car arm, downloaded trade secrets and left the company to work for Uber. While it’s hard to stop current employees, unless you have proper documentation of who is accessing files and when stopping outside thieves is a simple matter of digital security.
Your first option is keeping records offsite in long-term storage. With external security, breaking in and stealing the right documents at a storage facility can be difficult. However, this can also extend to your own employees — a hard copy offsite is difficult to access all around.
It might be best to have a hard copy offsite and to also use cloud services. Security is of the utmost importance when using the cloud. Use proper protocols like SSL and TLS when transmitting data. If possible, use a virtual private network as an extra layer of keeping hackers out. Change all default credentials, as you don’t want someone stealing your trade secrets or patent ideas by entering “admin” and “password.” Limit access as much as possible.
Document everything. Use a secure e-signature service if needed so that there is less of a chance of a hacker using your e-sign service to access your cloud, and thus your IP. This can also extend to non-disclosure agreements regarding your IPs. Remember, your IPs can be 90 percent of the value of your company, and their security is of the utmost importance.
VCs and angel investors will not want to invest in a company that has had their IP stolen and splashed across the dark web like a common credit card number. This has happened to major companies, so don’t assume you are safe.
For example, Valve, a major name in computer gaming, saw the code for Half-Life 2 stolen in 2003. The culprit was able to hack Valve’s servers. He was arrested and charged with $250 million in damages. While not quite as elegant as an employee taking the code — the IP — like Levandowski did with Waymo, it’s still a breach of security. Both examples are major companies that can and have weathered the storm, but a startup with their IP leaked will have a hard time finding investors.
Your IP will define your startup. It’s extremely valuable and could be your golden ticket. Keep it safe, do your due diligence, and seek investors or buyers. Above all, maintain your IP in a secure place, limit access, and keep your information safe.