Founders: here's what you need to know about IP

David Fisher at IW Capital discusses the key criteria investors look for when it comes to assessing a start-up’s Intellectual Property

 

Throughout my career in venture capital, I’ve evaluated thousands of pitches from founders with breakthrough innovations. While impressive technology and ambitious visions catch attention, they’re just table stakes in today’s competitive funding landscape. What truly sets apart investment-ready companies is their strategic approach to intellectual property (IP).

 

Core IP has become increasingly crucial for securing investment. It signals that founders are thinking beyond immediate product development and protecting their hard-earned ideas by building long-term defensible value. When evaluating potential investments, one of our earliest questions is disarmingly simple yet profound: "What’s stopping someone else from doing this?"

 

Dyson provides an interesting example compared to traditional vacuum manufacturers. When James Dyson entered the market with cyclone technology, he protected his innovation with over 2,000 patents.

 

However, what truly created Dyson’s £23 billion enterprise wasn’t just the patents themselves, but how they were integrated into a distinctive brand, premium positioning, and continuous innovation strategy. Meanwhile, competitors with similar technical capabilities but less strategic IP integration struggled to command premium prices or build comparable brand equity. Dyson’s approach protected their technology together with their entire business model.

 

Protecting your innovations through patents, trademarks, and copyrights is important, but documentation alone isn’t sufficient. Investors look for founders who can demonstrate how their IP creates sustainable competitive advantage and drives scalable growth. Here are the critical questions you should be prepared to answer about your IP strategy:

 

 

Is your business generating real value?

While IP can provide significant protection, investors want to see how it translates to commercial success. For most businesses, IP needs to connect directly to revenue generation and profit potential. Pharmaceutical companies are classic exceptions where patents alone carry substantial value, but most investors need to see your product creating tangible customer value.

 

Strong IP combined with paying customers demonstrates that your innovation is both theoretically valuable and market-validated. Patents offer important protection, but the most compelling validation comes from customers willingly paying for your product or service. When these elements align, your IP becomes far more valuable in investors’ eyes.

 

 

What makes your IP truly differentiated?

Being first to market with patented technology doesn’t guarantee success. Facebook wasn’t the first social media platform, but it created a user experience that outpaced competitors like MySpace, and we’re seeing the same leapfrog with platforms such as TikTok today, where social networks embed a deep understanding of customer behaviours and requirements.

 

Investors value your ability to articulate precisely why your IP creates meaningful differentiation that customers recognise and value. When Daily Dose, a premium cold-pressed juice and functional drinks business, approached us, they weren’t pioneering a new category. What set them apart was how they integrated IP throughout their business model, brand and processes—creating scalable growth in an established market. They demonstrated clear strategic thinking about their intellectual assets.

 

 

Convincing customers they need your innovation

As Geoffrey A Moore explores in his seminal book "Crossing the Chasm," there’s a significant gap between early adopters who embrace innovation and the mainstream market requiring proven solutions.

 

Once you’ve secured your IP foundation, the next critical step is developing a strategy to generate demand—particularly when potential customers don’t yet recognise they need your solution.

 

Magic AI Mirror, a company IW Capital chose to invest in, demonstrated this approach by targeting people who can’t access or afford traditional personal trainers. Rather than competing broadly against gym brands, they identified a specific gap their proprietary technology could fill. Their AI personal trainer delivers guidance without the £60+ hourly rates of human trainers. This focused targeting created a defined market position that amplifies the value of their underlying IP. Their impressive adoption metrics demonstrate how well-positioned IP can drive growth.

 

Another element often overlooked in IP strategy is timing—knowing when to invest heavily in patents versus when to focus on market validation. Many successful startups begin with a lightweight IP approach, filing provisional patents while testing market fit, then expand their IP portfolio as revenue grows and specific threats emerge. This staged approach balances protection with the flexibility needed in early-stage growth.

 

 

Will your IP create value in a potential exit?

For technology companies, robust IP reassures investors about scalability—the coveted "write once, sell many times" model. Well-structured IP correlates with growth potential and increased shareholder value, making a company significantly more attractive for acquisition or IPO.

 

Strategic acquirers look for IP that can be leveraged across larger platforms and customer bases. In your investor conversations, articulate how your protected innovations might solve problems larger companies struggle with or unlock new revenue streams. This narrative strengthens both your current fundraising efforts and positions you for eventual exit opportunities.

 

 

Building an IP strategy that attracts investment

For founders seeking to build a compelling IP strategy, begin with commercial validation. Before extensive patent filings, demonstrate that your innovation addresses problems customers will pay to solve. Create layered protection through complementary defences: brand strength, network effects, proprietary data and technical complexity. These integrated barriers often multiply the value of your formal IP protections. Professional documentation and organised IP materials signal seriousness during due diligence and accelerate investment decisions.

 

Consider how Borrow My Doggy (a IW Capital port-co) exemplifies this integrated approach. While their core technology isn’t complex, they’ve built multi-layered protection through a distinctive emotional brand, a verified dog-sitter database that grows more valuable with scale, and community features that increase switching costs. This strategic combination creates a sustainable competitive advantage that directly supports their subscription revenue model.

 

When seeking investment, strong IP is fundamental to protecting your innovations, but more importantly, validating them. If properly positioned,IP can convert a pitch to a promise with substance, and a concept to an established company. Before your next investor meeting, ensure you can articulate clear answers to these strategic IP questions.

 

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David Fisher is Senior Investment Director at IW Capital, a London-based growth capital private equity house

 

Main image courtesy of iStockPhoto.com and May Lim