DESCRIBING INTELLECTUAL PROPERTY IN YOUR

DESCRIBING INTELLECTUAL PROPERTY IN YOUR
BUSINESS PLAN
by: dave lavinsky
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.

about the author:
GT BUSINESS PLANS [2] HAS DEVELOPED OVER 200
business plans for clients that have
collectively raised over $750 million in
FINANCING, LAUNCHED NUMEROUS NEW PRODUCT AND
service lines and gained competitive advantage
and market share. gt business plans is the
SISTER SITE OF GT VENTURE CAPITAL [3]

CIRCULATED BY ARTICLE EMPORIUM [4]
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