Part 10/20 - Twenty Questions You Will Be Asked By Venture Capitalists (If You Get That Far)

By Laurence K. Hayward

This is part ten of a twenty part series on this topic.

10. Does your company have proprietary intellectual property in the form of patents, trademarks, copyrights, etc.?

What do you own? What can you protect? These are two important questions in evaluating an investment opportunity.

Patents can play a critical role in protecting the research and development investments of the company and in helping to ensure that there is a window of opportunity (usually before competitor offerings arrive) for the company to realize a significant share of revenues for a particular category. People tend to think of patents in terms of protecting a physical matter or product. However, patents can be used to protect a business method or process as well, and this may be more appropriate for your business. The use of patents can vary significantly by industry with some finding them to be essential and others less so depending on the ability to use them as a barrier to entry.

No matter what industry you are in, the company's intellectual property is generally regarded as a indication of uniqueness and a source of "sustainable" competitive advantage (how sustainable will be debated).  Intellectual property (IP) comprises more than patents, many companies intentionally keep some of all of their IP undisclosed, i.e. the public won't see it in a published patent application.

Trademarks and copyrights are critical to protecting the company's intellectual assets and its "brand."  VCs will want to ensure that you've taken the proper steps (through non-disclosure agreements, non-competes and employment agreements) to ensure that the company is protecting its intellectual capital.

For information on patents and other forms of intellectual property protection, consult your attorney or visit the United States Patent and Trademark office’s website at http://www.uspto.gov/.

Laurence K. Hayward is the Founder and CEO of TheVentureLab. To learn more about him follow the link here

Part 9/20 - Twenty Questions You Will Be Asked By Venture Capitalists (If You Get That Far)

By Laurence K. Hayward

This is part nine of a twenty part series on this topic.

9. What gives your company a competitive advantage?

VCs want to know how you plan to outmaneuver the competition -- and this doesn't just pertain to existing competitors. They want to see that you've thought about future market entrants and how you will stave them off. "First-mover advantage" is rarely a sufficient response to this question. A more effective answer depicts intellectual property barriers or the ability to reach the target market in a manner that is more effective than the competition. What is unique about your company that gives it an edge?

Positioning matrixes in business plans can demonstrate visually how a company is differentiated from its competitors. A matrix shows the space your company plans to occupy in the market relative to everyone else. People often mistakenly assume that a crowded marketplace is ‘bad’. What is more important is the relative strength of the competitors. For example, it may be preferable to have a number of fragmented competitors than to be up against just one Microsoft. So, in your business plan, be sure to address the strength of your competitors and why some may be greater threats than others.

Laurence K. Hayward is the Founder and CEO of TheVentureLab. To learn more about him follow the link here