Author: Dr. Sandjar Muminov, the President of SANDJAR GROUP, Head of IP & Investment Team, Founder of INTEROCO Copyright Group.
Let’s take a look at a situation when a startup demonstrates its product to the investor. From the first perception, it seems that only the final results of the work done matter now, and nothing else, right? Well, it’s not quite like that.
Statistics shows that about 80% of startups grow in leaps and bounds: at the very beginning, a good idea comes to the entrepreneur’s head. Then he (she) puts it aside for a while. Then he (she) gets back to it – finds some money, does something, and puts the idea aside again. Entrepreneur returns to it in a few months after some research, and so on. The project’s author dedicates some time to his own business and keeps doing something else to make some money for a living. At this point, an evolving startup does not generate any income, so the businessman cannot work on it full time. It all happens erratically, inconsistently, from time to time. The same is with the documents – a logo was registered, a few months later, the website design was finished and registered, then it takes some time to enroll the source code, and so on.
Such random “leaps of time” make a rough impression on potential investors as they perceive such work as chaotic. As a result of such a disorganized approach, doubts arise in the investors’ heads: how will everything work further? Therefore, the step-by-step concept will be necessary and obligatory.
That is where the Systematic Approach Principle applies – this means that your entire business project, as well as the documentation, is maintained and kept accurately and systematically.
This principle proves that you are ready for steady work from a long-term perspective. It shows potential investors that you know how to manage business processes, maintain your records, and are able to provide necessary documents. This is what the investors like to see – it is one of the most influential decisive factors.
Put a plan and arrange everything in a system that can be presented to the investor. A systematic approach to plan-based work looks like this:
Step 1: You come up with an idea,
Step 2: Conducted the market research,
Step 3: Then test your product or service,
Step 4: Register intellectual property (IP) rights,
Step 5: Implement it, etc.
Such an approach will show your investor that you haven’t given up and left the project halfway, on contrary you have been working on it to create a solid product.
Working with Intellectual Property to Attract Investors
The above-mentioned Systematic Approach Principle applies to intellectual property as well. You should have a clear history of what has been done in terms of IP registration and protection, be ready to explain the details and show the entire roadmap with work in progress.
As a vivid example, once we have worked with a large online project where the investors were ready to invest an impressive amount of money. Our client, the project leader, came to us with a problem: “Look, I’m meeting with investors next week, but my project is not legally protected at all! Can we do something about it?”
They gave me an investor questionnaire to show how everything is protected, what documents I have to provide, etc. But I don’t even know what to answer.
In an emergency mode, we’ve finished all the paperwork and necessary registrations within three days. On the 4th day, the meeting with the investors took place where our client showed all required documents – everything was excellent and properly executed. It was a huge deal as they have invested 50% of the project.
In an informal atmosphere, the investor’s lawyer looked at all the documents and asked: “Why were all the documents signed yesterday? Your project exists for more than five years in the market. So why is everything all of a sudden, like coming out of nowhere?”.
Unfortunately, we did not instruct our client what to say in such a situation. He replied: “You know, we’ve been continuously working on the project. So we’ve constantly updated the design, engine, and databases. Thus, we have shown you only the latest updated version of IP protection documents and certificates.”
Of course, we had all the work in progress before, but there’s no need to confuse the investors. That was a great answer, but everything could go wrong in just a few seconds.
Capitalizing Your Startup
Capitalization is another aspect. Be aware of capitalizing your works a week before a meeting, as it may look suspicious for the investor when the estimation goes up to, for example, a few million. The question “how come that you had such a leap from zero to million” will appear from any investor.
To avoid such concerns and be successful with a startup project, you have to constantly support it, provide it with legal protection, capitalize it, keep accurate records of investments, and do other necessary paperwork. Be prepared to provide all the data in the form of a detailed log: here is the history of all our investments, it’s continuous. And here is the history of our document protection and the history of our product.
Last but not least: it’s necessary not only to showcase your project but also “wrap it up” to attract investments. Use the Systematic Approach Principle, and it will make your investor trust you and increase the chance for a sealed deal.
Stay tuned and don’t hesitate to ask questions the author of the blog via email firstname.lastname@example.org.