Many early stage investors focus intently upon intellectual property protection, advantages, and ownership. This narrow focus can be a bit misleading as IP strategies are often overvalued when compared to the value of flawless execution. However, that doesn’t mean that they can be ignored completely. When looking at IP, there are some minimal thresholds that must be examined, as IP strategy is primarily a defensive measure that enables entrepreneurs to defend their businesses in a mature market. If a company hasn’t bothered to put a government-approved mark on their assets, then they probably don’t have much ground to stand on in a free economy. Properly secured IP is the foundation for nearly all successful companies that maintain success over the long run, whether it’s the trademark protection for your own version of the Nike swoosh, or an iron clad patent on a revolutionary new nano-technology.
While any business that achieves some measure of success will inspire competition to chase the same market, the barriers to entry that can be constructed through various means can help protect the investment in the company. Is there a clear plan the company is executing that will provide some sort of a barrier to entry for competition? Or can the business be copied with the clone up and running in less than a month? How important is it that there is a natural or non-legal barrier to entry?
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