Venture Investment IP Due Diligence

Venture capital (VC) is a type of private equity, a form of financing that is provided by firms or funds to small,early-stage, emerging firms that are deemed to have high growth potential, or which have demonstrated high growth (in terms of number of employees, annual revenue, or both). Venture capital firms or funds invest in these early-stage companies in exchange for equity–an ownership stake–in the companies they invest in. Venture capitalists take on the risk of financing risky start-ups in the hopes that some of the firms they support will become successful. The start-ups are usually based on an innovative technology or business model and they are usually from the high technology industries, such as information technology (IT), social media or biotechnology.

The typical venture capital investment occurs after an initial “seed funding” round. The first round of institutional venture capital to fund growth is called the Series A round. Venture capitalists provide this financing in the interest of generating a return through an eventual “exit” event, such as the company selling shares to the public for the first time in an Initial public offering (IPO) or doing a merger and acquisition (also known as a “trade sale”) of the company.

Mergers, acquisitions, partnering, and investment transactions require obtaining an accurate and comprehensive intellectual property evaluation for quite possibly the most important assets under consideration. The possible outcome of pending or potential litigation, the assignability of a company’s IP agreements, and the scope and ownership of IP rights are just some of the issues one must consider. This could mean assessing the strength of a single licensed patent or a thorough review of an entire portfolio.

Our deep understanding of varied technologies and mastery of IP law allow us to help companies react quickly to any issue that emerges during an IP transaction, to provide thoughtful and accurate answers to investors’ questions, and to craft contract terms that properly allocate risks. We deliver highly targeted and sophisticated analyses of the IP assets at issue that can help drive an equitable deal.

We have conducted successful due diligence on matters as complex and as focused as an analysis requires. Our technical background and experience allow us to quickly identify key issues, propose options for mitigating risks, and outline a strategy for strengthening our client’s bargaining position. Ideally, due diligence investigations are conducted at the onset of negotiations, allowing time for a reasoned analysis of the value of the IP portfolio and time for corrective action to address issues that may influence the deal.