Intangible assets are the core assets of every company. They include the relationships and know-how of employees, brand, intellectual property and critical relationships with stakeholders. They are the most valuable assets for any startup company. Intangible assets account for eighty percent of the company’s total worth. Unfortunately, these assets are often overlooked and undervalued. It hurts a company through its potential and future growth.
Why are intangible assets so valuable?
To generate multiple revenue streams and growth, a company can sell its intangible assets. These assets help you gain a competitive advantage and increase customer value. In addition, these assets help you differentiate your brand and offers. These are just a few examples of how they can add value.
- The protection of patents for technological innovations developed by the company makes it valuable in the long run.
- To distinguish a company and its brand from other businesses can use trade secrets and internal proprietary procedures.
- The foundation for a startup’s recognition is its brand. It includes the name, logo, slogan, and other characteristics.
Employees can provide detailed information about the company’s products and services, plans and innovations, and internal processes. Your brand can benefit from their skills and knowledge. It increases the team’s value; hence this knowledge could make a startup an attractive investment.
Protection of intangible assets
Loss of intangible assets can have devastating effects on an organization. For example, Quartz reported an entrepreneur who spent one year designing the product that would make him rich—a smartphone case and found success with Kickstarter, but was surprised by clones who reached the market even before the Kickstarter project was fully funded.
In another case reported by Protocol, a now-defunct startup Phhhoto sued Facebook, now rebranded as Meta, and alleged that Facebook showed interest in partnering with the company, then proceeded to take its features as a “slavish clone” and introduced it on Instagram as Boomerang. Whether the start-up will prevail against Meta will take time, but it is clear that companies must have a coherent strategy to identify and protect their intangible assets.
Startups may decide to patent their inventions in many cases which protects IP and inventions from unauthorized use by others. Patents are legally authorized protection. Without permission, e.g. license to use the invention is considered as an infringement. Startups are allowed to explore their ideas and business plans without any restrictions. For long-term growth for a startup, patents are filed. Before filing a patent, businesses should research all of their target markets. These businesses should also aim to protect their assets in these jurisdictions. With technological advancements at an ever-increasing rate, patents are an essential tool to protect intangible assets.
Protecting intangible assets is expensive.
Many startups fear high costs and have to protect their intangible assets due to cash flow limitations. There are many ways to avoid filing a patent, even though it is costly. Startups can speak to their patent attorney about how they want to protect their IP.
One way to do patents cost-effectively is to use PowerPatent to create the first draft application. PowerPatent applies AI to help inventors quickly expand on their description for edit by the inventor and then by a patent attorney. In many cases, most inventors can quickly prepare a paragraph on the problem she is solving and the solution as input to PowerPatent. Then, with a few drawings and the part lists in the drawing, the software can expand to a 20-30 page first draft ready for review by the patent attorney.
The attorney can advise on the best route to take. Understanding the costs associated with patent applications makes it possible to align funding rounds and upcoming expenses. Trade secrets could be an alternative to patent protection. It is up to the business, however, to keep them secret. Nevertheless, most businesses will have a portfolio that includes trademarks, secrets, and know-how in practice. It is also essential to keep in mind that investing in your intangible assets will benefit your business over the long term. It reduces future costs. Startup differentiation and sustainable value creation are dependent on intangible assets. Therefore, a company should address it at an early stage and throughout the company’s life.