10 IP and commercial contract loose ends to tie up before you approach investors

Last year saw investors throw record amounts of dollars into startups, but recent events and an anticipated increase in interest rates are leading to a decrease in venture capital financing.

Intellectual property assets have seen an increase in value and are becoming a focus for investors looking to spend their dry powder. Ensuring intellectual property and commercial contracts are in order can be helpful for startup companies.

Waiting to tackle these issues during a financing could cause delays, result in time consuming and expensive remediation, and lead to lower valuations.

Below is a list of 10 intellectual property and commercial areas that investors look at during due diligence, and steps that startups can take to better prepare for these issues.

Ensure former employers cannot claim IP ownership

The investors are concerned about the exclusive ownership of intellectual property by the startup. If a founder of a new startup is still employed by another company, it can pose a risk to exclusive ownership.

The best IP strategy is to file for federal protection as soon as possible.

After ending previous employment, a founder should start working on their startup. If possible, they should document that they don't start work on their new product or company on their former employer's time.

When starting a new company, it is important for the founder to carefully review any non-solicitation provisions.

If a founder is developing a product or service that will compete with their former employer, they should use a clean-room software development method to ensure that the product or service was created independently of their former employer.

Document IP created by employees and contractors

It's usually not enough for a company to secure any intellectual property developed by an employee.

One of the easiest ways to protect their intellectual property is to have all employees, advisers, contractors, interns and other entities sign confidentiality and invention assignment agreements. Although these agreements are typically short and simple contracts that are not heavily negotiated, companies often fail to obtain them, which can result in them not owning key aspects of their intellectual property.