All I want for Christmas is an investor

As children, most of us sat on Santa’s lap at some point in our lives, barely containing our enthusiasm as we shared our deep-felt hopes and desires. Many business owners, if given a chance, would ask Santa to help with payroll, taxes or any and all manner of HR challenges. But for most business owners, the gift of an investor would be the best gift of all.

Across the world, business has been good. The past 12 months delivered a banner year for investment, merger and acquisition deal flow. The economy, buoyed by market gains, has helped fuel investment in early-stage companies.

In Northwest Arkansas, we’ve seen this effect as a few of our very own have had the great fortune of investment, merger and acquisition deal flow in 2018. Dan Sanker sold his company CaseStack for $255 million. John James’ company Engine recently raised $4 million in venture capital. And last but not least, Movista, founded in 2010 by Stan Zylowski and April Seggebruch, raised over $10 million in venture capital.

But let’s face it. Not every business owner is hoping Santa will bring them an investor. After all, some business owners choose to operate as lifestyle businesses, or even decide to pass the company down through generations. But for those businesses hoping for an investor or buyer, financials and business processes aren’t the only things about which to worry.

Here are a few things to consider to help you get the best deal at the best price.

Protect Company Brands
Take steps to protect company brands. If a company does national business, the company should consider registering company trademarks at the U.S. Patent and Trademark Office. U.S. registered marks are presumed valid and can be a powerful tool in building a strong brand. When companies don’t take steps to register company brands that are core to the business, a lot of value is left in question, meaning a national brand can be left with less than national brand-protection.

Own Company Innovations
Owning company innovations may be a little more complicated than you might think. Many companies operate teams using a variety of structures- contractors, W-2 employees, temps, external business collaborations, etc. And many companies don’t give much thought to who legally owns the creative output of the team. Many business owners never require employment or consulting agreements, and in many instances, the company finds out (too late) that it doesn’t own the innovation. When companies don’t own the innovations that they think they do, investors usually walk away (and take their money with them).

Manage Infringement Risk
Every operating company entertains the risk of infringing another company’s brand, design, products or creative. So, companies should be diligent about investigating infringement risk before any product launch. In most investment or acquisition processes, companies are often asked if the company has ever received a cease and desist letter or been the subject of litigation.

As the target company, if you can show you are careful about launching brands and products, and that you routinely seek the legal advice of an attorney, you’ll be much better off. I’ve worked on many deals where the offer price was significantly discounted when patent, trademark or copyright infringement risk was uncovered.

If you want Santa to bring you an investor this year (or next), then start getting your business investor-ready now. If you can begin to think about strengthening your company’s bargaining position through strong product, brand, and design protection, you too can have “A Wonderful Life.”

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Editor’s note: Angela Grayson is the principal and founder of Precipice IP, a legal firm in Bentonville. She is a registered patent attorney and is admitted to the U.S. Supreme Court Bar. The opinions expressed are those of the author.