This blog post is part one of a four part series that will give you a complete understanding of the four (4) types of risk a startup faces and how to deal with them in a proven, systematic manner. This will outline the same process we use with our portfolio investments at eBoost Ventures.

Time to read: 10 mins.

Great vision and great risk go hand-in-hand. One supports the other, and without one, the other loses its soul. Startup founders often come in with great vision but often, their inability to deal effectively with risk robs them of their ability to execute on their vision. As a result, they often have to compromise on either (a) how far they fulfill their vision, or (b) their vision completely.

That’s a risk that no one needs to take.

In my eleven years in key executive/leadership roles of startups and as a close advisor/consultant to startups, I’ve concluded that an entrepreneur’s ability to deal with business risk comes from the entrepreneur’s acumen in grasping business risk. Over the following four days, I will offer a simple and comprehensive guide to the four (4) types of business risk, what they are, who to go to as a resource, and when to deal with them. Today, I’ll provide the general overview and begin with intellectual property (IP)/technology risk.

The four types of business risk are:

1. IP/Technology Risk
2. Legal Risk
3. Market Risk
4. Financial Risk

IP/TECHNOLOGY RISK

What IP/Technology Risk is – IP risk refers to any risk to any IP asset that your startup may have; most commonly (i) trademarks and copyrights (ii) trade secrets (iii) patents, and (iv) licensing.
Who to go to – IP attorneys with a strong track record with startups (look for past year performance as an indicator of what worked and how many patents/copyrights/trademarks they pulled through out of how many attempts.
When to deal with it – early. Intellectual capital is recognized as the foundation for market dominance and defensibility. It is often a key piece in acquisitions and should be dealt with very early by very smart/very expensive people.

My good friends Roger Rappoport and Noel Gillespie, Partners at Procopio Cory Hargreaves and Savitch, one of the largest business law firms in the California startup community, wrote a great piece called, How to Build and Maximize Value in an IP Portfolio – The Key to Venture Capital Financing, that gives a tremendous overview of IP portfolio strategy. Here’s an excerpt:

This makes the selection of IP counsel a key decision in any start-up’s IP strategy. Not every IP attorney understands the business aspect of building a successful IP strategy in today’s competitive market. Moreover, not every IP attorney understands the importance of being able to convey the IP strategy in a manner that makes it easy for potential investors to understand. Litigation experience is also important, not only because it helps in writing stronger patents, but navigating a start-up through the critical early phases requires skills in litgation avoidance.

Shrewd advice. You can read the rest of Roger and Noel’s whitepaper here: How to Build and Maximize Value in an IP Portfolio – The Key to Venture Capital Financing.

Tomorrow we’ll cover legal risk.