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Venture Capital Due Diligence

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Our client was a venture capital firm looking to invest in a pre-revenue tech company. Glasshouse Advisory carried out an IP Rating based as part of the due diligence.

The target company has developed potentially ground-breaking payments technology, which is protected by two patent families and trade secrets.

The VC required an analysis of the technology’s earnings potential and risk profile – integrating economic, legal and technical perspectives.

Economic analysis

Our IP Economics team – with assistance from a patent attorney specialising in electronics - provided an analysis of the technology through an assessment of:

  • Incremental commercial utility;
  • Legal protection;
  • Market attractiveness;
  • Exploitation period;
  • Development risk;
  • Market and asset risk.

Our key findings

  • that the technology did indeed offer a step-up in commercial utility in a highly attractive market;
  • however, the claims of the two patent families only offered limited protection of the key features of the technology;
  • which limited the period during which the owner of the IP would have exclusive use of the invention; and
  • despite this, the complexity of the technology and the extent of the trade secrets provided the owner with a two year head start over rivals.

Outcome

The VC was satisfied that first-mover advantage and limited period of exclusivity were sufficient to meet its hurdle rate of return. It invested in the company and has already on-sold its stake.

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