For many drug discovery startups, intellectual property (IP) is one of the company’s most important assets. Patents, know-how, data, and other forms of IP can support fundraising activities, attract strategic partners, and underpin future commercial growth.
As companies progress towards investment, their IP position comes under increased scrutiny. Investors and their advisers may examine not only the IP assets held by the company, but also the extent to which those IP assets support the business’s products, technology and long-term objectives.
What challenges can arise when IP is reviewed during investment due diligence?
Investment due diligence often requires companies to provide detailed information about their IP position. This can involve gathering documentation from multiple sources, demonstrating a clear chain of title, explaining how IP supports commercial objectives, responding to freedom-to-operate questions, and providing evidence to support strategic decisions that may have been made over a number of years.
Without adequate preparation, addressing these questions can become time consuming and may divert a management team’s attention away from ongoing fundraising activities. Taking a proactive approach can help drug discovery startups better understand their IP position and prepare for discussions with investors and their advisers.
What are 5 strategic strategies drug discovery startups can use to prepare their IP position for investment?
The following practical strategies can help startups prepare for investor scrutiny and due diligence activities:
1) Establish clear ownership of your IP
Investors may expect companies to demonstrate a clear chain of title for IP underpinning the business. This can be particularly important where innovation has been developed by founders, employees, consultants, academic collaborators, universities, or third-party service providers. Reviewing assignments, employment contracts, consultancy agreements, and collaboration arrangements may help establish how ownership has transferred from inventors or creators to the startup.
Where discrepancies are identified, startups may wish to consider whether additional assignments or confirmatory documentation are required. Addressing IP ownership issues early can help reduce uncertainty during due diligence and provide greater confidence that the relevant IP assets are held by the startup.
2) Audit your IP before investors do
Before entering fundraising discussion, it can be beneficial to review the startups IP position from an external perspective. This may include identifying patent applications, granted patents, know-how, trade secrets, databases, software, trade marks, licences, contracts, and other IP assets that contribute to the startup. An internal audit can also help identify gaps, inconsistencies, or areas that may warrant additional attention before due diligence begins.
By understanding what IP assets exist and how they support the business, startups are better prepared for investor scrutiny.
3) Craft a coherent IP narrative
Investors are frequently interested in understanding how IP supports the startup’s broader strategy. As a result, it can be helpful to develop a clear and consistent narrative explaining how the startup’s IP position supports key technologies, products, development programmes, and future opportunities.
A coherent IP narrative may also help explain why particular IP filing decisions have been made, how proprietary know-how contributes to competitive advantage, and how the startup’s IP strategy aligns with its commercial objectives.
4) Prepare for investor questions
IP due diligence often involves more than reviewing documents. Investors and their advisors may ask questions relating to ownership, inventorship, portfolio strategy, competitive positioning, patent prosecution history, and future filing plans. They may also seek to understand whether the startup has considered potential freedom-to-operate (FTO) risks associated with its preferred development pathway.
While investors do not necessarily expect every possible issue to have been resolved, they are interested in understanding whether potential risks have been identified and whether appropriate mitigation strategies have been considered where necessary.
Preparing for these discussions in advance can help management teams’ response more effectively and demonstrates a proactive and commercially focused approach to IP management.
5) Organise your IP data room
Well-organised documentation can play an important role in investment due diligence. Startups may wish to ensure that key documents can be accessed efficiently, including patent filing records, assignments, licence agreements, employment contracts, invention disclosures, portfolio summaries and other relevant materials.
A structured IP data room can help streamline due diligence activities, reduce administrative burden, and make it easier to respond to investor requests as they arise.
How can drug discovery startups maintain IP investment readiness as they grow?
Preparing an IP position for investment is rarely a one-off exercise undertaken immediately before fundraising. Instead, it is most effective when embedded within the startup’s broader business and innovation strategy.
Regularly reviewing ownership arrangements, monitoring the development of new IP assets, assessing FTO, and ensuring that the startup’s IP position continues to align with commercial objectives can help maintain investment readiness over time. Engaging with experienced IP professional like Secerna may also help startups identify potential issues before they arise, prioritise activities that are likely to have the greatest commercial impact, and present their IP position more effectively during investment discussions.
For drug discovery startups, investment readiness is about understanding existing IP assets, managing them strategically, and demonstrating how they support future growth and value creation.
If you are attending ELRIG Drug Discover 2026, come and talk to our attorneys at stand D11 to discuss the importance of IP investment readiness.
