Company Structure, Formation & Corporate Basics

Retaining a license to your IP

It may seem logical and fair that the founders contributing IP they invented to launch a new startup should retain a license to that IP should the company fail or should the founders identify other uses for the IP outside those contemplated by the company. After all, the founders developed the idea and invented the IP prior to forming the company.

However, venture capitalists and other institutional investors will almost always object to the founders retaining rights to the IP. From a business perspective, the investors want to ensure the company has every chance to succeed and that any IP will be available in the future under circumstances that may be difficult to predict. From a signaling perspective, the investors want to see that the founders are entirely committed to the startup they are funding and aren’t hedging their bets or using the IP for other purposes.