What investors see that most spinout founders don’t.
A moat, in investor language, is the set of competitive advantages that make your technology hard to replicate. Your patent is one input to that moat. It is not the moat itself.
I spent years in corporate finance and M&A, where part of the work was valuing IP and goodwill on balance sheets. What I learned there is what most spinout founders never see: the way a sophisticated acquirer or investor looks at a patent portfolio is fundamentally different from that of a researcher or a patent attorney. The commercial question is not ‘is this IP valid?’ but ‘is this IP defensible, scalable, and worth what the company claims?’ Those questions are different.
Any patent that your university TTO (or you directly) filed is a legal instrument written for patent examiners and lawyers. Investors look at it differently, more like a commercial narrative written for people who need to know that their investment will be defensible. These are different documents, approaches, and questions. University spinout founders, in particular, are often confused because they’ve never been taught to bridge them.
That gap is what I write about here.
To provide a quick example, I recently encountered this gap while advising a deep tech energy venture in Europe. The founding team had superb credentials with scientific backgrounds, a defensible technology, and a term sheet from a strategic corporate partner. But they couldn’t answer the commercial IP question: what exactly would a well-funded competitor have to do differently to replicate what they’d built? The patent addressed that question for a patent examiner, but not for the investor’s lawyers, who were structuring the royalty terms in their favor because the founder couldn’t demonstrate what made the technology genuinely hard to replicate.
Numbers that make IP non-negotiable
How important is getting the IP translation correct?
According to recent data from Qubit Capital, patent-owning startups are 6.4 times more likely to attract investment than their peers. The European Patent Office has an even higher figure, over 10x more likely for deep tech ventures specifically. The reasons are clear: patents command higher valuation multiples, serve as tangible assets during diligence, and position founders more strongly in negotiations with partners, acquirers, and future investors.
However, this also works in reverse: a patent that investors can’t evaluate is worth significantly less than one they can, and will be valued accordingly. In my experience, spinout founders often present their IP in a way that investors can’t evaluate (and many times, the founders can’t either because the university filed it), because the language of patent claims and the language of commercial defensibility don’t connect.
How investors, not lawyers, evaluate IP
What language are investors actually speaking? Here’s what they evaluate:
- Strength and scope: are patents substantial, relevant, and clearly defined. This is not “the patent covers X process” but “a competitor building this product would need to use a fundamentally different approach that increases their cost by Y.”
- Ownership verification: clear documentation for each IP asset including assignments from founders, employees, and contractors. For spinouts, you need clarity on what your university owns versus what you do.
- Legal vulnerability: disputes, litigation, or third-party claims. Have the patents been contested and could be vulnerable to future challenges?
- Business case alignment: do patents support long-term growth plans and enable product differentiation, market entry, or technological leadership. Patents that are not aligned with the company’s roadmap diminish investment attractiveness.
- Enforceability: can patents actually be defended if challenged?
Founders should be aware of the structural challenges before they negotiate any University IP agreements with their tech transfer office; or, if not before, at least be aware of it now and seek to remedy any weak areas.
License vs. assignment trade-offs
Beyond the diligence checklist, there is a structural question which most spinout founders don’t ask early enough: does your company own the IP or just license it? With full ownership, founders and investors can control how IP is used, changed, or commercialized with no need to check in with the parent institution. Freedom of action provides the level of speed and flexibility which is most attractive to early-stage investors.
Licensing keeps the university more involved by allowing it to benefit through royalties, revenue share, or milestone payments. That is often necessary and helpful for PhD and post-doc founders to get off the ground. However, it can slow everything down if every IP change requires approval. As I wrote in The Spinout Negotiation, a university’s negotiated terms may also include anti-assignment clauses that require a university sign-off on any acquisition. That can thwart a founder’s future activities or, at minimum, create doubts among investors about freedom of action.
In practical terms, commercial protection is what a spinout founder builds on top of the licensed university IP, including continuation patents filed in the company’s name, trade secrets, manufacturing know-how, or proprietary datasets. It is often more valuable than the patent because the founder, not the University, owns it outright. Most spinout founders don’t know to build this layer, which brings us to the questions investors ask that exposes this gap.
Here are five questions investors consistently ask, and most spinout founders can’t answer:
1. Can a well-funded competitor design around your core patent?
Weak patents don’t just fail to protect; they actively help competitors by creating roadmaps for designing around your innovations faster and cheaper. Investors want a specific analysis of the claims, not a general assertion that the patent is broad.
2. What is your freedom to operate?
Does the company have the legal right to commercialize the technology without infringing existing third-party patents? As mentioned earlier, this is a separate question from whether the company’s own patent is valid, but often as important.
3. What is the licensing revenue potential of your IP?
Even if the company never licenses its IP, investors want to know that it can because licensing potential signals that the IP is genuinely valuable to others in the market. If a university licenses your IP, are you free to license it elsewhere?
4. What happens to the IP in an acquisition?
Are there anti-assignment clauses that require TTO approval for any M&A transaction? This is a red flag in any spinout term sheet, as noted earlier, and the question needs a specific answer.
5. What IP does the founder own outright, independent of the university license?
Continuation patents, trade secrets, know-how, and proprietary data generated since incorporation: has this been mapped clearly enough to communicate to investors?
This last question underscores the most actionable part of this issue, because for many spinout founders, the ability to build IP beyond the university layer is a lot more than they think.
The four-layer moat
To clarify this further, the IP moat for a spinout founder has four layers, but only the first typically comes from the TTO:
Most spinout founders have more in layers two, three, and four than they might realize; they just haven’t mapped it or communicated it to anyone. Which is what the IP narrative section addresses.
The four-layer mapping often surfaces more than founders expect. I worked with a materials science founder who assumed her IP was entirely the licensed base patent that her TTO filed. When we started integrating the four layers approach, she realized the company had developed three distinct manufacturing protocols that were not disclosed in the patent; generated eighteen months of performance data from a corporate pilot; and had two potential continuation patent claims her attorney had flagged but never pursued. None of it had been communicated to investors, even though she had already raised seed capital and was further along in her venture than most other founders. That was potentially a costly gap to leave open.
ONE ACTION
Before your next investor conversation, do three things:
- Answer the five investor questions above in plain language. If you can’t answer any without calling your patent attorney, that is the gap to close before your next investor conversation.
- Map your four-layer moat, eg. licensed base patent, continuation patents filed in the company’s name, trade secrets and know-how not disclosed in the patent, and proprietary data generated since incorporation. Your venture may have more in layers two, three, and four than you realize (or anticipate).
- If you work with a university TTO, ask them about the geographic scope of your patent. Did they file a PCT application? Know the geographic scope of your IP protection.
Patents are the beginning of your IP strategy, not the end. The commercial narrative you build around them is the difference between an investor conversation that accelerates your round and one that stalls it.
How I can help
IP translation is a commercial communication problem, not a legal one. My advisory practice helps spinout founders translate patent claims into investor language, map the four layers, and connect IP to the overall funding sequence. For filing, litigation, or freedom-to-operate analysis, talk to an IP lawyer or your TTO. My focus is helping founders build a fundable business on top of their IP.
Coda: The Global Dimensions
My work in emerging markets taught me something about IP that most US-based founders learn too late: in jurisdictions where IP enforcement is weak or slow, the moat you build around the patent — trade secrets, know-how, proprietary data — matters more than the patent itself. You cannot rely on the legal system to protect you. You have to make the technology hard to replicate. That instinct informs the four-layer framework above and the global filing guidance that follows.
EU: Unified Patent Court changes the calculus.
The UPC launched in 2023. It’s a single patent filing that provides protection across 17 EU member states simultaneously. For ETH Zurich, EPFL, and other European spinouts, this initiative makes European IP protection significantly more valuable than it was three years ago. For US-based founders entering European markets through EIC grant programs, a UPC filing is now the most efficient path to EU protection.
UK: a two-track filing requirement
Post-Brexit, UK patents are now filed separately from EU patents. For spinout founders at universities such as Oxford, Cambridge, or Imperial, the choice is between EU UPC coverage and UK national filing. Your primary commercialization market should decide this.
China: defensive filing imperative.
China is an IP minefield: a US or EU patent provides zero protection against Chinese manufacturers unless a Chinese patent is also filed. For deep tech founders with technology that could be manufactured or deployed in China, such as advanced materials, energy technology, industrial hardware, a China filing is necessary, and should be done quickly, to prevent IP copycats.
PCT: a common app for venture founders
The Patent Cooperation Treaty is a single international application that preserves filing rights in 150+ countries for 30 months. This gives founders time to validate the technology commercially before committing to expensive national phase filings. Ask your TTO whether a PCT application has been filed and which national phases have been entered. The geographic scope of your IP protection will depend on this information.
The commercial value of your IP is only as strong as the jurisdictions where it is protected, and where your business is or will be focused at the initial or subsequent stages. A patent that covers the US but not China or the EU is a partial moat at best, and investors in those markets will ask about it. Much depends on how global your ambitions are.
Sources
- Qubit Capital: “How Investors Evaluate IP & Patents in Startup Acquisitions” (December 30, 2025)
- Golden Egg Check: “How to Handle IP Due Diligence for Deep Tech Startups” (April 13, 2026)
- PatentPC: “IP Strategy for Spinouts and Corporate Venture Building” (April 25, 2026) ·
- PatentPC: “How Patent Laws Impact Deep Tech Startups” (April 14, 2026)
- Schell IP: “Deeptech Patents: Patent & Startup Brief” (April 7, 2025)
- Thompson Patent Law: “US Patent Process in 2026” (February 7, 2026)
- Tangible IP: “The Year in Review and 2026 Outlook” (January 14, 2026)
- Murgitroyd: “Intellectual Property Trends & Predictions for 2026” (March 31, 2026) ·
- AsiaTechDaily: “Lost in Translation: Why Deeptech Startups Struggle to Scale” (April 30, 2026)
- Fifty Years: Spinout Playbook (fiftyyears.com) · European Patent Office: Patent Statistics Report 2025 · WIPO: PCT Statistics 2025