Three Common Mistakes Made by Startup Companies

  1. Undercapitalization

Before building a tower, consider the cost. Many startup companies start with great intentions but their forecasts for revenue generation are too optimistic and there is not enough capital to sustain the business until it becomes established. Another related issue for companies seeking investors is failure to ask for enough money. Ask for what is needed with an eye toward some rainy days ahead.

 

  1. Failure to Protect Intellectual Property

Patent protection is what most companies think of when it comes to intellectual property and owning a patent is a great way to exclude your competition. However, companies that are not eligible for patent protection often assume that intellectual property is not something for them. In the process, trademarks and copyrights are overlooked. Every company has access to intellectual property rights—it’s just a matter of finding what you can protect for your company. Assume you have something worth protecting, find out what it is, and take the steps to formally protect your intellectual property.

 

  1. Not Finding the Right Market

Most companies offer a product or service that meets the needs of a particular market or group of people. Identifying that group is crucial in establishing early sales and driving a consistent stream of revenue to the company. When a company fails to identify a particular and correct target market, marketing efforts are spread too thin and the company message is not communicated efficiently to the people that need to hear it. Find your niche and drive your message home in your target market.

Patent Protection Is Not Always the Best Option

When a new technology is developed, obtaining a patent often becomes a priority. There are some situations, however, in which seeking patent protection is a less desirable option. One of those situations is when a technology is developed that cannot easily be reverse engineered—a technology that can be kept secret.

A classic example of this is the formula for Coca-Cola. Had the Coca-Cola Company sought patent protection, their patent would have expired in the early 20th century. However, because Coca-Cola knew that its formula could not be easily reverse engineered, the company opted to rely instead on trade secret protection. Now, well into the 21st century, Coca-Cola still has a secret formula and a brand that is very valuable.

A key to trade secret protection is in its name—keeping your technology secret. If a technology is in public view or can otherwise be easily reverse engineered, it’s very difficult to keep the technology secret. In such a situation, patent protection is preferable. The life of a patent is limited and extends 20 years from the filing date of a nonprovisional patent application assuming all maintenance fees are paid. In some cases, the term may be extended due to delay by the U.S. Patent Office during patent prosecution. In any event, the life of a patent has a definite ending point. Trade secrets on the other hand have no expiration. So if you have a new technology that can be kept secret with proper controls, you may want to seriously consider relying on trade secret protection instead of patent protection.