In 2017, we had a death in the portfolio. Once all the employees left, the only remaining assets were some patents, servers, domains, and a lot of code. Eventually we managed to sell that intellectual property (“IP”). Here is what we learned.
Reach out to everyone. If you’ve decided it’s worth it to try and recover something for the IP, reach out to absolutely everyone you know. That includes old customers, prospects, former customers, anyone who has ever solicited you for acquisition, your cousin, your aunt, etc. The point is don’t eliminate anyone as a potential acquirer as you don’t know what’s on someone’s product roadmap and be shameless about reaching out to your entire network. The acquirer of the IP in our dead company was a prospect who never actually became a customer. We also had interest from very random firms that weren’t remotely adjacent to our space.
You need great counsel. The code was once part of a company, and that company has liabilities, creditors, equity owners, former employees, and various other obligations. All of those parties are probably pretty upset with you that things didn’t work out. Before you embark on a path to sell the IP, consult with an attorney that can tell you who has a right to any proceeds collected, what the waterfall of recipients looks like, who can potentially block a deal, who you need to get approval from, whether patents are in good standing, etc. You’ll need to pay the attorney up front for his work and as you progress through the deal, so it takes money to make money from selling IP.
Get all the assets. Make sure you have access to all the assets. This includes all code, training modules, patents, domains, actual servers and hardware, trademarks, logos, etc. An acquirer is going to want absolutely everything even if there are some things he can’t necessarily use.
Be patient. Since the purchase price will likely be heavily earn-out or royalty based (the chances of getting an all cash deal up front are slim), you’ll need to be patient as the acquirer’s dev team absorbs the code, the sales team gets up to speed on new capabilities, and the acquirer evangelizes your product to the world. I expect if everything goes smoothly, we will be fully paid 18 to 24 months after the day the acquirer bought the code.
sammy@blossomstreetventures.com