I had a call last month with a SaaS founder who’d just closed their Series A. Great news, right? Except the celebration was dampened by a $75,000 problem they discovered during due diligence and three months of delays that almost killed the deal.
The issue? They’d been operating in Europe and Asia for two years without any trademark protection. Their lead investor insisted they clean it up before finalizing the round. What should have been a routine closing turned into an expensive scramble to file emergency trademark applications across eight countries, with premium processing fees and rush legal work.
Here’s the thing: this wasn’t a careless founder. They were smart, focused, and building a genuinely innovative product. They just didn’t know what VCs would actually check during IP due diligence and by the time they found out, it cost them real money and nearly derailed their funding.
If you’re a SaaS founder planning to raise a Series A in the next 12-18 months, this article will show you exactly what investors look for during IP due diligence, the three critical gaps that kill valuations, and how to fix them before you’re in the hot seat.
What VCs Actually Check During IP Due Diligence
Venture capital firms aren’t IP lawyers, but they know that intellectual property problems can destroy enterprise value. During due diligence, they’re specifically looking for three things:
**First, they want to know you actually own what you’re building.** This means reviewing employment agreements, contractor agreements, and invention assignment paperwork. If there’s any ambiguity about who owns your core IP and whether it’s because a contractor didn’t sign the right paperwork or a co-founder left without a clear assignment and that’s a red flag.
**Second, they want to see that you’ve protected your brand and technology in the markets where you operate.** If you’re generating revenue in Europe but have no European trademark protection, that’s a gap. If you’re planning to expand into Asia but haven’t filed anything, they’ll want to understand your timeline and budget for fixing it.
**Third, they’re checking for existential risks.** Are you potentially infringing on someone else’s IP? Have you done a freedom-to-operate analysis? Are there any pending disputes or threats? These aren’t just legal questions and they’re business continuity questions.
Here’s what surprises most founders: VCs care less about how many patents you have and more about whether your IP strategy aligns with your business plan. If you’re operating globally but protecting nothing, that’s a problem. If you’re filing patents in countries where you have no customers and no plans to expand, that’s wasteful spending.
The Three IP Gaps That Cost SaaS Founders $50K+ in Valuation
Based on working with over 100 early-stage SaaS companies, I’ve seen the same three gaps come up repeatedly during funding rounds. Each one either reduces valuation, delays closing, or forces expensive last-minute fixes.
Gap #1: No International Trademark Protection (Despite International Revenue)
This is the most common and most expensive gap I see.
You launched your SaaS product two years ago. You filed a U.S. trademark and got it registered. Great start. But then you started getting customers in the UK, Germany, Australia, and Canada. Maybe you even set up European hosting to improve latency. Revenue is growing internationally—30% of your MRR comes from outside the U.S.
During due diligence, the VC’s lawyer asks: “Where are your trademarks registered?”
“U.S. only,” you answer.
That’s a problem. Because trademark rights are territorial. Your U.S. registration gives you zero protection in Europe, zero protection in Asia, and zero protection in Australia. If a competitor or trademark squatter registers your brand name in those markets before you do, they can block you from operating there or worse, demand payment to transfer the rights.
The fix requires filing trademark applications in every country where you have meaningful revenue or growth plans. For a typical SaaS company, that’s 5-10 countries minimum. At $1,500-$3,000 per country (filing fees plus attorney costs), you’re looking at $15,000-$30,000. Add expedited processing if you’re in a rush, and it doubles.
One founder I worked with discovered this problem three weeks before their term sheet was set to expire. They ended up spending $52,000 on emergency filings across nine countries, plus another $8,000 in legal fees for the expedited work. The VCs didn’t walk away, but they did reduce the valuation by $200,000 to account for the “IP cleanup” as a post-closing expense.
Gap #2: Unclear Ownership of Core Technology
Investors want certainty that your company actually owns the technology it’s built on. That means every person who contributed to your codebase, product design, or core algorithms needs to have assigned their rights to the company—in writing, before they did the work.
Where this breaks down:
**Early contractors who built your MVP.** Did they sign an agreement that explicitly assigned all IP rights to your company? Or did you just pay them via Upwork with no paperwork? If it’s the latter, they technically still own their contributions.
**Co-founders who left early.** When your technical co-founder left after six months, did they sign an intellectual property assignment? Or did they just walk away with an informal understanding? Without a signed document, they could claim ownership of the code they wrote.
**Open source dependencies.** Are you using open-source libraries with viral licenses (like GPL) that could create obligations to release your source code? Most VCs will want to see a detailed inventory of your dependencies and confirmation that you’re compliant with license requirements.
I’ve seen deals delayed by 30-60 days while founders scrambled to track down former contractors and get them to sign retroactive IP assignments. In one case, a former developer demanded $15,000 in “consulting fees” to sign the paperwork essentially holding the funding round hostage.
The preventative fix is simple: use proper contractor agreements with IP assignment language from day one. But if you’re already past that point, you’ll need to audit your contributor history, identify gaps, and get signatures before due diligence starts.
Gap #3: No Freedom to Operate Analysis in Key Markets
Here’s the scenario: You’ve built a novel feature that differentiates your product. Your investors love it. But during due diligence, they ask: “Have you done a freedom-to-operate analysis to make sure you’re not infringing anyone else’s patents?”
If the answer is “no,” that’s a risk they’ll want quantified.
A freedom-to-operate (FTO) analysis is basically a search for existing patents that could cover what you’re doing. It doesn’t guarantee you’re safe—patent law is complex and full of gray areas—but it shows you’ve done your homework.
The cost of an FTO analysis varies widely depending on scope. A basic search focused on your core technology in the U.S. might cost $5,000-$10,000. A comprehensive analysis covering multiple jurisdictions and technology areas can run $20,000-$50,000.
Most early-stage SaaS companies skip this because it feels like an expensive insurance policy on a problem that probably won’t happen. But if you’re raising significant capital, investors will want to know you’ve at least looked.
I worked with a fintech SaaS company that postponed their FTO analysis until two weeks before their Series A closed. The analysis came back with three potentially relevant patents. None of them were show-stoppers, but the VCs required the company to set aside $100,000 in escrow as a contingency reserve and effectively reducing the amount the founders could take off the table.
If they’d done the analysis six months earlier, they could have designed around the patents or sought opinions from counsel that would have satisfied the investors without the escrow requirement.
The 90-Day Pre-Series A IP Checklist
If you’re planning to raise a Series A in the next 12-18 months, here’s what you should do right now 90 days before you start serious fundraising conversations:
Month 1: Audit What You Have
Week 1-2: Trademark Audit**
– List every market where you generate revenue or have users
– Check where your trademarks are registered (probably just the U.S.)
– Identify gaps between where you operate and where you’re protected
– Get cost estimates for filing in priority markets
Week 3: Technology Ownership Audit**
– Review all employment agreements, contractor agreements, and consultant agreements
– Identify anyone who contributed to your core technology without a signed IP assignment
– Make a list of who you need to track down for signatures
Week 4: Open Source Compliance Audit**
– Run a dependency scan on your codebase (tools like FOSSA or Black Duck can help)
– Review licenses for any GPL, AGPL, or other viral licenses
– Document your compliance and flag any issues
Month 2: Fix the Gaps
Trademark Filings
– File trademark applications in your top 5 revenue-generating countries outside the U.S.
– Use the Madrid Protocol if possible (it’s more cost-effective for multiple countries)
– Budget 4-6 months for registration, so start early
IP Assignment Cleanup
– Contact former contractors and co-founders to get retroactive IP assignments
– Be prepared to pay reasonable “consulting fees” to get signatures (it’s cheaper than losing the deal)
– Have your lawyer draft clean assignment agreements
FTO Analysis (if applicable)
– If you have novel technology or are in a patent-heavy space (e.g., fintech, AI, biotech), commission an FTO analysis
– Scope it to your core differentiating features and your primary markets
– Get it done early so you have time to adjust your roadmap if needed
Month 3: Organize Your Documentation
Create a Data Room
– Set up a secure folder (Google Drive, Dropbox, or a proper data room platform)
– Organize all IP-related documents: trademark registrations, patent filings, contractor agreements, IP assignments, FTO reports
– Make sure everything is labeled clearly so investors can find what they need quickly
Prepare Your IP Summary
– Write a 1-2 page memo summarizing your IP strategy
– Explain what you’ve filed, where you’re protected, and why you made those choices
– Address any known gaps proactively (don’t wait for them to ask)
Having this ready before due diligence starts shows investors you’re thoughtful and organized. It also dramatically speeds up the process and I’ve personally seen closings accelerate by 2-3 weeks just because the founder had clean documentation ready to go.
Smart Filing Strategies vs. Expensive Overkill
Not every SaaS company needs patents. Not every company needs trademarks in 50 countries. The goal is strategic protection that aligns with your business plans and not comprehensive coverage that drains your budget.
Here’s how to think about it:
Trademarks: Protect Where You Do Business (or Plan To)
If you’re generating revenue in a country or planning to enter that market within the next 12 months, file a trademark application. If you have no customers there and no near-term plans, skip it for now.
Priority markets for most SaaS companies:
– United States (obviously)
– European Union (file one EU trademark to cover all 27 member states)
– United Kingdom (post-Brexit, this is separate from the EU)
– Canada and Australia (if you have meaningful English-speaking customer bases there)
– Key Asian markets where you operate (Japan, Singapore, India, etc.)
Patents: Only If They Actually Support Your Business Goals
Patents are expensive and time-consuming. A single U.S. patent can cost $15,000-$30,000 from filing to issuance. International patents multiply that cost by every country you file in.
For most SaaS companies, patents make sense if:
– You have truly novel algorithms or methods that competitors can’t easily design around
– You’re in a patent-heavy industry where investors expect to see them (e.g., AI/ML, fintech, health tech)
– You’re planning to license your technology or build a platform that others will integrate with
If your differentiation is in execution, customer experience, or network effects in patentable technology and you’re probably better off investing in trademark protection and trade secret management instead.
Trade Secrets: Protect Your Secret Sauce
If you have proprietary algorithms, unique datasets, or internal processes that give you a competitive edge, treat them as trade secrets. That means:
– Restricting access to only those who need it
– Using confidentiality agreements with employees and contractors
– Avoiding public disclosures (including in patent applications, which are public documents)
Trade secrets can be just as valuable as patents and they don’t expire. But they require discipline to maintain.
What to Do If You’re Already in Due Diligence
Let’s say you’re reading this and thinking, “Oh no, I’m already in due diligence and I have these gaps.”
Don’t panic. Here’s what to do:
Be Transparent
Don’t try to hide IP gaps. Investors will find them, and discovering a problem you didn’t disclose is far worse than hearing about it from you upfront.
Quantify the Fix
Get cost estimates for fixing the issues. Show the investors you understand the problem and have a plan to address it. Most VCs are fine with post-closing IP cleanup if the cost is reasonable and the timeline is clear.
Negotiate Escrows or Budgets
If the fix is expensive, propose setting aside funds from the raise to handle it. For example: “We need to file trademarks in six countries, estimated cost $25,000. We’ll allocate that from the Series A proceeds and handle it in the first 90 days post-closing.”
Use It as a Learning Opportunity
Show investors you’re thoughtful about IP going forward. Explain what processes you’re putting in place to avoid similar gaps in the future. That demonstrates maturity and diligence.
I’ve seen deals where founders proactively flagged IP gaps, presented a clear remediation plan, and actually strengthened investor confidence in the process. Transparency + competence goes a long way.
Your Next Steps: Don’t Wait Until Due Diligence
The best time to build your IP strategy was when you incorporated. The second-best time is right now before you’re in the pressure cooker of a funding round.
If you’re a SaaS founder planning to raise a Series A, here’s what I recommend:
1. Do the 90-day audit outlined above. It’s an afternoon of work that could save you $50,000+ in last-minute fixes.
2. File trademarks in your top revenue markets. Don’t wait until investors ask. Get the applications in now so you have something to show during due diligence.
3. Clean up your IP assignments. Track down anyone who contributed to your technology without a signed agreement and get the paperwork done.
4. Have a clear IP strategy memo ready. One page explaining what you’ve filed, where you’re protected, and why you made those choices. It shows investors you’re thinking strategically.
The founders who do this early don’t just avoid expensive problems and they use IP as a competitive advantage. They show investors a thoughtful approach to protecting their business, they demonstrate operational maturity, and they close rounds faster because there’s no scramble to fix gaps.
Look, I get it. When you’re heads-down building product and chasing revenue, IP strategy feels like something you can deal with later. But “later” turns into “three weeks before your term sheet expires,” and suddenly you’re writing big checks to fix problems that were avoidable.
Ready to Get Your IP House in Order?
If you’re planning to raise a Series A in the next year and want to make sure your IP strategy won’t derail your funding, I offer free 15-minute IP strategy calls for pre-Series A founders. No sales pitch, no pressure just a quick conversation to help you understand what gaps you might have and what to prioritize.
Book a free 15-minute IP strategy call
Or download my free SaaS Founder’s IP Due Diligence Checklist, which is a detailed 47-point audit you can run yourself to identify gaps before investors do.
Questions about your specific situation? Email me at crossborderiptrxns@gmail.com or schedule a call. I’m here to help anytime.
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About the Author
Cameron Reid is the co-founder of CrossBorderIP, where he advises SaaS companies, tech startups, and emerging technology innovators on international IP strategy. With over 20 years of experience spanning Big Law, in-house counsel roles, and startup advisory, Cameron specializes in helping technology companies protect and scale their IP globally particularly across the US and Asia-Pacific markets. He believes the best IP strategy is one that serves your business goals, not the other way around.
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**Disclaimer:** This article provides general information about international IP strategy and should not be relied upon as legal advice. IP laws vary significantly by jurisdiction, and every business situation is unique. For specific guidance on your IP protection needs, please consult with a qualified attorney in your jurisdiction.