Founders typically envision selling their entire company: revenue streams, brand, operations and everything in between.
And in most cases, that’s the best approach for landing a meaningful deal.
But sometimes you can’t sell your entire business. Maybe it’s not profitable, so buyers aren’t interested. Or there’s another reason why it’s time to shut down the company.
In those instances, it might make sense to sell the company’s intellectual property (IP). This could include a content library, software algorithm, client list, audience or even processes for doing the work.
“What you have may well have value to somebody,” explained James Marciano, CEO of M&A advisory firm Tuck Advisors, which specializes in selling education and healthcare tech companies. “Sometimes founders will underestimate the value of [their IP]. Under the right circumstances, those things can be acquired by somebody who really appreciates that.”
But business owners sometimes fall on the opposite side of the spectrum, too: overestimating the value of what they’ve created.
The truth is, your IP is only valuable if another business can use it to improve their financial metrics — and sometimes it’s challenging to make that case.
Understanding what counts as IP and its potential value can open the doors for monetization without selling the entire company, even as a company shutters.
Why founders sell their company’s IP
Founders usually look to sell their IP when it’s impossible to sell the entire business. Selling IP gives the business owner an opportunity to make some money or see some of what they’ve created live on, even if the business itself is no longer sustainable.
Brigitte Lyons, founder of Podcast Ally, closed her podcast booking agency, Podcast Ally, in May 2023. But then, in January 2024, she sold the agency’s IP.
“That is a testament to the strength of our reputation and the IP I created,” she wrote in a blog post.
Her company’s IP included customer contacts, website, podcast and blog posts. But the most valuable asset was the codification of the Podcast Ally approach. Lyons had created systems for everything involved in the agency’s work. This included a tool she called the Podcast Relationship Management database.
“That’s just amazing to me,” she told They Got Acquired. “It drove home how much opportunity there is around us, if we think to look or ask.”
Chris Erwin, the founder of RockWater, an M&A advisory for businesses within the creator economy, sees media companies sell videos, newsletters, content verticals and podcasts — and even their channels of distribution — if they’re not performing well or if the company needs to refocus their resources elsewhere.
“They might actually sell off some of their new business initiatives that are distracting their team,” he shared, then use the proceeds to reinvest in the core business.
One of the tough parts about selling IP is it can be challenging to find an M&A advisor to help you. While Marciano and Erwin take on some of these clients, most advisors or brokers want to work with sellers they are confident they can close a deal for, and selling IP is not a sure bet.
Many founders end up pitching buyers themselves, or reviewing opportunities from buyers who find them. If you go this route, just make sure you use an M&A lawyer for the transaction.
What is intellectual property, or IP?
Intellectual property can be tricky to define. The legal definition often cited is “creations of the mind.”
To go deeper, Shefali Lakhani, managing attorney at the business and IP law firm Lakhani Legal, outlined four core categories:
- Trademark. “It protects your brand assets by distinguishing your offers from competitors in the marketplace and can also communicate important information about your brand,” she explained. This can be a word, mark, symbol, phrase or design. Examples of a trademark include a company’s name, slogan or logo.
- Copyright: “A copyright protects original works of authorship that are fixed in a tangible medium,” Lakhani said. Examples of a copyright include artistic works (paintings, photos, illustrations and musical compositions), literary works (books, blog posts and poems) and digital creations (online courses, website content and computer programs).
- Patent: “A patent gives the owner the exclusive right to make, use or sell an invention for a limited period of time,” Lakhani said. “It applies to new and useful processes, machines, compositions of matter, or functional designs for manufactured products.” Examples include a new skincare formula, a unique piece of hardware, software algorithm that improves performance, or innovative tool or device.
- Trade secret: “It’s information that 1.) has independent economic value because it is not generally known, 2.) would be valuable to others who cannot legitimately obtain it, and 3.) is subject to reasonable efforts to keep it secret,” Lakhani shared. “All three elements must be met to be considered a trade secret.” Examples of trade secrets include internal processes, financial models, formulas, or marketing and customer lists.
Note that trademarks, copyrights and patents are registered with an agency, while trade secrets are protected through confidentiality measures, like nondisclosure agreements, internal policies and secure data practices.
The tricky part about IP, though, is there are a lot of gray areas, and even areas that aren’t gray can be confusing to buyers and sellers.
For example, social media accounts can be difficult to define and often have multiple layers of IP. The content might fall under copyright, while the handle or names might be trademarked.
You’ll also often see domain names lumped under IP when they contain a brand’s name, but, Lakhani explained, they are technically contractual rights.
“While not every intangible asset qualifies as IP in the legal sense, many of these assets exist alongside IP and often might be lumped into the same category in business deals, especially when transferring or valuing a brand as a whole,” Lakhani said.
If you’re not sure what counts as IP, work with a lawyer to figure that out. They can also help ensure these assets are legally protected before a sale.
What’s your IP worth? How to value your intellectual property
So how do you value your IP? This is another challenging part of the process.
It’s common for founders to overestimate how much money their IP might be worth, because they’ve put effort into creating it. But buyers aren’t interested in the effort you put in along the way; they only care about the result, and how it can help their business.
In the end, IP is only worth what the market will pay for it.
Here are three methods for valuing IP from The World Intellectual Property Organization (WIPO) that might help you assign value:
- Income method: How much money is the IP expected to generate? This method is easiest to apply when IP assets are bringing in cash flows that can be projected into the future. If it’s not bringing in money, you can still estimate what that might look like going forward.
- Market method: What have similar IP assets in similar circumstances sold for? If you have comparables to look at, that can help you justify your price.
- Cost method: How much would it cost to recreate or replace the IP? This can be especially useful when the economic benefits can’t be accurately quantified or when it would be hard or time-consuming to replicate the assets. For example, if you’re selling an email audience, how much money and time would it take the buyer to build that list on their own?
Just like valuing a company, it’s important to understand why a potential buyer is interested in your IP — because that affects how much they’ll pay for it.
Maybe they want to eliminate competition, add a new line of business or avoid sinking resources into building an asset from scratch.
“The goal is to identify buyers that we think would value that IP the most, and then put it out there,” Marciano said. “What we always say to folks is, ‘We don’t really know what your IP is worth. We’ll go to the market and find out what people think it’s worth today — not yesterday, not tomorrow, but today.’”
In the media industry, Erwin has seen founders rely on vanity metrics, like total impressions or audience engagement, to value IP. But when there’s a clear business monetization model attached to the IP, he recommends focusing on profit and revenue. If the IP hasn’t been monetized, you can estimate value by calculating how much impressions or views could generate under typical ad or sponsorship rates.
How selling IP differs from selling a business
Generally, selling IP is similar to selling an entire company. The main difference is scope.
“Once those assets are defined, the parties negotiate the terms of the sale, often documented through an assignment agreement,” Lakhani explained. “If the IP is registered, ownership must then be updated with the appropriate agency.”
When selling IP, due diligence focuses particularly on the specific IP rights.
For example, if you’re selling trademarked assets, “due diligence would entail confirming actual registration and ownership of the registered mark, reviewing licensing agreements (if any), as well as making sure no one else is using the mark in a way that could limit its value or create potential conflicts,” Lakhani said.
Marciano estimated the average IP sale takes 60 to 90 days to close — less time than the typical 6 to 9 months it takes to sell an entire business.
4 tips for selling your IP
When selling IP, keep these tips in mind.
- Get legal protections in place. When building a business, IP can easily get overlooked. But it’s important to make sure your IP is properly documented and protected. “This includes having contractors, vendors and collaborators assign over any IP rights in the work they create for the company,” Lakhani said. “Without those assignments, the company may not actually own what it thinks it owns.”
- Be realistic about value. Marciano shared a cautionary tale of a client who was interested in selling IP. A broker valued the assets at $20 million, but Marciano estimated they were worth closer to $6-8 million. The client opted to work with the broker that valued the assets higher — and they never found a buyer. “At that point, they wasted a lot of time and energy, and they decided to shut the division down, lay off everybody, and disappoint 35 or 40 customers,” he said.
- Sell while you can afford good counsel, Marciano advised. A lawyer can help throughout the process — from identifying what’s classified as IP to ensuring you’re protected to structuring the sale agreement.
- Clearly define the sale. When selling IP, it’s important to clearly define what’s being sold. Is it all IP rights? Only certain assets? Limited use? Get clear on exactly what you’re transferring to the new owner, so there are no surprises.
The average IP sale takes 60 to 90 days to close, Marciano estimated, compared to a sale process for a full business, which typically takes 6 to 9 months. A previous version of this story misstated that timeline.
