Fundraising and IP Due Diligence: The Complete Founder’s Checklist

IP Due Diligence for Fundraising: A Founder’s 15-Item Checklist

By Harshdeep Singh Narula, FCS, LL.B — IP & Trademark Practitioner, Gurgaon

A trademark and IP practitioner’s 15-item checklist for founders preparing IP due diligence ahead of a fundraise — covering chain of title, registrations, exposure, and contract integrity.

IP due diligence is where a fundraise most often slows down — and sometimes where it dies. Founders spend months preparing pitch decks and financial models but treat IP as an afterthought, discovering only during a term sheet review that a founder assignment was never executed, a critical trademark is registered in the wrong entity’s name, or an employee’s IP assignment agreement is missing altogether. By that stage, the delay is measured in weeks and the negotiating leverage is with the investor.

The good news: IP due diligence is one of the most predictable parts of the fundraise process. Investors and their counsel look at broadly the same fifteen items every time. Founders who prepare the checklist six months before the intended raise close the diligence phase quickly and often at better terms.

Here is the checklist I now run through with every startup client before a Series A raise, organised into four categories.

Category 1: Chain of Title

This is where most deals stumble. Investors need to see a clean, unbroken chain from the individual creators of each material IP asset to the company. Missing links here are deal-killers.

1. Founder IP assignment to the company. Every founder must have executed a written assignment transferring all pre-incorporation IP (software, drawings, brand names, business plans, prior code) to the company. This is the most-missed item across Indian startups. Many founders assume incorporation automatically transfers IP; it does not.

2. Employee IP assignment agreements. Every current and former employee should have signed an IP assignment covering all work-product created during employment. The clause must be present in the appointment letter or a separate agreement — a boilerplate offer letter without IP language is inadequate.

3. Contractor, consultant, and freelancer IP assignments. Anyone paid to create IP (including developers, designers, copywriters, and consultants) must have signed a work-for-hire or IP assignment agreement. Verbal understandings do not transfer IP under Indian law.

4. University or prior employer IP release. Where a founder is a scientist, academic, or was employed at a large corporate before starting the company, obtain a written release confirming that the current venture does not use IP developed during that prior engagement.

5. Open source software audit and license compliance. For any startup building software, an audit of open source components and their licence obligations is essential. Copyleft licences (GPL family) can create IP disclosure obligations that alarm investors.

Category 2: Registration Status

6. Trademark registrations across relevant classes. Word marks, logo marks, and any distinctive brand elements should be registered in each class where goods or services are sold. Check registration status on the IP India portal, verify that the current registered proprietor is the company (not a founder personally), and confirm all renewal dates are current.

7. Patent applications status and prosecution history. For any patents filed, prepare the full prosecution history — application date, examination report responses, current status, and geographies. Investors expect visibility into where each patent stands.

8. Copyright registrations for key software or content. While copyright subsists automatically, registration provides evidentiary weight. For SaaS or content-heavy startups, registrations of core codebase versions and marquee content are worth completing before diligence.

Category 3: Enforcement and Exposure

9. Freedom-to-operate analysis for the core product. A written analysis confirming the startup’s core product or technology does not infringe existing patents or trademarks in target markets. Investors in deep-tech and consumer-brand startups specifically ask for this.

10. Trademark watch and pending oppositions. Any pending oppositions filed by or against the startup, with current status. Also, evidence of an active trademark watch service protecting the brand from third-party infringement.

11. Litigation history and pending disputes. Full disclosure of any IP litigation — infringement claims made or received, cease and desist notices, and settlement agreements. Investors will find this in diligence anyway; disclose upfront.

Category 4: Contract Integrity

12. Customer contracts and IP indemnity clauses. Review the IP indemnity clauses in customer contracts. Excessive uncapped IP indemnities create investor concern. Standard-limit indemnities with mutual carve-outs are acceptable.

13. Vendor contracts and IP encumbrances. Confirm no vendor contract creates an encumbrance on core IP. Sole-supplier arrangements for critical IP components can be a diligence red flag.

14. Licensing agreements — inbound and outbound. A schedule of all IP licences the company grants or receives. Perpetual, exclusive licences granted out of the company can reduce enterprise value substantially.

15. Confidentiality and trade secret regime. Documentation of trade secret protection measures — NDAs with all counter-parties, access controls on source code and know-how, and internal information security policies.

Common red flags investors respond to

• Trademark registered in a founder’s personal name rather than the company.
• Employee IP clause absent from the appointment letter (common in early-stage startups).
• Freelance developers who contributed to core code without written assignment.
• Open source components under GPL used in commercial closed-source product.
• Verbal understandings with technology co-founders who exited before formal incorporation.

Timing — start six months before the raise

The realistic timeline for completing IP due diligence readiness is four to six months. Trademark registrations pending examination cannot be accelerated; employee assignments once identified as missing take four to eight weeks to correct across a growing team; freedom-to-operate analysis takes six to ten weeks for a technology startup. Starting during the fundraise itself compresses timelines painfully and hands negotiating leverage to the investor.

Closing action list

• Run this fifteen-item checklist internally at least six months before your intended raise.
• Address chain-of-title gaps first — they cannot be fixed retrospectively.
• Convert boilerplate offer letters to include comprehensive IP assignment clauses going forward.
• Consolidate all IP records in a single data room folder ready for investor review.
• Engage IP counsel before the term sheet negotiation, not after.

Investors do not walk away from deals over IP issues that are honestly disclosed and being fixed. They walk away — or negotiate hard — when issues surface during diligence that founders should have known about. This checklist is the difference between the two outcomes.