Should I transfer the intellectual property of a product to get investors?

I've been working on a new software that could do a nice work on the current market, and I'm trying to get investors to be able to work full time on this project and deliver before the other companies realize what is lacking in their software.

Now, an advisor told me that I should create a company if I want to get investors involved, because they are not going to put money on a person but on a company (this part makes sense), and that I should transfer the intellectual property of the software to this newly created company.

Is it wise to transfer the IP to the company, even if the company will be mine at first (the main idea is that I will sell some shares to get money), or should I keep the IP and create a contract with my company to ensure that this newly created company will be the only company that could do business with my product?

My primary concern is that someone told me that I should keep it to me, because even if I wrote a song the recording studios will be able to handle everything, but the song will be mine forever, no matter what.

Software Intellectual Property

asked Mar 1 '12 at 01:08

Cross
141 points

My question back at you would be, do you *need* investors? If you listen to some of [DHH's](http://david.heinemeierhansson.com/) comments, he would say you're better off maturing the product on your own. Don't spend money you don't have, and keep all the glory to yourself. – Chase Florell 13 years ago
Nice Advice, but I think that the only way to keep up with the industry is to dedicate full time to this product, and that means quitting my day time job for this, although it looks good I need money to keep up with my expenses. I'll give a deep read of DHH comments, thanks for sharing this. – Cross 13 years ago

2 Answers

It will be extremely hard to attract investors without the IP in the company. They will think "What's to stop him taking his IP elsewhere?" and walk away.

The thing is, investors see so many pitches that it is a bad idea to give them anything negative, and this will be seen as a red flag.

answered Mar 1 '12 at 03:46

Steve Jones
3,239 points

It's tough to get investors to buy an idea. You want a company, so you can get started with the product and show an interest, market, value, revenue etc. Just because you personally own the IP and not the company while you're developing the product, doesn't mean it is totally unavailable. You transfer it to the company when you want. You may take on other partners in the company (a second developer or sales person) and give them equity. If the whole thing goes belly-up, you still own the rights to the product. All of this is negotiable and can be handled by a lawyer when necessary. I don't see how not giving the company ownership of the IP from inception paints you into a corner.

Consult a lawyer.

answered Mar 1 '12 at 08:32

Jeff O
6,169 points

Thanks Jeff, that's exactly what I'm thinking, my main concern is that I will transfer the IP to the company, if I can't get investors the guy who is helping me to create the Company, get the investors, etc. will own the IP of the product even when his work was not successful. – Cross 13 years ago