When investors enter a technology project, what are they actually investing in?
Jet Zero Australia's proposed Project Ulysses in Townsville reached several major milestones recently, including a $30 million funding round, strategic investment from POSCO INTERNATIONAL and final development approval.
The proposed sustainable aviation fuel refinery also involves technology from specialist providers, including alcohol-to-jet technology associated with LanzaJet.
That combination raises an important question for any technology business seeking investment:
What does the company actually own?
Owning the project is not the same as owning the technology
A company may own the project, customer relationships, land access or commercial opportunity while relying on technology owned by somebody else.
That is not necessarily a problem.
Licensing is a normal part of technology commercialisation.
But investors need to understand exactly what rights the business has.
A technology licence may restrict:
where the technology can be used;
how long it can be used;
what products can be produced;
whether the technology can be modified;
whether the rights can be transferred; and
whether the business can use it for future projects.
Those limitations can directly affect the value of the investment.
Investors will look at the IP
Before investing in a technology business, investors will often want to understand:
what IP the company owns;
what technology it licenses;
whether key patents are registered or pending;
whether licences can survive a sale or restructure;
who owns improvements;
whether employees and contractors have assigned their IP; and
whether important know-how is properly protected.
A weak IP position can become a commercial problem even when the technology itself is strong.
Clean up the IP before the capital raise
Businesses sometimes leave IP housekeeping until investors start asking questions.
That can slow a transaction down.
Before seeking significant investment, it is worth checking that ownership records, assignments, licences and confidentiality arrangements are all in order.
Investors are not only investing in what the business plans to build.
They are investing in the rights that allow the business to build it.