A couple of years ago, we explored how tech companies can put measures in place to protect their physical, financial, and intangible assets. But in light of the increasing complexity around intellectual property (IP) rights and the fallout of the Silicon Valley Bank (SVB) collapse, we thought it was worth revisiting best practices for startups who want to safeguard their assets.
Protecting your IP
Let’s start with IP security since it’s a big topic. First, zoom out and figure out what you need to protect. What would negatively impact your business if it got out? Whether it’s an algorithm or a core business idea, get clarity about what sets your company apart and what creates its unique value-add for customers.
Then, think through how you’ll protect your valuable IP. That might mean patenting algorithms. For an added layer of security, you might distribute components of whatever you want to protect across multiple patents.
Employee data and IP usage
Also, make sure your company can track how its data gets used and moved. The right people should get flagged for unusual data activity, like huge downloads or files moving to an unexpected location.
It’s important to make sure this protection applies to every employee’s device, especially if your employees work remotely. Ideally, you want to have them using accounts that you can disable remotely and operating in cloud environments that you’ve secured.
To further protect your IP, think through access rights. As an agile startup, it’s tempting to want to give everyone access to everything so you’re never dealing with permissions roadblocks. Don’t. The more you can control roles and responsibilities in the digital sphere, the easier it will be to protect your IP.
Also, don’t leave your access rights unchecked. Schedule periodic reviews to make sure nothing has changed and no one needs more or less access.
Other intellectual property protections to consider
You should also be sure to:
- Have IP-protecting legal agreements in place with all of your employees and contractors
- Be mindful of any free demos you offer and how much info they could give to a competitor
- Change any associated passwords when an employee quits, is fired or retires
Finally, if anything does happen, act on it fast. Pursue legal action and issue a press release. This way, the whole world — not just the IP thief — knows your company takes protecting its assets seriously. This can help to deter future would-be IP stealers.
Safeguarding your financial assets
As the Silicon Valley Bank collapse drove home, deposits with FDIC-insured banks are only covered up to $250,000. The fact that the FDIC fully covered deposits for those banking with SVB was unprecedented — and it’s not likely to happen again.
Even if you trust your bank, you should still be prepared for the worst-case scenario. And that means never leaving more than $250,000 sitting in any given account. Specifically, FDIC insurance covers deposits up to that limit per ownership category per bank. So you could potentially open up different account categories within the same bank, but you’ll likely quickly hit the ceiling of protection you can achieve there.
Fortunately, you have other options. To protect deposits over $250,000, you can use:
- A bank network — With this option, your deposits get broken up and placed with different banks. There’s usually a fee for this service, but it ensures that all of your deposits have full FDIC coverage.
- A sweep account — As their name suggests, these accounts sweep money into a different account (often a money market account) once the account balance reaches a certain limit.
- A bond ladder — Using your money to buy certificates of deposit (CDs) or bonds from trusted institutions can help to safeguard your cash and yield reliable returns. The trick here is to make sure you’re keeping enough liquid capital on hand. With a ladder, you strategically place money into different bonds/CDs that will release back to you at specific intervals, maintaining the cash flow you need.
- A brokerage account — If you’re the type of founder who doesn’t mind a little risk, investing excess money over the $250,000 mark can help you diversify your portfolio and keep things secure. Just remember that you’ll be subject to market fluctuations, so risk-managed investments are key.
Also, while we’re on the subject of your financial assets, be thoughtful about who has access to them. Separating accounts payable and accounts receivable can prevent fraud. You should also have multiple eyes (two of them could be yours) on account balances to make sure no one has the opportunity to pull funds without them getting flagged.
Protecting your other asset types
Safeguarding your IP and your financial assets puts you in a good position. But don’t stop there. Your startup has more assets worth your attention, including:
- Your people — Every new employee you hire brings a new level of risk. Ideally, you want to retain the team you have. Think through your benefits and company culture and do what you can to bolster both.
- Physical assets — As a tech startup, you’re probably thinking more about data and IP than tangible materials. But if you totaled up the value of all the equipment your team uses — laptops, desktops, monitors, tablets, and cellphones, not to mention desks, chairs, and the like — you’d arrive at a tidy sum. Keep a business owners’ policy (BOP) in place and make sure you can track IT equipment for all remote employees.
- Cybersecurity — You’re most likely on the ball here, but it’s worth periodically revisiting your cybersecurity measures to make sure you’re using the latest, most advanced tools and technologies possible. With the rise of artificial intelligence (AI) tools like ChatGPT, there is presently a greater risk that hackers will reach sophistication levels we’ve never seen before.
As a founder, you have a lot to evaluate and some big decisions to make when it comes to protecting your startup’s assets. Conferring with experts in each area can go a long way toward helping you make the right decisions.
For finance protection guidance, you can turn to our team of startup-focused accountants. For years, we’ve helped our clients safeguard their money, and we recently helped them navigate the SVB collapse. In other words, we understand your world and the unique protections startups need. Don’t hesitate to contact us.