How to pitch your IP without giving away the secret sauce: some observations from IT technologist and angel investor Dr Anthony (Tony) Harris

In this piece by Anthony Harris, IT technologist, long-time angel investor, and board member of Cambridge Angels, the focus is on a familiar founder dilemma: how to pitch strong, defensible IP without giving away the secret sauce. Drawing on decades of investing and company-building experience, Harris examines why many pitches fail early, questions the default reliance on patents, and sets out a clear case for trade secrets as a credible and often superior alternative. The article offers practical insight into how founders can demonstrate IP strength and defensibility to investors while keeping what really matters protected.

Anthony has been a member of Cambridge Angels since 2019. Before that he was a member of Cambridge Capital Group (CCG) and continues as a member of the Oxford Capital co-investor circle. He has been angel investing for over twenty years, has invested in more than fifty companies, and is somewhat unusual in that he makes a living out of angel investing as well as investing in the capital markets (he was an early-stage investor in Amazon, PayPal, Google, Microsoft, PayPal, Motorola, Apple, Palantir and many other tech success stories). According to him he does this by ‘investing in things I know with a few fun investments along the way’ (Flit, and Oxitec being just two examples). Anthony originally studied computing at Oxford Brookes (when it was Oxford Polytechnic) and then went on to work in R&D and development in the computing industry (mainframes and microcomputers), including some time working in Silicon Valley. In 1989 he founded Software 2000, an OEM software house which he used to suggest was ‘the most successful company you’ve never heard of’. The company’s royalty and licensing business transformed inkjet and connected laser printer technologies world-wide, won four Queen’s awards for export, numerous other industry awards, and grew to $150m valuation with offices in three continents. Anthony exited in 2007 to a management buy-out and went on to study for an MA at Oxford, an MA(Res) at Reading and his PhD at Cambridge (Sidney Sussex). He has been mentoring on the ‘Accelerate’ programme at the Judge Business School since 2014 and continues to help start-ups with advice on intellectual property and business finance. He has just finished a research fellowship at Clare Hall (Cambridge) and is now a fellow and director of studies for computer science at Emmanuel College (Cambridge). Anthony sits on the board of Cambridge Angels as our treasurer and is on the boards of Flit and ScaleXP, two Cambridge Angels portfolio companies.

The Pitching Conundrum

The First Hurdle (Vetting) - Getting to the Pitch

It is unusual for early-stage founders to be able to talk directly to a business angel or VC analyst. Normally there is a front-end vetting process that they must go through where their pitch is sifted, by a person or persons unknown, from the hundreds or (sometimes) thousands sent to angel groups or VCs each year. Because the vetting process is, by its very nature, opaque founders don’t really know who will see their pitch deck first. As a result, they tend to be overly reticent about their product and its ‘secret sauce’. Hence, many pitch decks sent in for vetting don’t end up answering the crucial question, ‘What is it and what makes it unique?’ Founders fear putting this in a first-approach pitch deck because they don’t know where it will end up or who will see it but this means many pitch decks never get past this first hurdle because the front-end vetting team can’t work out what it does. The logic here is that if the founders can’t explain what their product does in simple terms, then they will be laughed at when/if they get in front of an angel group or VC investment panel and the vetting team will be left with egg on their faces if it did get through their process. Hence, to grab attention and to make a deck stand out it is extremely important to explain succinctly what the product does and why what it does is important (and hopefully unique). This means also explaining that there is a high cost of entry to competitors entering the market and doing the same thing quicker and cheaper! High costs of entry can be demonstrated through ‘patent(s) applied for’, ‘patent(s) granted’, ‘trade-secrets’, or ‘it’s demonstrably difficult’ (e.g. a unique hardware design that has taken years to develop, Quantum, or AGI). It’s worth-while having a couple of slides in the initial deck which state ‘here exactly is what it

is’ and ‘here’s why it’s difficult for somebody else to do exactly what we do’. Generally, pitches that deal with this up-front are the ones that pass the vetting process and get moved on to pitch to the investors. ‘Many are called but few are chosen’ so it is important to get things right at this stage.

The Second Hurdle (The Pitch)

When founders pass the vetting process and do eventually get to pitch directly to investors, they naturally want to demonstrate the value of their product and its intellectual property. This means further justifying the valuation, demonstrating its defensibility in concrete terms, and validating the high cost of entry for potential competitors. Yet they are also acutely aware that the people they are pitching to will understand their market in some depth, have valuable networks directly in their area of expertise, and might not be the investors that they ultimately end up with. Hence the ‘pitching conundrum’. How much do they reveal without giving away the farm and how do they prove they have got something genuinely defensible without handing potential competitors a complete instruction manual of how to do what they are doing (or intend to do)?

Many founders default to patents as the answer, because patents are a familiar choice and having a patent, or ‘patent applied for’, feels like proper IP protection. Patents carry prestige and are often one of the first things that investors ask about. They also have recognisable value and can often be capitalised to add substance to a young company’s balance sheet. Many investors are unwilling to enter into confidential disclosure agreements (CDAs/NDAs) so having a patent gives a measure of strong IP protection when pitching to an unknown audience. However, there is alternative approach to filing patents (trade secrets) which, if executed well, can make a company more valuable to investors, not less. Before discussing trade secrets it is important to understand the pro’s and con’s associated with patents.

The Patent Paradox

The uncomfortable truth about patents is that at some point along the way they require inventors to tell the world exactly how their technology works. Filing a patent means eventually disclosing your invention in sufficient detail that someone ‘skilled in the art’ (i.e. an expert in your field) could theoretically reproduce it. That full specification becomes publicly available through publication, normally 12-18 months after filing, regardless of whether your patent is ultimately granted or not. There is really no alternative to ‘full disclosure’ of the invention in the patent application because a common defence in patent litigation is ‘non-reproducibility’. In other words, if somebody can demonstrate that your invention cannot be reproduced using the details in your published patent then they can apply for it to be struck out. It is a mark of an inexperienced founder/inventor to suggest that they have only disclosed ‘some’ of their invention. Such a comment would normally make me very unlikely to invest in the venture.

For a software company, this publication/disclosure rule is particularly problematic. Software patents are difficult enough to apply for and get granted but the patent must describe your algorithms, data structures, and specific implementation choices in enough detail so that somebody else can do what you do. Obviously, these are the exact details that constitute your competitive advantage and, once this information is published, then your competitors can study it, reproduce it, potentially design around it, and even create variations themselves that replicate your tech, but maybe from a different angle. It’s a risk whichever way you look at it.

Patents also come with a significant price tag. Filing, prosecution, and maintenance of a single patent can easily cost thousands in the UK, and substantially more in the US, Europe, and beyond. That's before considering the time overhead: managing the prosecution process, responding to examiner

rejections, and maintaining the patent portfolio over many years if you want global protection. When the patent eventually expires your IP is free for anyone to use so that, for many technology companies, this feels less like protection and more like an expiration date on your competitive advantage.

The Trade Secret Alternative

Trade secrets operate on fundamentally different principles to patents. They represent confidential business information (including your algorithms, methods, and data), that provide your competitive advantage and which remain undisclosed outside of your company. There's no patent office, no formal registration, no expiration date. As long as you maintain confidentiality and can demonstrate that you took reasonable steps to protect it, your trade secret remains protected indefinitely. Internally you need to restrict access to your trade secrets and to document how you do that. In my own company we developed proprietary imaging/halftoning technology, a novel imaging pipeline (based on display-list technology), and a colour management system. These were well ahead of other technologies in the market and so we wanted to keep them as our ‘trade secrets’ rather than publishing what we were doing. This strategy worked well for us because once competitors had worked out what we were doing, we had already innovated beyond our previous techniques and shifted the goalposts.

Probably one of the best known examples of a trade secret is the formula for Coca-Cola. Despite it being one of the world's most valuable trade secrets for over a century, Coca-Cola have never patented it. They have kept it confidential, protected it through NDAs, and physically restricted access to it. That strategy has served them better than any patent would have because the moment you patent a formula; the world knows the formula exists and eventually gets to use it. By keeping it secret, Coca-Cola have preserved their competitive advantage permanently. A similar example is the Aero chocolate bar where the chocolate recipe is not documented but you can find an ancillary patent which explains how to generate bubbles in chocolate by using nitrogen in a reduced pressure environment. So, in this case, one aspect of the technique is protected through a patent but the chocolate recipe remains a ‘trade secret’.

For technology startups the flexibility offered by a trade secret is extraordinary. You are not forced to choose between disclosure (patenting) and no protection (keeping quiet) so you can actually demonstrate robust IP protection to investors without surrendering your technological secrets. What is not to like!

Proving Value Without Revealing Details

Sophisticated founders don’t say to investors, ‘trust us, we have great IP.’ Instead, they show structured evidence of a defensible competitive advantage. This is the real pitch advantage of a trade secrets strategy because it’s something you can talk about openly when chatting to investors.

A well-executed trade secrets programme demonstrates several things to investors:

First: It proves that you understand your own IP. You've identified those aspects of your technology that provide competitive advantage. You've categorized your confidential information, core algorithms, manufacturing processes, business methods, customer data, and market approaches. You've thought strategically about what elements of your business need protecting versus what can be public-facing. Investors notice this rigour. It signals you're not just haphazardly protecting everything; you're thinking like a scaled business that understands its IP assets.

Second: it demonstrates defensive capability. You've implemented robust non-disclosure agreements between employees, contractors, and partners. You've built a security infrastructure appropriate to the value of your secrets. You've created documented processes for maintaining confidentiality. When presented as a structured trade secrets programme, this becomes visible proof that you're defensible against competitive threats, talent poaching, and other IP risks.

Third: it makes your valuation more robust. When your data room includes evidence of a thoughtful trade secrets strategy, including indexed and categorized confidential information, NDAs, security protocols, documented history of IP protection, then investors take it seriously. That intellectual property becomes quantifiable value on the balance sheet. Exit valuations can be materially affected by the quality and defensibility of your IP, and a properly structured trade secrets programme demonstrates real, transferable value.

Most importantly: with trade secrets investors don't need to know your secret sauce. They just need confidence that you have a secret sauce and that you're protecting it seriously. Of course, there is always a risk that a competitor may come along later and patent what you have been doing for some years. That’s why it is important to keep innovating and continually moving the technological goalposts so that by the time they arrive where you are you will be waving at them from a distance. Trade secrets are not a good solution if you intend to rest on your laurels and stay where you are. Note that the original Coca-Cola recipe may have remained a trade-secret but they are always innovating recipes, bottle designs, flavours etc. etc.

When Disclosure Actually Hurts You

Consider the alternative: if you patent core technology, you've just handed detailed technical specifications to every competitor, every potential acquirer, and every patent troll with access to a search database. If your exit scenario involves acquisition by a strategic buyer, they might use that publicly available patent information to design around your technology or develop competing approaches. If you're bootstrapping and bootstrapped, you've incurred significant costs for protection that potentially makes you less defensible, not more.

For software in particular, the problem is acute. Software patents face eligibility challenges and many innovations simply don't qualify for patent protection. The technical specifications required for patent prosecution might reveal implementation details that competitors could adapt. The exclusivity period of 20 years may be longer than the period that your technology remains commercially relevant. Hence, you would've spent significant resources protecting something that will become commoditised well before the patent expires.

The Practical Approach: Know Your Audience

Here's where strategy meets execution. Different stakeholders need different assurances:

For Investors: Focus on demonstrating structured IP thinking. Show categorized confidential information, explain your rationale for trade secret protection in your specific market, and present concrete evidence of security measures. This reassures investors you are building real defensibility. You're not hiding behind vague claims of ‘proprietary technology’ but instead are demonstrating a sophisticated, and well-thought-out, IP strategy.

For Partners and Contractors: Robust CDAs/NDAs are your tool. These should clearly define what information is confidential, how it can be used, and what happens if it's misused. Well-drafted CDAs/NDAs are extraordinarily effective at creating legally binding confidentiality without requiring public disclosure. Remember to identify everything that you deem CONFIDENTIAL in the legal documentation and to mark everything CONFIDENTIAL that you send out to them.

For Acquirers: Your data room should give a comprehensive story of your IP. Evidence of your programme of trade secrets, the breadth and depth of protected information, security measures, and documented history will all contribute to acquisition value. Buyers value companies that have thoughtfully protected their IP because it means a cleaner acquisition, a lower integration risk, and a clearer ownership of valuable assets.

The Hybrid IP Advantage

The most sophisticated approach to IP employs a mixture of patents and trade secrets (as with the example of the Aero chocolate bar). For example, you might decide to patent broad architectural approaches or specific novel technical innovations, the aspects that define your solution category. All the while maintaining as trade secrets the specific implementation details, algorithms, data structures, and processes that would take competitors significant time and resources to reverse engineer and duplicate. This approach gives you the public recognition and competitive advantage of patents while preserving the indefinite, disclosed-free protection of trade secrets. You control exactly what the world sees, and what remains hidden.

The Disciplined Execution

However, trade secrets come with their own challenge in that they require discipline. You cannot be sloppy about confidentiality and still claim protection. Employees, contractors, and partners need clear understanding of what's confidential and why. For example, documents associated your secret sauce should be marked appropriately. Access should be restricted to it, normally through a small subset of members of trusted staff. NDAs should be signed before confidential information is shared, confidential information should be marked as CONFIDENTIAL (it often isn’t!), and your IT security should match the value of what you're protecting. These procedures are not onerous for a small team as it's largely common sense assuming that it is applied consistently. However, it does require attention and you need someone thinking about it, even if that someone is just your founder.

Making the Pitch

So, the next time that you send a pitch for vetting, and hopefully get to present to the investors, consider reframing the IP conversation. Rather than leading with patents (which immediately raises questions about disclosure and defensibility), present your strategy as a thoughtfully structured trade secrets programme, supplemented by patents where strategically appropriate. Show your investors the specific confidential assets that you have which provide your competitive advantage. Explain how you protect them and why your approach makes your IP defensible. Finish off by explaining what this means for the scalability of your technology as well as your final exit value.

That conversation, anchored in visible, strategic thinking about IP protection, is far more compelling than a vague reference to patent applications and ‘proprietary technology.’ Not only does it demonstrate maturity, strategy, and defensibility but it shows that you are protecting what actually matters. Perhaps more importantly, it helps you to keep your secret sauce exactly where it belongs: secret.