How to pitch your IP without giving away the secret sauce. PART 3 OF 3: Proving IP Value Without Revealing the Secret Sauce

Series Preface

This article is part of a three-part series on how founders can pitch intellectual property convincingly without revealing their “secret sauce”, written by IT technologist and angel investor Dr Anthony Harris.

Author Bio

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.

In Part 1 of this series, Anthony set out the core pitching challenge founders face when trying to explain what makes their technology valuable and defensible. In Part 2, he examined why patents are often the default response — and why, particularly for technology and software businesses, they can unintentionally weaken defensibility rather than strengthen it.

You can read the earlier pieces here:
Part 1: www.cambridgeangels.com/news-ecosystem/how-to-pitch-your-ip-without-giving-away-the-secret-sauce-some-part1
Part 2: www.cambridgeangels.com/news-ecosystem/how-to-pitch-your-ip-without-giving-away-the-secret-sauce-some-part2

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.