Originally published in NVCA Today - August 2012.

Private equity and venture capital firms have grown increasingly comfortable with investing in the government contracting space, with several making significant investments in federal contractors in the past few years. Government contracting is one of the few bright spots in the economy, due to low credit risk and predictable, virtually guaranteed cash flow from long-term contracts. The sector is not without its hazards, however. Government contracts can give rise to unique risks that must be thoroughly considered by the potential investor.

Intellectual Property Issues -

The federal government has extensive and complicated rules about ownership and transfer of intellectual property rights. These rules differ considerably from standard commercial principles. Investors therefore must be conscious of how IP rights are developed, protected, and enforced in the government arena.