The Strategic Business Planning Company has long championed an aggressive approach by startup companies that centers on obtaining a patent(s) on a new product/service at or near the time of market entry to offer unique value and competitive protection. V
ery young companies need funding. Venture capitalists are a
major source of funding and, according to a study by the University of
California Berkeley Law School, “many investors place a premium on patents when
making investment decisions. In fact,
67% of firms surveyed indicated that the existence of patents were an important
factor in their investment decisions… proving that it doesn’t matter what
industry you are in a significant percentage of VCs place a premium of patents
when making investment decisions.” (“Why
Patents Matter for Job Creation and Economic Growth,” Gene Quinn, IP Watchdog)
[For additional confirmation, see Shark Tank]
There
are other compelling reasons why patents are important. A paper entitled “The
Bright Side of Patents” sites the economic benefits that patents bring to start-up
businesses. Joan Farre-Mensa
of Harvard, Alexander Liunggvist and Deepak Hedge of
NYU studied all first-time patent applications filed at the US Patent and
Trademark Office (USPRO) by start-ups from 2001- 2013, 45,819 in total. They concluded that patent approvals help
startups create jobs and succeed. Key points from the research:
- The first patent application
increases a company’s employment growth over the next five years by 36%. The effect on sales growth – a 51%
increase – is even larger.
- Approval of a patent
application increases a start-up’s probability of securing VC funding by 53% over companies without patents.
- Patents more than double the
likelihood that a start-up is eventually listed on a stock exchange.
To make your market introduction positioning even stronger, buy some patents from IBM before your IPO as described in this blog post from
iam-media.com: http://www.iam-media.com/Blog/Detail.aspx?g=e5b4517b-6c86-4932-8451-6bb110c6b011. Banks, in addition to venture capitalists, look favorably on tech startups that have a patent portfolio from Big Blue which has sold 15,000 patents since 1991.
IBM has been the leader in annual patent procurement for years and years. But, even in Big Blue, not all patents can be commercialized and many other patents are not consistent with its marketing strategies. For these reasons and, it turns out, for tax benefits, the company puts many patents on the market to supplement its licensing royalties.
