Lumenci for Startups
Why would a Startup care about Patents?
A restauranteur would not open a new restaurant in most cities without ensuring the patrons have convenient access to parking. Without such ready access, the restauranteur is at the mercy of other property owners to provide parking to their customers -- potentially a costly proposition. Prime parking might be controlled by other restaurant owners who aggressively deny access to a potential competitor, significantly if your restaurant could disrupt their business.
Similarly, startups often face competitors whose technology is inferior, so they use intellectual property to skew the playing field, disadvantaging any newcomers. Startups that own patents can level the playing field, allowing them to compete based on the quality of the product and service to their customers.
The data supports the intuition that patents matter much to valuation. Stout writes: "[a] paper by Professors David Hsu and Rosemarie Ziedonis examines the degree to which patents enable entrepreneurs to acquire financial capital across the new venture life cycle. The authors conclude that having larger patent application portfolios increases the likelihood that entrepreneurs attract initial financing from venture capitalists. Specifically, they found that a doubling in the patent application portfolio of a new venture is associated with a 24% increase in valuation, representing an upward funding-round adjustment of approximately $12 million for the average startup in their sample."
Gornitzky & Co. write that "startups with strong IP positions were six times more likely to become "winners" rather than "losers" for the investing VCs." Similarly, according to Dr. Kristina Lybecker in a March 2015 IP Watchdog article, IP-intensive industries have more than double the sales and capital spending than non-IP-intensive industries. Robin Feldman offered perhaps the bluntest assessment, as one venture capitalist has commented, "[it is] impossible to get financing without a good patent strategy, freedom to operate and good prospects of patentability."
Even provisional patent applications, which are substantially less expensive to obtain, can have a substantial impact. Intellectual property attorney Celia Lerman says, "investors may look with better eyes at provisional patent applications that serve to postpone the final patenting decision for a year. After this period, the startup may be in a better position to decide whether a non-provisional utility patent would be worth [it] for the company."
In short, patents can increase your valuations and allow your company to compete where you want to compete - on technology and execution - increasing your chances of market success.
Can Startups do it themselves?
Possibly, but it can distract from R&D in two ways:
Successful startups work quickly to deliver the best technology to the market in the shortest possible time. While developing strong patents is critical to long-term success, investing the time necessary to create them can be a distraction from delivering outstanding products quickly.
Founders and early employees are enthusiastic experts in the relevant technologies, but they might not have deep experience creating strong patents. Companies can develop inventing skills, but again, at the cost of time and the risk of missing the opportunity to secure the broadest patent rights.
And remember, the US and many other countries use a "first-to-file" approach, so you are in a race with your competitors for the broadest intellectual property rights.
Lumenci Deliverables for Startups
Lumenci's patent expert team helps your team leverage small investments in time to create patents intended to support your business objectives. Our services include:
As your company matures, we recommend the following services:
Pre-seed or Post-seed
Lumenci recommends patent mining and co-creation to ensure that your company attains the earliest and broadest patent rights possible.
Post Series A
Lumenci recommends that companies build, or continue to build, a broad technology patent portfolio through patent mining and patent co-creation sessions. As the relevant patent offices begin responding to your patent filings, Lumenci can help with patent prosecution.
Beyond Series A
To ensure their freedom to innovate, companies should continue to enhance their patent portfolios. As you attain market success, it is essential to understand IP risks through patent valuation & landscape analysis and develop an appropriate patent strategy.
Lumenci's Startup Engagement Model
We gladly work with startups themselves or with venture capital firms. We assign a dedicated project lead to ensure that we provide the most responsive service. And to ensure that you have cost-certainty, we offer fixed-fee engagements, along with variable-fee options.