Lumenci for Venture Capitalists

Why would a VC care about Patents?

 

Simply put, patents increase the likelihood of a positive outcome.  Gornitzky & Co. write that startups with strong IP positions were six times more likely to become 'winners' than 'losers' for the investing VCs. Further, an MIT report states that founders who registered in Delaware and acquired a patent and trademark protection were "278 times more likely to achieve an equity growth event than firms that are associated with none of these choices."

 

Also, the data show that patents matter a lot to valuation. Stout reports that 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 more extensive 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.

In short, patents can increase the value of their portfolio companies and improve their likelihood of success.

Can our Portfolio companies do it themselves?

Possibly, but it can distract them from R&D in two ways:

  • Time

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.

  • Inventing experience

While founders and early startup employees are enthusiastic experts in their relevant technologies, 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 patent rights.

And remember, the US and many other countries use a "first-to-file" approach, so your firms are in a race with their competitors for the broadest intellectual property rights.

Lumenci Deliverables for VCs

 

Lumenci's patent experts team helps your portfolio companies leverage small investments in time to create patents intended to support their business objectives.  Our services include:

Pre-Investment Patent and Invention Valuation

As you consider a potential investment, understanding the value of existing patents and patents pending allows your firm to determine the proper valuation. Also, Lumenci further assesses the prospect's potential to file patent applications on technology not yet patented.  Recognizing such untapped patent potential gives your firm additional insight before you decide to invest.

Patent Mining

We assign an experienced invention expert to work with your teams to identify and document critical innovations in your portfolio firms. We work with their legal team (or one of our partner law firms) to secure the broadest patents possible, all while minimizing their time investment distraction.

 Patent Co-creation

Our team has experience working with innovators to identify the broadest possible inventions, including inventions in adjacent technologies.  We can also suggest inventions related to their work, and our clients own 100% of the inventions created.

 

Patent Acquisition

Especially for more mature startups, it can be strategically beneficial to develop a robust defensive patent portfolio quickly by acquiring patents from third parties. Our team of valuation experts identifies the patents we believe meet their needs and negotiate on your behalf.  And to avoid tipping off their competitors, our clients remain anonymous until the transaction is ready to complete.

Patent Valuation & Landscape Analysis

Concerned about what competitors to your portfolio companies are doing?  We provide a thorough analysis of public patent data relevant to your main competitors, and, working with your IP legal team, we can provide a thorough, technical assessment of existing patents.

Lumenci's Approach

 

As your companies mature, we recommend the following services:

Post-seed

Lumenci recommends patent mining and patent co-creation to ensure that your portfolio companies attain the earliest and broadest patent rights possible.

Post Series A

Lumenci recommends that companies build or continue building its broad technology patents 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. Still, as you attain market success, it is essential to understand IP risks through patent valuation & landscape analysis and develop an appropriate patent strategy.

IP Ownership Structures

Unfortunately, some startups do not achieve a positive exit. As part of the wind-down period, valuable IP rights might be lost, or they can be prohibitively expensive for investors to recover.

At Lumenci, we can work with venture firms to advise on creative IP ownership models that allow IP ownership to transfer to the portfolio company on success and investors when success eludes.  Such structures can allow investors an opportunity to recoup some of the investment.

Lumenci's Startup Engagement Model

We gladly work with venture capital firms, their portfolio companies, or both.  In all cases, 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.

  • Facebook | Lumenci
  • Twitter | Lumenci
  • LinkedIn | Lumenci

©  2020 by Lumenci Inc.