When it comes to backing start-ups, investors and venture capitalists want to believe they’re investing in the next big thing. This is especially true in the case of tech start-ups and companies who are creating innovative products. In short, investors want to know they’re putting their money into something valuable.
The obvious problem with that is that start-ups and early-stage businesses are notoriously hard to value, and understandably so. With no business record to go on, there are no concrete numbers to point to. Developing technologies can be particularly difficult to assess, especially for those who may not be familiar with your industry or technically inclined in general.
While there’s no strict formula for how to value intellectual property, possessing protected IP, and patents in particular, can add significant value to your business. Perhaps more important for funding purposes, patents also give your business the appearance of having value for a number of reasons.
- Competitive advantage. If you’re in an innovative field, there’s no question that patents give your company a competitive market advantage. Start-ups that lack patents or other protected intellectual property can be seen as lacking any real ability to compete in the market, making them appear weaker and less desirable to investors.
- The appearance of quality. Whether or not it’s true, when your innovations are patented, they appear to investors to be of higher quality. Higher quality products, in turn, make your company seem more valuable. When value can’t be easily measured, anything that gives the appearance of value helps your cause. After all, the goal is to make your business appear to have as much potential as possible to attract investors.
- Commitment. Venture capitalists want to invest in businesses that are well-run and entrepreneurs who are serious about the futures of their companies. Patents are a signal to investors that you’re committed to making your business a success. Having taken the time to protect your intellectual property is a clear indication that you’re past the very nascent stages of company formation and into development, and that you’ve identified and staked a claim on a particular niche in your market.
If you have patentable innovations that are not yet patented, you might want to think about doing so before seeking out investors. If you have more than one potential legitimate patent within your reach, go for all of them. When investors are trying to figure out how to value your intellectual property, more is better. The larger your patent portfolio is, the more of an advantage you’re seen as having. Protecting your innovations shows that you’re serious about your business and serious about making money. In a sea of potential start-ups to invest in, a real commitment to innovation can make you stand out.
For technology-based companies, a lack of patents or other intellectual property can make for an uphill battle when it comes to securing financing. Investors often view intellectual property as the greatest asset your company has. Because they’re looking for the highest possible return on their investments, they want companies that don’t just have a competitive market advantage right now, but one that is sustainable in the long run. Patents go a long way toward guaranteeing that.
Intellectual Property Guidance For Growing Businesses
At The Gouchev Law Firm in New York, we work with businesses of all sizes, including start-ups and franchise businesses. Call us at (212) 537-9209 or schedule a free strategy session today to see what The Gouchev Law Firm can do for your business.