Role of Intellectual Property in Attracting Investment For Start-Ups
“The Sharks Always Ask One Common Question to All Participants for their Product – Do you have IP protection for your product or service?“
Investors are intrigued by the intellectual property held by the start-ups, and they as well are keen to invest in those start-ups those have their products or services protected by trademarks, copyrights, patents etc. Furthermore, big companies often can be seen acquiring small businesses just for their intellectual property portfolios. In 2012, Google acquired Motorola Mobility for $12.5bn and the main objective behind this acquisition was the patents portfolio held by Motorola which was an asset for Google to protect its range of android mobile against its competitors like Apple.[1] Quite recently in January 2022, BlackBerry sold its patent portfolio for $600 million to Catapult IP Innovations Inc., the portfolio includes patents for mobile devices, messaging and wireless networking.[2]
In a world where innovations are the key to success for any start-up, it becomes crucial to protect those inventions or inventive products and services developed by the start-ups. Intellectual property rights provide startups with legal protection for their work, allowing them to reap the rewards of their investment or research. Intellectual property is an increasingly important asset for big and small companies equally. This article will discuss the importance of intellectual property for start-ups and why it lures investors to invest in an IP-protected product of the start-up.
Importance of IP for Start-UPs
- Helps in creating market monopoly: Intellectual property provides a competitive edge to start-ups as it prevents their competitors from copying or imitating their products or services. Any possible theft or infringement of intellectual property can be curtailed by obtaining patent, copyright, or trademark protection for the goods and services. This means that startups can protect the value of their ideas and invest in developing those ideas into profitable products or services.
- Generation of revenue: Intellectual property also provides startups with the opportunity to license their products and services to third parties or interested parties. This allows startups to earn revenue from the sale or use of their intellectual property without having to manufacture or sell it themselves.
- Advertising the Product: Finally, intellectual property is an important tool for startups when it comes to marketing and promotion. Trademarks, for example, can be used to distinguish a start-up’s products or services from those of its competitors.
Challenges
- Lack of awareness: The start-ups mostly undermine the importance of intellectual property protection considering them just a means of creating a barrier. The start-ups generally do not consider the probability of infringing someone else’s patent and its legal and financial implications.
- Lack of knowledge to monetize IP: They are unaware of the commercialisation of intellectual property. The applicants and start-up owners generally lack awareness as to the ways to monetise their intellectual property by licensing, selling and the value of their IP etc.
- Complex Process: IP filing requires expertise, so start-ups are not in a position to apply it themselves. They might even require to services of firms or attorneys for filing of IP, as it is a complex and lengthy process. Thus, they are hesitant to go for it.
- High Costs: The start-ups already are deficient in funds and think of filing for patent protection as one that involves huge costs including the official fees along with fees of attorneys. Thus, it makes them reluctant to acquire intellectual property rights.
Reasons IP is an Attractive Investment
Intellectual property represents an important financial and legal asset for companies, including startups. For investors, companies with intellectual property portfolios are attractive investment targets or opportunities. The reasons for the same are as follows:
- The value of the intellectual property can increase indefinitely: the growth of IP cannot be ascertained in the present or the future. Intellectual property not only protects the brands, innovations, and design of the company but also contributes to its growth. The patents have significant intrinsic value which means good inventions protected by the patents will always be useful in the market.
- Example – According to Forbes, the brand value of Apple is nearly 150 Billion Euros and has been increasing for 10 years because it has a huge number of patents and it develops an incredible amount of technical products with which they try to outdo its competitors. These include computers, laptops, tablets, phones and other innovative products.
- IP can be leveraged in various ways: this is the biggest reason for investors to invest in a start-up with an IP portfolio or IP assets. The portfolio helps in obtaining different types of financing like equity and debt. In the case of debt, the start-ups have to pledge their portfolio as debt, as for equity the investors take part in the growth of the start-up. As the assets of the start-up, grows so does the value of the investor’s shares in those assets.3]
- Further, licensing and selling are also increasingly popular ways to make intellectual property monetizable. Example– Rovio, the creator of Angry Birds makes over 20% of the company’s revenue with licensing and many smaller companies do the same. The investors assess the value of IP holdings of the start-ups on these parameters and then decide on investment.
- IP portfolio reduces operational risks: having patents, and trademarks registered in various countries help in protecting them and effectively enforcing them in case of infringement. Thus, investors want to thrive in the market by investing their money, which is less likely to be in products which have no competitive advantage and are likely to be infringed on without IP protection. Investors do not want to be part of long litigation processes thus start-ups having their IP protected also ensures that someone else’s property is not been infringed on.
- Protecting the brand, innovation and design of the product with intellectual property rights in major markets creates a basis for scaling business quickly and extensively – a good reason for investors to love intellectual property rights.
- Start-ups protecting intellectual property seem more trust-worthy partners: the start-up acquiring intellectual property showcases their intention to be in the market in long run. Furthermore, getting a patent, or trademark is not easy and requires a lot of prior searches done by the start-up, this saves troubles for investors to be worried about an already existing product in the market. that increases the viability of the product for the investors. So by protecting intellectual property companies are also protecting their business partners’ interests and thereby attracting higher quality partners.
Government Schemes For Start-Ups
- Scheme for Facilitating Start-Ups Intellectual Property Protection (SIPP), 2016: The primary objective of the SIPP is to promote awareness and acquisition of Intellectual Property Rights among Start-Ups. The scheme has empanelled facilitators to help start-ups assisting them in filing applications for their products and services.[4]
- Start-up India Initiative: It was launched in 2016 to build a strong ecosystem for nurturing innovation and entrepreneurship in the country. Fund of Funds for Startups (FFS) Scheme and Startup India Seed Fund Scheme (SISFS) provide financial assistance to startups through Alternative Investment Funds (AIFs) and incubators respectively.[5]
- Action Plan for Startup India, 2016: It comprises 19 action items spanning across areas such as simplification and handholding funding support and incentives and ‘Industry academia partnership and incubation’. It laid the foundation of Government support, schemes and incentives envisaged to create a vibrant start-up ecosystem in the country.
- MeitY Startup Hub (MSH): Ministry of Electronics and Information Technology (MeitY’s) established MSH for quick value additions to domestic tech startups in terms of improving scalability, market outreach and domestic value addition. It helped in setting up innovative partnerships with various stakeholders and has been a key differentiator in MSH’s efforts to catapult the tech start-up ecosystem in the country.[6]
Conclusion
In this evolving world of innovations and startups, the competition in the market, and the global economy, is growing at a constant speed. The startups generally aim for profit earning and playing the long game in the market. Therefore, every start-up should build a comprehensive plan pertinent to the framework of IPR. Most startups fail to recognize their IP, let alone protect it. Founders need to realize, from day one, the impact that secured IP assets can have on the growth of their start-up. From getting the early stage funding to getting subsequent high-value investments, IP has one of the most important roles to play. It is time that founders realize this and start working on building IP and protecting it to reap its numerous benefits.
[1] https://www.bbc.com/news/business-18164190
[2]https://www.blackberry.com/us/en/company/newsroom/press-releases/2022/blackberry-agrees-to-sell-legacy-patents-for-600m
[3] https://www.wipo.int/wipo_magazine/en/2021/02/article_0007.html
[4] https://ipindia.gov.in/SIPP.htm
[5] https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1884256
How to License & Monetize your Patents?
Understanding the Concept of Written Description in Patent Law
The Role Of Patent Pools And Cross-Licensing Agreements
White Space Analysis in Patents: Process, Analysis, Benefits and Tools
Role of Intellectual Property in Attracting Investment For Start-Ups
“The Sharks Always Ask One Common Question to All Participants for their Product – Do you have IP protection for your product or service?“
Investors are intrigued by the intellectual property held by the start-ups, and they as well are keen to invest in those start-ups those have their products or services protected by trademarks, copyrights, patents etc. Furthermore, big companies often can be seen acquiring small businesses just for their intellectual property portfolios. In 2012, Google acquired Motorola Mobility for $12.5bn and the main objective behind this acquisition was the patents portfolio held by Motorola which was an asset for Google to protect its range of android mobile against its competitors like Apple.[1] Quite recently in January 2022, BlackBerry sold its patent portfolio for $600 million to Catapult IP Innovations Inc., the portfolio includes patents for mobile devices, messaging and wireless networking.[2]
In a world where innovations are the key to success for any start-up, it becomes crucial to protect those inventions or inventive products and services developed by the start-ups. Intellectual property rights provide startups with legal protection for their work, allowing them to reap the rewards of their investment or research. Intellectual property is an increasingly important asset for big and small companies equally. This article will discuss the importance of intellectual property for start-ups and why it lures investors to invest in an IP-protected product of the start-up.
Importance of IP for Start-UPs
- Helps in creating market monopoly: Intellectual property provides a competitive edge to start-ups as it prevents their competitors from copying or imitating their products or services. Any possible theft or infringement of intellectual property can be curtailed by obtaining patent, copyright, or trademark protection for the goods and services. This means that startups can protect the value of their ideas and invest in developing those ideas into profitable products or services.
- Generation of revenue: Intellectual property also provides startups with the opportunity to license their products and services to third parties or interested parties. This allows startups to earn revenue from the sale or use of their intellectual property without having to manufacture or sell it themselves.
- Advertising the Product: Finally, intellectual property is an important tool for startups when it comes to marketing and promotion. Trademarks, for example, can be used to distinguish a start-up’s products or services from those of its competitors.
Challenges
- Lack of awareness: The start-ups mostly undermine the importance of intellectual property protection considering them just a means of creating a barrier. The start-ups generally do not consider the probability of infringing someone else’s patent and its legal and financial implications.
- Lack of knowledge to monetize IP: They are unaware of the commercialisation of intellectual property. The applicants and start-up owners generally lack awareness as to the ways to monetise their intellectual property by licensing, selling and the value of their IP etc.
- Complex Process: IP filing requires expertise, so start-ups are not in a position to apply it themselves. They might even require to services of firms or attorneys for filing of IP, as it is a complex and lengthy process. Thus, they are hesitant to go for it.
- High Costs: The start-ups already are deficient in funds and think of filing for patent protection as one that involves huge costs including the official fees along with fees of attorneys. Thus, it makes them reluctant to acquire intellectual property rights.
Reasons IP is an Attractive Investment
Intellectual property represents an important financial and legal asset for companies, including startups. For investors, companies with intellectual property portfolios are attractive investment targets or opportunities. The reasons for the same are as follows:
- The value of the intellectual property can increase indefinitely: the growth of IP cannot be ascertained in the present or the future. Intellectual property not only protects the brands, innovations, and design of the company but also contributes to its growth. The patents have significant intrinsic value which means good inventions protected by the patents will always be useful in the market.
- Example – According to Forbes, the brand value of Apple is nearly 150 Billion Euros and has been increasing for 10 years because it has a huge number of patents and it develops an incredible amount of technical products with which they try to outdo its competitors. These include computers, laptops, tablets, phones and other innovative products.
- IP can be leveraged in various ways: this is the biggest reason for investors to invest in a start-up with an IP portfolio or IP assets. The portfolio helps in obtaining different types of financing like equity and debt. In the case of debt, the start-ups have to pledge their portfolio as debt, as for equity the investors take part in the growth of the start-up. As the assets of the start-up, grows so does the value of the investor’s shares in those assets.3]
- Further, licensing and selling are also increasingly popular ways to make intellectual property monetizable. Example– Rovio, the creator of Angry Birds makes over 20% of the company’s revenue with licensing and many smaller companies do the same. The investors assess the value of IP holdings of the start-ups on these parameters and then decide on investment.
- IP portfolio reduces operational risks: having patents, and trademarks registered in various countries help in protecting them and effectively enforcing them in case of infringement. Thus, investors want to thrive in the market by investing their money, which is less likely to be in products which have no competitive advantage and are likely to be infringed on without IP protection. Investors do not want to be part of long litigation processes thus start-ups having their IP protected also ensures that someone else’s property is not been infringed on.
- Protecting the brand, innovation and design of the product with intellectual property rights in major markets creates a basis for scaling business quickly and extensively – a good reason for investors to love intellectual property rights.
- Start-ups protecting intellectual property seem more trust-worthy partners: the start-up acquiring intellectual property showcases their intention to be in the market in long run. Furthermore, getting a patent, or trademark is not easy and requires a lot of prior searches done by the start-up, this saves troubles for investors to be worried about an already existing product in the market. that increases the viability of the product for the investors. So by protecting intellectual property companies are also protecting their business partners’ interests and thereby attracting higher quality partners.
Government Schemes For Start-Ups
- Scheme for Facilitating Start-Ups Intellectual Property Protection (SIPP), 2016: The primary objective of the SIPP is to promote awareness and acquisition of Intellectual Property Rights among Start-Ups. The scheme has empanelled facilitators to help start-ups assisting them in filing applications for their products and services.[4]
- Start-up India Initiative: It was launched in 2016 to build a strong ecosystem for nurturing innovation and entrepreneurship in the country. Fund of Funds for Startups (FFS) Scheme and Startup India Seed Fund Scheme (SISFS) provide financial assistance to startups through Alternative Investment Funds (AIFs) and incubators respectively.[5]
- Action Plan for Startup India, 2016: It comprises 19 action items spanning across areas such as simplification and handholding funding support and incentives and ‘Industry academia partnership and incubation’. It laid the foundation of Government support, schemes and incentives envisaged to create a vibrant start-up ecosystem in the country.
- MeitY Startup Hub (MSH): Ministry of Electronics and Information Technology (MeitY’s) established MSH for quick value additions to domestic tech startups in terms of improving scalability, market outreach and domestic value addition. It helped in setting up innovative partnerships with various stakeholders and has been a key differentiator in MSH’s efforts to catapult the tech start-up ecosystem in the country.[6]
Conclusion
In this evolving world of innovations and startups, the competition in the market, and the global economy, is growing at a constant speed. The startups generally aim for profit earning and playing the long game in the market. Therefore, every start-up should build a comprehensive plan pertinent to the framework of IPR. Most startups fail to recognize their IP, let alone protect it. Founders need to realize, from day one, the impact that secured IP assets can have on the growth of their start-up. From getting the early stage funding to getting subsequent high-value investments, IP has one of the most important roles to play. It is time that founders realize this and start working on building IP and protecting it to reap its numerous benefits.
[1] https://www.bbc.com/news/business-18164190
[2]https://www.blackberry.com/us/en/company/newsroom/press-releases/2022/blackberry-agrees-to-sell-legacy-patents-for-600m
[3] https://www.wipo.int/wipo_magazine/en/2021/02/article_0007.html
[4] https://ipindia.gov.in/SIPP.htm
[5] https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1884256
How to License & Monetize your Patents?
Understanding the Concept of Written Description in Patent Law
The Role Of Patent Pools And Cross-Licensing Agreements
White Space Analysis in Patents: Process, Analysis, Benefits and Tools
Role of Intellectual Property in Attracting Investment For Start-Ups
“The Sharks Always Ask One Common Question to All Participants for their Product – Do you have IP protection for your product or service?“
Investors are intrigued by the intellectual property held by the start-ups, and they as well are keen to invest in those start-ups those have their products or services protected by trademarks, copyrights, patents etc. Furthermore, big companies often can be seen acquiring small businesses just for their intellectual property portfolios. In 2012, Google acquired Motorola Mobility for $12.5bn and the main objective behind this acquisition was the patents portfolio held by Motorola which was an asset for Google to protect its range of android mobile against its competitors like Apple.[1] Quite recently in January 2022, BlackBerry sold its patent portfolio for $600 million to Catapult IP Innovations Inc., the portfolio includes patents for mobile devices, messaging and wireless networking.[2]
In a world where innovations are the key to success for any start-up, it becomes crucial to protect those inventions or inventive products and services developed by the start-ups. Intellectual property rights provide startups with legal protection for their work, allowing them to reap the rewards of their investment or research. Intellectual property is an increasingly important asset for big and small companies equally. This article will discuss the importance of intellectual property for start-ups and why it lures investors to invest in an IP-protected product of the start-up.
Importance of IP for Start-UPs
- Helps in creating market monopoly: Intellectual property provides a competitive edge to start-ups as it prevents their competitors from copying or imitating their products or services. Any possible theft or infringement of intellectual property can be curtailed by obtaining patent, copyright, or trademark protection for the goods and services. This means that startups can protect the value of their ideas and invest in developing those ideas into profitable products or services.
- Generation of revenue: Intellectual property also provides startups with the opportunity to license their products and services to third parties or interested parties. This allows startups to earn revenue from the sale or use of their intellectual property without having to manufacture or sell it themselves.
- Advertising the Product: Finally, intellectual property is an important tool for startups when it comes to marketing and promotion. Trademarks, for example, can be used to distinguish a start-up’s products or services from those of its competitors.
Challenges
- Lack of awareness: The start-ups mostly undermine the importance of intellectual property protection considering them just a means of creating a barrier. The start-ups generally do not consider the probability of infringing someone else’s patent and its legal and financial implications.
- Lack of knowledge to monetize IP: They are unaware of the commercialisation of intellectual property. The applicants and start-up owners generally lack awareness as to the ways to monetise their intellectual property by licensing, selling and the value of their IP etc.
- Complex Process: IP filing requires expertise, so start-ups are not in a position to apply it themselves. They might even require to services of firms or attorneys for filing of IP, as it is a complex and lengthy process. Thus, they are hesitant to go for it.
- High Costs: The start-ups already are deficient in funds and think of filing for patent protection as one that involves huge costs including the official fees along with fees of attorneys. Thus, it makes them reluctant to acquire intellectual property rights.
Reasons IP is an Attractive Investment
Intellectual property represents an important financial and legal asset for companies, including startups. For investors, companies with intellectual property portfolios are attractive investment targets or opportunities. The reasons for the same are as follows:
- The value of the intellectual property can increase indefinitely: the growth of IP cannot be ascertained in the present or the future. Intellectual property not only protects the brands, innovations, and design of the company but also contributes to its growth. The patents have significant intrinsic value which means good inventions protected by the patents will always be useful in the market.
- Example – According to Forbes, the brand value of Apple is nearly 150 Billion Euros and has been increasing for 10 years because it has a huge number of patents and it develops an incredible amount of technical products with which they try to outdo its competitors. These include computers, laptops, tablets, phones and other innovative products.
- IP can be leveraged in various ways: this is the biggest reason for investors to invest in a start-up with an IP portfolio or IP assets. The portfolio helps in obtaining different types of financing like equity and debt. In the case of debt, the start-ups have to pledge their portfolio as debt, as for equity the investors take part in the growth of the start-up. As the assets of the start-up, grows so does the value of the investor’s shares in those assets.3]
- Further, licensing and selling are also increasingly popular ways to make intellectual property monetizable. Example– Rovio, the creator of Angry Birds makes over 20% of the company’s revenue with licensing and many smaller companies do the same. The investors assess the value of IP holdings of the start-ups on these parameters and then decide on investment.
- IP portfolio reduces operational risks: having patents, and trademarks registered in various countries help in protecting them and effectively enforcing them in case of infringement. Thus, investors want to thrive in the market by investing their money, which is less likely to be in products which have no competitive advantage and are likely to be infringed on without IP protection. Investors do not want to be part of long litigation processes thus start-ups having their IP protected also ensures that someone else’s property is not been infringed on.
- Protecting the brand, innovation and design of the product with intellectual property rights in major markets creates a basis for scaling business quickly and extensively – a good reason for investors to love intellectual property rights.
- Start-ups protecting intellectual property seem more trust-worthy partners: the start-up acquiring intellectual property showcases their intention to be in the market in long run. Furthermore, getting a patent, or trademark is not easy and requires a lot of prior searches done by the start-up, this saves troubles for investors to be worried about an already existing product in the market. that increases the viability of the product for the investors. So by protecting intellectual property companies are also protecting their business partners’ interests and thereby attracting higher quality partners.
Government Schemes For Start-Ups
- Scheme for Facilitating Start-Ups Intellectual Property Protection (SIPP), 2016: The primary objective of the SIPP is to promote awareness and acquisition of Intellectual Property Rights among Start-Ups. The scheme has empanelled facilitators to help start-ups assisting them in filing applications for their products and services.[4]
- Start-up India Initiative: It was launched in 2016 to build a strong ecosystem for nurturing innovation and entrepreneurship in the country. Fund of Funds for Startups (FFS) Scheme and Startup India Seed Fund Scheme (SISFS) provide financial assistance to startups through Alternative Investment Funds (AIFs) and incubators respectively.[5]
- Action Plan for Startup India, 2016: It comprises 19 action items spanning across areas such as simplification and handholding funding support and incentives and ‘Industry academia partnership and incubation’. It laid the foundation of Government support, schemes and incentives envisaged to create a vibrant start-up ecosystem in the country.
- MeitY Startup Hub (MSH): Ministry of Electronics and Information Technology (MeitY’s) established MSH for quick value additions to domestic tech startups in terms of improving scalability, market outreach and domestic value addition. It helped in setting up innovative partnerships with various stakeholders and has been a key differentiator in MSH’s efforts to catapult the tech start-up ecosystem in the country.[6]
Conclusion
In this evolving world of innovations and startups, the competition in the market, and the global economy, is growing at a constant speed. The startups generally aim for profit earning and playing the long game in the market. Therefore, every start-up should build a comprehensive plan pertinent to the framework of IPR. Most startups fail to recognize their IP, let alone protect it. Founders need to realize, from day one, the impact that secured IP assets can have on the growth of their start-up. From getting the early stage funding to getting subsequent high-value investments, IP has one of the most important roles to play. It is time that founders realize this and start working on building IP and protecting it to reap its numerous benefits.
[1] https://www.bbc.com/news/business-18164190
[2]https://www.blackberry.com/us/en/company/newsroom/press-releases/2022/blackberry-agrees-to-sell-legacy-patents-for-600m
[3] https://www.wipo.int/wipo_magazine/en/2021/02/article_0007.html
[4] https://ipindia.gov.in/SIPP.htm
[5] https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1884256
How to License & Monetize your Patents?
Understanding the Concept of Written Description in Patent Law
The Role Of Patent Pools And Cross-Licensing Agreements
White Space Analysis in Patents: Process, Analysis, Benefits and Tools
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