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IP Intelligence

3 Reasons IP Matters for Early Stage Companies

As the leader of an early stage company, you’re worried about a lot of different business functions. Managing IP can be confusing and intimidating for founders used to working in biotech, electronics, software, and other innovative spaces; you’re probably not an expert in IP law! What is patentable? Are defensive publication and trade secrets viable options? Do your assets meet the requirements for trademarks or copyrights? Complex IP questions like these can easily fall to the wayside among more immediate and straightforward concerns.

However, the sooner your early stage company addresses IP-related matters, the better prepared you’ll be when investors begin to show interest. Waiting to protect your IP until a capital partner shows interest puts you at a disadvantage. The importance of IP for startups is clear when you consider the ways enforceable IP rights can benefit an early stage company.

1. Competitive Advantage

A patent gives its assignee the right to exclude other entities from utilizing the protected technology. Therefore, patents help companies of all sizes and stages monetize their innovations while weakening competitors’ ability to do the same. Startups don’t have the same assets such as brand recognition and established partnerships, as more mature competitors, making IP rights more important for an early stage company’s competitive advantage.

Strong patents and other IP can also deter competitors from attempting to claim infringement against you as you enter the marketplace.

2. Valuation

Early stage companies may have some market share and revenue, but neither are as valuable as the IP that drives them. Intellectual property is a startup’s most valuable asset. In some industries, patents aren’t as important to enter the marketplace. However, they may become more valuable as your company grows and looks to diversify or be acquired by a complementary business.

3. Investment

Protecting your intellectual property—sooner rather than later—increases your visibility and attractiveness to potential funders. Patents are a “quality signal” for early stage companies. Investors look for companies with strong IP assets because that is where the true value often lies. They want to make sure you own your IP and have freedom to operate in your market without the risk of litigation. In a review of German and British biotech startups, “having at least one patent application reduces the time to the first VC investment by 76%.”