September 29th, 2021
In today’s business world, strong and well-managed Intellectual Property (IP) is considered a crucial factor for determining a startup’s success. IP is part of the intangible assets of any company creating or innovating any kind of work. The value of any IP (which includes patents, designs, copyright, and trademarks) is defined by the level of exclusivity given to the innovation, and the future benefits of the assets. Therefore, a company’s intangible assets contain essential information about the future strength of its business model.
For startups, IP assets are particularly important as they can ensure their future strength and funding in the first years of the companies’ development.
The question is how to create a high-quality IP portfolio that will attract investors in the future? The answer is simple: You need an effective IP Strategy.
But what is an IP strategy?
IP strategy is the act of aligning your IP decisions with your business goals and it should be carefully tailored to your company needs. This level of personalization is important as the risks of developing a wrong IP strategy are high. As with any other asset in a company, IP value should be higher than the cost of maintaining the asset.
That is why hasty decisions over your IP portfolio will reduce interest as many external investors see IP assets as a mechanism to safeguard the return on their investment. In fact, The European Commission for Economic and Financial Affairs affirms that 60% of investors use intangible assets as an increasingly significant part of their assessment and evaluation of prospect companies.
What are the benefits of early development IP strategy?
Aligning your IP strategy with your business strategy goals can guarantee the value of your startup for the next few years, as a good IP strategy can be the key difference between success and failure. Here are six benefits of why having an IP strategy in your business is an absolute must:
1. Increase your market visibility and funding
Having a strong and valuable IP portfolio will show your success. An IP right is the tangible evidence of the positive results your company may have in the future and can become a major source of attraction for investments (particularly from non-institutional investors). For example, 67% of Series A-funded startups in 2017 with already granted patents were generating revenue even before they got funded in the USA.
This information is what investors are looking for. The search for the right product or the right company is highly time-consuming for stakeholders. If they are on the hunt for high-tech startups, a well-managed IP portfolio as a reference point will facilitate their process and increase your company’s visibility.
2. Reduce your company uncertainty and risks
To invest in IP assets can be costly and can require a lot of your time and effort, especially during the development process of your innovation. An early IP strategy will allow you to enter the tangled field of patents and other IP assets with lower risk and effort.
The use of a proper IP strategy will give you practical information and will answer the most important questions about your IP process:
- About your market: In which market or location is the protection of my innovations most valuable?
- Your patent portfolio innovation: Is my patent portfolio innovative compared to similar patents in the same or related technology field
- Innovation stage: Is my patent early in the applicable technology life cycle
- Future IP assets goals, and more.
Assuring an IP assets plan will significantly reduce the risk of failure and uncertainties during and after the development process, and will reduce in the long run the investment requirement value.
3. Boost your revenue
IP assets generate new sources of revenue and are one of the most important drivers that motivate companies to innovate:
- IP strategy can allow you to have higher prices or a more attractive price ratio than your competition. For example, in the pharmaceutical industry drugs with granted IP protection can provide the company with 60–80% more revenue than other drugs in the same field without a patent or with expired patents.
- In IP-relevant industries, performance, features, and branding are essential for highly differentiated and complex products, and many of these features and technologies have already active patents. That is why trading, licensing, and cross-licensing can represent at least 20% of the revenue of your product.
- Selling an IP portfolio will always give you a clear path to revenue. One of the most sounded cases is the one from Amanti Communications who sold its IP patent portfolio for $395 million. The transaction was not only unprecedented for Amati but also helped the company to recover from a loss in revenue in the prior years. IP assets transactions can, in fact, create and spin out in small and medium companies with a good patent portfolio.
4. Lead over your competitors
Creating a fast and easier IP development through an effective IP strategy can provide your startup an advantage and increase your market share. The reason? As mentioned before, you can keep your competitors from using or copying your innovation without proper licensing, franchising, or buying the patent from you, which translates into an instant competitive advantage.
Likewise, a well-managed IP portfolio will make you step up in the market innovation race. In many cases, companies even created new industries from their innovations. Examples such as Chester Carlson’s original xerography or the Ocado Warehouse model can be found in the IP world.
5. Reduce costs and tax liabilities
Not investing in patents, which play a fundamental role in IP assets, can become a huge liability. Patenting too sparingly or too recklessly is not strategic and is not a way to generate company value. This was the case of Dow in 2000’. The chemical company got rid of unneeded or expensive patents and saved more than $50 million in costs and fees. With a well-designed IP strategy, you have to ways of improving your financial performance:
- Firstly, you will achieve this by reducing your operational costs. It will allow you to decide how to effectively protect your intangible assets from your competitors (sometimes trade secret or patent protection) with a tailored decision solution that will avoid unnecessary expenditure.
- Secondly, you benefit from avoiding the over-priced fees burden. The patent and trademark offices levy high fees for IP assets in most of the countries, as a result the most valuable companies in the world carefully decide which patents are valuable enough to be maintained.
“The proper management of patent assets can yield significant savings in the form of reduced portfolio maintenance costs and taxes.” Kevin G. Rivette
6. Promote branding and R&D
A proper IP strategy will boost partnerships and licensing alliances faster than other more traditional practices. Having a strong IP portfolio and investing time will accelerate your credibility and protect your key innovations. In the end, monitoring and evaluating your portfolio can assure you and your startup that the decisions you are making are indeed the correct ones.
Building a strong IP strategy and matching it to a startup business goals is vital. Need help with building the perfect IP strategy for your company? Get more information from our business insiders.
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