Of all the patents your startup might attain, the first patent is frequently the most valuable (particularly if it is a high-quality patent), providing substantial value over and above the value provided by the underlying innovations themselves.
Statistically, the success of a startup’s first patent application is correlated with the following benefits:
- Employment expands by 50+% over the five years after the patent is granted;
- Sales grow by 80% over that same five-year period of time;
- Number of additional patents the startup will be granted jumps by over 50%;
- Quality of those additional patents improves by 33%;
- Odds of securing initial VC funding increases by over 75%, and a second VC round by nearly 100%;
- Chance of securing an IP collateralized loan grows by over 90%; and
- Likelihood of being listed on a stock exchange (i.e., an IPO) rises by over 125%.
Again, those performance improvements are due to the issuance of the first patent, regardless of the innovations that patent seeks to protect and the quality of that patent. For high quality patents, expect much greater performance improvements.
Although gains in employment and sales are not immediate, they do seem to appear soon after additional funding is obtained. Statistically, within 12 months of a startup obtaining its first patent, sales increase at least 4-fold (11% vs. 2.7%), and headcount grows over 6% (and 23% by year 2), over what they would have without obtaining that first patent.
Interestingly, the improvement in attracting venture capital funding is greatest for first patents awarded to startups founded by inexperienced entrepreneurs and for startups located in geographic areas where capturing the attention of investors is more challenging. Thus, a startup founded by a rookie entrepreneur located outside the largest metropolitan areas is much more likely to attract VC funding if it obtains a first patent than if it doesn’t.
At least in the software and biotech fields, earning that first patent improves the odds of a startup’s survival nearly threefold.
Reputable research shows that earning a patent sets a startup on a funding-initiated growth path that helps transform its innovative concepts into products that generate jobs, sales, and further innovations.
The benefits of owning IP hold true elsewhere in the world too. For example, the European Patent Office (EPO) and the European Union Intellectual Property Office (EUIPO) recently reported that European startups with patents and registered trademarks are up to 10 times more likely to secure funding.