Last Updated on Wednesday, 29 September 2010 09:05 Written by dbhalling Wednesday, 29 September 2010 09:05

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Another study shows that start-up company success is tied to patenting success.  The authors of the study are a pair of professors of  finance, Jerry Cao of Singapore Management University and Po-Hsuan Hsu of University of Connecticut.  Perhaps the key finding is:

Start-up firms that successfully file patents before receiving any VC investment and more likely to complete IPOs and less likely to fail or be acquired.

The study shows that

67.39% of patenting VC investees successfully completed the IPO process, whereas only 14.81% of VC investees without patents did do.

This is a huge difference.  Patents are also a good indicator of whether a firm will end up in bankruptcy.

On the other hand, only 3.47% or patent-filing VC investees filed bankruptcy, in sharp contrast to the 10.12% of VC investees without patents who did so.

This study clearly shows that patents are critical to the success of start-up companies.