State of Innovation

Patents and Innovation Economics

Study Shows Strong IP Key to VC Back Company Success

An article in IAM (Intellectual Asset Management), reports (please read the full article) on a study on the relationship between the success of venture backed companies and their intellectual property portfolio.  The study states

Success in the venture capital industry is an exit: an acquisition of, or an initial public offering (IPO) by, a portfolio company. Analysis shows that across all sectors a significantly higher percentage of venture capital backed winners (companies that have been acquired or have gone public) have patent portfolios as opposed to losers (companies that are out of business).

Winners are many times more likely to hold intellectual property than losers. Although the presence of intellectual property portfolios is not perfectly correlated to success or failure, this indication alone should support executive and investor focus on the role of intellectual property in their decisions and actions.

While having intellectual property increases the probability of success, those who manage intellectual property will have an even higher probability of success. In certain sectors, such as healthcare, data demonstrates the value of higher quality portfolios. In other sectors, such as telecommunications or information technology, the effect is less prominent – although still clearly and demonstrably present.

IAM summarizes it this way:

In fact, according to the metrics applied by IP Vision, 86% of the VC-backed winners (ie, companies that are acquired or go to an IPO) they identified had strong as opposed to typical intellectual property assessments. In other words, while a healthy IP position may not guarantee that a start-up technology company is going to be successful, it is going to find it a whole lot harder to succeed if it does not have one. And ,crucially, it is not just ownership of IP that is important, it is understanding the IP that is key.

The article also explains

[A] healthy IP position may not guarantee that a start-up technology company is going to be successful, it is going to find it a whole lot harder to succeed if it does not have one. And,crucially, it is not just ownership of IP that is important, it is understanding the IP that is key.

If you want to learn how to create strong intellectual property portfolio see my post IP Strategy Document That Amazes Investors .

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March 12, 2010 - Posted by | Business Models, Innovation | , , , , , , ,

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