What do we understand by a successful startup? It is a company that is associated with good profits from a great idea or initiative in a relatively short period of time.
However, a lot of detailing, foresight, planning, funding and most importantly the passion to execute are extremely important. Several other challenges might crop up and failure rate can be high, even with some of the best ideas and great plans.
Start-ups when in need of funding approach the Venture Capitalists, angel investors or others to invest in their ideas.
These investors look at aspects such as the business case, the initial investment required, the viability of the project and of course, the benefits the funding would bring back, in terms of returns over a period. Another important aspect that they are increasingly looking at is the startup’s IP or Intellectual Property.
Chandra Iyer, Head of Intellectual Property & Standards at Philips – India, writes on the importance of intellectual property in startups.
The white paper published by WIPO (World Intellectual Property Organization) titled Intellectual Property – The Basis for Venture Capital Investments suggested that an investor would want to know how well an invention or innovation or the idea they are investing in would fare in the market with reference to existing and potential competitors.
Although the mindset of the Indian startups seems to be rapidly changing, one important aspect that seems to have been overlooked by many startups in the past is the importance of IP protection and an overall IP strategy.
This includes considering and planning around factors such as, what aspects should be protected, when and in which countries etc., based on the intended market.
As per a recent report, Indian startups filed about 909 patent applications in 2017 as compared to 61 filed a year earlier. The Startup India program has brought about this welcome change in the startup ecosystem.
Appropriate IP protection via patents could not only establish the uniqueness of the product or solution but also offer a competitive advantage that could last for a term of about 20 years, under appropriate situations. Other advantages include:
- The threat of others copying is minimized with enforcement measures
- The technology/ product can be licensed to others for manufacture.
- The IP behind the product/technology can be sold later if the owner (assignees) of these patent so desire for some financial consideration. Trademarks, copyrights or design rights are other forms of IP that can be explored.
Thus, IP can help startups attract funding and can be useful even in the stage of valuation in case of a potential merger, buyout or sale.
It is important to note that different types of IP protection may have to be chosen, based on the IP strategy which may have to be tailored for specific needs, as there is no size that fits all. Expert advice should be sought to facilitate planning because of the cost and timelines involved.
Increasingly we may find that smart investors are looking at IP they can bank on. In the worst case, even if a startup fails because of any unforeseen reason, IP retains its own value and has the potential to be monetized as such, apart from its undisputed value in the valuation of the startups themselves.
Also Read: 10 Qualities That Investors Always Look For In An Entrepreneur!
