Written by: Harry Bedford

The European Patent Office  (EPO) and the European Union Intellectual Property Office (EUIPO) have recently published a new joint study highlighting just how impactful intellectual property (IP) rights, such as patents and trademarks, can be in securing funding for start-ups.

The study involved the collection of data on patent and trademark applications (both European and national rights) combined with data on startup financing at their seed, early (Series A or B) or late (Series C and beyond) funding stages.

The headline figure of the study is that, on average, startups that possess both trademarks and patents during their initial seed or early growth stages are up to 10.2 times more likely to successfully secure funding. This is yet another indication that investors are happier to fund start-ups that have been savvy enough to protect their IP in their early stages.

Start-ups having only trademarks were up to 4.3 times more likely to secure funding whilst those with only patents were up to 6.4 times more likely.

The study also looked into the effect IP can have on successful exits for investors, finding that an initial public offering (IPO) or acquisition was more than twice as likely if the start-up involved had trademarks or patents. For start-ups with both trademarks and patents, successful exits are more than three times as likely.

The study highlights several explanations for these figures, and why investors are generally keen on start-ups with IP. These include:

  • Patent filings are effective indicators of the technical capabilities of the firms and their employees
  • Patents secure higher returns for investors by reducing competitive pressures from other players
  • Both patents and trademarks survive beyond bankruptcy, therefore providing security to investors and lenders

Interestingly, the study found that, on average, only 29% of European starts-ups have filed IP rights. This differs between sectors. Biotech leads the way by some margin, with nearly half of start-ups using patents or registered trademarks. Other sectors include: healthcare (40% having trademarks and 20% having patents); science and engineering (38% having trademarks and 25% having patents); and manufacturing (36% having trademarks and 20% having patents).

These figures are encouraging, and show a growing awareness of the importance of IP in the start-up community. However, they also show room for further growth, and the study itself notes that there is still more to be done in Europe in order to bridge the funding gap to the US, where the investing market is more mature.

In summary, the study clearly illustrates how IP can propel start-ups towards their long term business objectives, be that funding, an IPO, or an acquisition. Start-ups should be aware of this and look to protect and consolidate their IP at an early stage.

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