Many start-up companies have found that having registered IP rights can be critical in raising financing from investors. A new study from the European Patent Office (EPO) and EU Intellectual Property Office (EUIPO) provides data to show just how important IP rights are both for raising capital and as predictors of successful exit strategies. The focus of the report is on patents and trade marks but copyright, designs, database rights and confidential information are also important!
The IP benefits for start-ups
The study, published on 19 October 2023, found that, on average, 29% of European starts-ups have filed registered IP rights. But there are important differences between industries. For example, biotechnology is the most IP-intensive sector, with nearly half of start-ups using patents or trade marks.
It also found that start-ups increasingly make use of IP rights as they grow but that patents and trade marks are important at all growth stages.
The filing of European patents and trade marks at the seed or early growth stage is associated with a higher likelihood of subsequent venture capital funding, according to the study. This effect is particularly important at the early stage.
Filing a trade mark gives a 4.3 X higher likelihood of funding.
Filing a patent results in a staggering 6.4 X higher likelihood of funding.
Start-ups that filed both trade marks and patents have the highest likelihood of securing:
funding at both the seed and early stages;
subsequent VC funding; and
undergoing a successful IPO or acquisition.
There is a more than 2X the likelihood of successful exit for investors.
Where does the data come from?
The report is based on analysis of IP filing data from the EPO, EUIPO and national IP offices as well as the commercial database Crunchbase: this provides details on the type of financial round a start-up participated in, the date on which it was announced and (in some cases) the amount. Crunchbase also provides information on acquisitions and initial public offerings.
What does this mean?
In their foreword to the report, EPO President António Campinos and EUIPO Executive Director João Negrão write:
“Europe still lags behind other regions...when it comes to financing innovative startups. ... making the IP system more accessible to newly started, innovative companies is part of the solution. ... the Unitary Patent also paves the way for deep-tech ventures to scale up in a much larger market. ....”
This report should be particularly useful for any entrepreneurs who are looking to persuade their cofounders or early stage investors of the importance of securing IP. More data driven readers may be delighted to learn that it includes a lot of data and charts, and several case studies.
It is great to see that IP offices (including the UK IPO) are taking steps to promote the accessibility of the IP system. As more areas become digitised, we are steadily moving toward a clearer and fairer system for all.
To find out more about the issues raised in this blog contact Rosie Burbidge, Intellectual Property Partner at Gunnercooke LLP in London - rosie.burbidge@gunnercooke.com