IP & Start Ups: A Potentially Serious Oversight

Picture of Franck Picard

Franck Picard

Principal Partner

What are the most important things you should consider when launching a startup? The name of the company? The website? What your social media presence should look like? How quickly you should ramp up your client base? I guess you would answer a great big “YES!” to all of these. However, one of the most overlooked areas for any startup is IP or Intellectual Property. And overlooking this could be a costly mistake.

The strategy for your Startup seems like a simple one. Launch, find customers and make money. But the devil is in the detail. To give your startup the strongest foundation possible, IP should be front and centre of your strategy.
Those businesses that don’t protect their Intellectual Property can find that they get left behind when others are growing. Take the biggest players for example. They know the value of this. The likes of IBM, Samsung and Apple are filing up to 18,000 patents per year. They are protecting their future business. Let’s take a look at why – and what it means for you.

Why Is IP Important?

As a startup, you usually don’t have much of an asset base. The physical assets are often burned up in the first few weeks and months of the new business. But one asset class that you might have in abundance is the intellectual side of your business.
The thoughts and ideas that give you competitive advantage over others are often the reason you started up in the first place. They should be protected at all costs. And again, we can look at what is already happening to see why this is an important part of a business strategy. At the peak of their powers, Microsoft was estimated to have made uS$2 to 3 billion per year from monetizing IP assets. Nice work if you can get it!

Many will think that in the early days of a startup there are no intellectual assets to be protected. After all, without much in the way of a customer base, how can a startup have anything that others want to get their hands on. But there is a great deal in the infancy of a business to be protected, including –

  • The ideas that the business was launched on
  • The marketing plans, including logos, images and photographs
  • Any code written specifically for a website or app.

Once these are in place, a business has something that is uniquely theirs – something that others in the same field would like to obtain. Alibaba, for example, has a patent portfolio of around 25,000 active grants – not a surprise that they achieved one of the largest IPO’s at over $230 billion.

What Do You Need In Terms Of Strategy?

One of the first things that happens is IP gets lost in all of the other expenses a business has at the outset. There are so many other areas that cold hard cash gets attracted to, that you can be forgiven for thinking that this will take care of itself. It won’t. Amazon, the most valuable company in the world, leads the way most years with the number of patents filed – a whopping 2,504 granted in 2019, up 18% from the previous year.

If cash is an issue, then there are other ways of strategizing for success. If going for a patent feels like a long, arduous and expensive process, then keeping the idea as a trade secret will offer protection without the expense. As time goes by and the startup generates cash, aim to plough some of this into getting that all- important patent at a later date. IBM holds a massive 9,262 patents, stretching back over the last 25 years of business. This has enabled them to prosper in the post-desktop age.

You have to think about what your business looks like (and what it will need) in the future. You may have a niche in the market today. But there is no guarantee that you will own that niche in the years to come. Putting in some hard graft now to protect what you have in the future is money and time well spent. The big players such as Google and Amazon are getting in on the act, filing more patents year on year in an attempt to add growth to their business in the future.

What Are The Benefits?

Protecting Intellectual Property might seem like a luxury as you launch a startup and look to gain a foothold in your chosen market. But the truth of the matter is that it is far more important than that. There is all manner of reasons why you want to avoid this issue –

If your business is involved in some kind of legal wrangle at a point in the future, then you will lose a huge amount of time, money and energy fighting this. Overlooking IP now means that you may lose the rights over it in the future. Amazon only made a handful of patent applications as they launched, seeing the value in this as they grew.

Your startup business will be much more valuable in the future if you own the Intellectual Property that has got you off the ground. Potential investors and potential suitors will value your business at a higher figure if you are in control of the IP. If not, well they may not want to invest at all. A study by the USPTO found that firms with approved patents are much more likely to receive capital support from venture firms. This is often critical to their development.

You can allow others to use the IP under licence if you control it. This means that you can derive an income from this as an asset, rather than see others make use of it without fear of reprisal if you don’t have that level of control. research states that startups with promising patents have a higher value business and more varied exit strategies. There is so much you can do with a solid IP strategy.

Intellectual Property almost certainly exists in your startup. If you haven’t thought about it then now is most definitely the time. If you have thought about it and haven’t acted, then you should look at what you can do to future-proof your business. The results one way or another can be hugely significant.