How patents can help Start-ups to increase their valuation & earnings?
What if I tell you that approx. 80% valuation of S&P 500 companies is covered by their intangible assets i.e. intellectual properties (IP). To sustain in today’s competitive world, it has become mandatory for big companies and start-ups to protect their intangible assets along with tangible ones. Intangible assets include all form of intellectual property like trademarks, patents, copyrights, designs, brand values etc.
Patents are no longer seen as merely protecting innovation but also considered as an important part of assets that can be sold through strategic decisions to generate huge revenues. Currently large enterprises are acquiring IP assets or start-ups itself for their IPs .
Patents and other IPs boost start-ups competitive advantage which they can leverage in years to come. Patents prevent others from using an invention, thereby keeping the competitors at bay. Patenting helps the innovators in generating money by licensing or selling the patent.
As an example, HCL Technologies, headquartered in Noida, plans to buy IBMs patented software products at whooping $1.8Bn deal.
It helps start-ups to introduce their invention to the market without the fear of infringement. Investors will get attracted towards an invention that has already been patented. It acquires the trust and confidence that the innovation has a promising future. Patents secure the position of the innovation in global markets sooner and quicker as the grant of patent will accelerate its creation. Without information leaking out to the public many smaller but similar deals are carried out every day.
Google bought Motorola not just for its business and brand name. With it, Google acquired more than 20,000 mobile patents of Motorola. Even after selling Motorola to Lenovo, Google has a vast patent portfolio.
Indeed filing patents is a good practice for start-ups to increase their valuation. Initially, filing a number of patent applications reinforces any claims to the innovative technology the start-up may have. In the later stages, owning a patent portfolio can become attractive and hence, can bolster to a large companies their strong position relative to competitors.
Wipro aimed to make $150 million from its intellectual property in FY2018-19. Bengaluru headquartered software service company had made a whooping revenue of $80 Million in financial year 2017-18 from its intellectual property led business. This strategy is on the lines of chief executive Abidali Neemuchwala’s strategy to extract more value form the segment.
Patents, especially for start-ups, are essential as they shield from competition, help to recover R&D costs involved and generate revenues.
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