Building a business requires fortitude, faith, and a lot of grit. You’re hustling every day, meeting with clients, leading a team, solving problems, finding solutions, serving customers. All of this is a predictable and essential part of being an entrepreneur.
But are you protecting what matters most: your startup’s unique competitive advantage?
Your competitive advantage is your moat
Businesses exist to fill an unmet need or space in the market. We all know stories of companies that solved problems with innovative solutions. Think about Airbnb, Uber, or LinkedIn: each focused on solving a specific problem.
And yours is no different: it has features that set it apart from other offerings on the market. Maybe you found a product to improve, or maybe you’re working on a brand new product or a better process.
Whatever “it” is, it’s what makes your idea different and unique. It’s your competitive advantage!
Many founders think that if their ideas are unique, that’s enough. Sadly, that’s not necessarily true. You need to protect your competitive advantage — and take it all the way to the bank.
The benefits of patents for your startup
Intellectual property (or IP) is a powerful strategic lever to build your startup. IP includes copyrights, trademarks, and patents.
I’m focusing on the power of patents, as they’re quite beneficial for startups. A patent is a form of intellectual property that protects unique ideas.
Not every idea can be patented. For your idea to be patentable, it needs to fulfill three things: it must under a patentable category, you need to be the first to file a patent application, and it needs to be useful.
If your idea fulfills these prerequisites, getting a patent is one of the best investments you can make for your company.
First off, a patent protects your ideas from copycats! You’ve spent time developing your idea, investing limited resources; you don’t want anybody else to benefit from your hard work. A patent protects you.
A patent can also prevent others from using your idea without your permission — essential if your startup operates in a competitive industry like artificial intelligence or biotechnology.
But those aren’t the only two reasons to consider patents for your startup. Five additional benefits strengthen your business:
#1: Patents increase your valuation
A patent secures your idea but also turns them into more tangible assets. This increases your startup’s valuation and makes you a target for acquisition.
In fact, some companies were acquired just because of their patents! Take Nest, for example. Nest is a company that specialized in thermostats and fire detectors. When Google bought it in 2014 for $ 3.2 billion, many wondered why it fetched such a high price.
Besides all the work they had been doing in creating useful alarms, it turns out that Nest had been building a patent portfolio, patenting ideas in the home automation and related tech space. This portfolio attracted the eye of Google, who wanted access to those patents as they expanded beyond search.
#2: You can use it as any other property
A patent is like any other property: you can buy, sell, or rent (license) them.
One of the most popular ways to monetize patents is to license them. There are small startups that make a lot of money by licensing their inventions to big companies.
Carles Puente, a 2014 finalist in the European Inventor Awards, is famous for inventing a mobile phone antenna based on fractal geometry. Basically, it allows antennas to be much smaller. If it weren’t for him, we’d still carry around brick-sized cellphones.
What’s most fascinating, though, is that his startup Fractus could never manufacture enough antennas for the billions of phones sold each year. But thanks to its patents, Fractus was able to license its technology to 90% of the world’s smartphone makers! Patents not only protected their innovative technology but also expanded Fractus’ market share. Win-win.
#3: Patents can help you secure partnerships
Speaking of licensing, patents can also help you secure partnerships.
Patents provide a legal structure for you to share, license, or develop new products with your partners.
I had a client in Israel named Compugen. The drug discovery company focuses on the field of immunology and oncology. For years, they’ve been developing and patenting new solutions.
In 2013, they made a licensing deal with Bayer to research, develop, and commercialize new cancer immunotherapy drugs. This deal was worth $ 540 million! That windfall was a big boost to the company’s bottom line.
The deal wouldn’t have been possible without patents, which provided that legal structure for the partnership.
#4: You can block competitors from the market
Having a patent means that you’re working on a unique idea. While many people think this only means that you’ll stop others from using your idea, it has other implications.
When you get a patent, it blocks others from your market. That means exactly what you think: no competition. If your idea is unique enough, by getting a patent, you’re also securing its market. No other company or individual will be able to exploit this market in the same way you do! You quite literally own the market for the patented product, invention, or idea.
#5: A patent attracts investors
Patents are magnets for investors. They prove to investors that your startup is ready to grow — and that you’re serious about protecting your idea from competitors and copycats.
Building something new is not easy, and success is never assured. That uncertainty is what makes investing risky — and why VCs look to mitigate that risk with tangible proof of potential. Patents are generally indicative of a startup’s innovative potential, increasing a startup’s ability to attract VCs.
A patent provides certainty. It protects investors’ interests as they know that your company is protected from competitors — and could potentially have an extremely valuable asset for getting acquired or closing licensing deals.
So, should you be getting a patent to protect your startup?
The short answer is yes. The specifics of patents (as well as copyrights and trademarks) can depend on the product that you’re building, your industry, and your core competitive advantage. In nearly every case, it’s better to have a patent than to not have it. More on that in my next article!
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