A study on about 2,000 companies that received venture funding between 2004 and 2010 by Harvard found that most startups fail. A startups’ biggest challenge is bringing a new product to market.
When a big company brings a new product to market, it spends months or years and millions of dollars doing market research to find out if it will gain traction. It leverages its brand awareness and a big marketing budget to promote it. And a big company can use its existing relationships with customers and partners to help boost the new product sales. Even with all that, a product launch is not a sure bet.
Startups don’t have that much time, and they don’t have that much money. They can’t do market research, so failure becomes their market research.
So what attributes separate the 25% of successful startups from their less successful counterparts?
Very often, the difference between success and failure for a startup is its ability to raise more capital. Most startups have little or no revenue, large research and development expenses, and few tangible assets. The start-ups’ primary and most valuable asset is their intellectual property –patents, trade secrets, trademarks, or copyrights.
A recent white paper from the World Intellectual Property Organization (“WIPO”) confirmed the importance of IP to startup funding. Its findings concluded that IP is now an essential element in obtaining venture funding.
If you are a start-up, your IP is directly linked to the future success and revenues of your company. No matter which business cycle you’re in (e.g., early, growth or late stage), capitalizing on your intellectual property is a part of your long-term strategy.
Licensing your IP shifts the risk to your licensees, giving your start-up a lower risk profile. With this move, your start-up gains low-cost licensing revenues, higher profit margins and increased company value.
Your IP is a powerful tool for competition, and can cut the risks on capital investments. When strategically applied, your IP assets increase your market value and the likelihood of obtaining investor financing. More importantly, effectively using your IP can significantly reduce your odds of startup failure.