Getting funding remains a real challenge for technology startups. Always a considerable risk, venture capitalists want to know where a company’s products fit in the marketplace and if they’ll be able to build a successful organization on top of their innovations.
Venture capitalists can’t escape from the fact that they’re operating in a highly unpredictable environment, but that doesn’t mean that they don’t do absolutely everything in their power to shift the odds in their favour. It’s about maximising returns and reducing risk and there’s no doubt that intellectual property in the form of trade secrets will be more appealing than fragile patents which are susceptible to litigation.
Litigation is something which young companies cannot afford to be dealing with. Burdened by the cost of developing their technological innovations, patent lawsuits can make or break a company in the early stages of its development.
For UK and US companies, there is little fear or anxiety surrounding ‘weak’ patents. Both countries are blessed with world class universities, which produce high-quality research as well as a whole host of new innovative companies that are starting to satisfy consumer demands.
Companies that are investing in companies from the UK and US are therefore an attract proposition for venture capitalists as they can say with some conviction that the innovations that they are investing in are protected from the courts.
Intellectual property has never been as central as it is now for British companies for example, with CITY A.M stating, ‘IP has never been so important and will continue to act as the hinge that will keep Britain open for business’.
Some may not consider the linkage between VC and IP as a direct one, but it’s unquestionably an influencer. The continual development of SMEs and their capacity to attract VC will continue to be affected by a company’s ability to attain strong IP.
With the innovation landscape as competitive as it is, there’s never been more companies for VCs to choose to invest in and whilst the pool of talent is undeniably greater, the level of risk is greater too.