Leverage Your Technology IP to Raise Capital

This is the second, in a six part series in which we will take a detailed look at the 6 most important truths that all entrepreneurial-minded scientists and/or inventors should understand in their quest to turn an idea or invention into a home-run multi-million dollar business. In our first article, we took a look at the importance of having a business plan for commercializing technology IP or innovations.

Now, imagine the following scenario: You submit your provisional patent. A year goes by. You submit your patent application. Now, it’s Patent Pending. Your patent lawyer has told you he or she found the cracks in the patent sidewalk (the claims) that enable your idea to have IP merit and value. You feel as though you are now home free and it’s just a matter of time before the money will be rolling in after the patent office grants your patent. Investors will be lining up to invest because you have a patent. Right?

Unfortunately, if it only were that simple!

A future patent holder needs to ask themselves the following questions before he or she even files the patent application:

• Is my patent truly a “disruptive” market game-changing invention or an “incremental” feature/benefit substitute in the marketplace?
• Does the future product or service, based on my patent, compete with well-funded, entrenched competitors?
• How fast will the end customer switch to my product over status quo?
• How much money will it take to market to these end customers to get them to switch?
• How long will my product or service be in the market before it gets the attention of major competitors?
• If my product sales grow quickly, can competitors create their own similar product or service by ignoring the patent or changing one or two features to contest any patent infringement?
• How much money do I have to litigate against these infringers?
• How many other patents are in the field of use of my product or service, i.e. how crowded is the IP landscape?
• Who owns these patents and will they think you are in any way infringing on their patents with other aspects of your product or service?

You’ll notice the main thrust to these questions is centered not on the technology features (what is patented) but on the market, competitive products and services offered, and competitors themselves.

Therefore Truth #2 – A Patented (or Pending) idea is similar to the size of a marble. A patent does afford considerable protection, in theory, and is great to have in your side pocket. It, however, needs to be properly applied to a product or service that not only can hold up legally against competitors, but most importantly, will cause the end customer to want to switch to it.

Until these end customers bite and sales result, most investors will acknowledge the potential of the patent, but will not attribute the same value you place on it. Thus, your patent is really a nice, shiny marble – one that you wouldn’t trade in a game amongst friends or competitors, but it is no guarantee that you will successfully raise capital.