How to significantly increase your chances of getting VC startup funding

The European Patent Office (EPO) and European IP Office (EUIPO) have recently released a study looking at the finance and exit performance of European startups – it found that innovative startups with patent and trade mark applications are 6 times more likely to get VC funding and more than twice as likely to make a successful exit for investors and founders.
We take a look at the study’s findings and discuss why, if you are a startup, protecting your Intellectual Property (IP) might give you so much advantage.

What did the study find?

Filing patent and trade mark applications in the seed or early growth stages is associated with a higher likelihood of obtaining VC funding. The effect of applying for IP protection in the early stage is particularly noticeable. Startups that have filed trade mark applications are 4.3 times more likely to get seed funding, and for those that have filed patent applications the effect is even more significant – they are 6.4 times more likely to receive seed funding.

The positive effect of IP protection is even stronger in the early growth stage. Startups with an EU trade mark application have a 6.1 times higher likelihood of obtaining early-stage funding and those that have filed a national trade mark application are 2.8 times more likely to obtain funding, compared to startups with no trade mark protection. European patents/applications are associated with a 5.3 times higher likelihood of obtaining early-stage funding, and startups that have filed national patent applications are 3.8 times more likely to be successful in early-stage funding rounds, compared to startups with no patent applications or patents.

And the effect continues at exit. Companies that have filed patent and/or trade mark applications are more than twice as likely to result in successful exit for investors, with a higher likelihood being observed for companies that have obtained European patents and/or trade marks than for those that only have national patents and/or trade marks.

On average, across all areas of technology, 29% of European (including the UK) startups have applied for national or European patents and trade marks. Biotechnology is by far the most IP  intensive sector, with nearly half of startups obtaining patents or registered trade marks. Other IP-intensive sectors include science and engineering (25% file patent applications and 38% file trade mark applications), healthcare (20% obtain patents and 40% trade marks) and manufacturing (20% obtain patents and 36% obtain trade marks).

You can find out more by listening to the EPO Podcast episode about the study, its methodology and its findings here.

Why does IP protection have such a positive effect?

For many VC investors, reviewing a startup’s IP portfolio is one of the key assessments that they make when deciding whether or not to invest, and on what terms. So why does IP protection matter to VCs?

A strong IP portfolio can give a startup a significant competitive advantage, with patent protection in particular offering potential market dominance and higher revenue potential. The ability to prevent others making or selling competing products also protects the VC investors’ funds – a strong patent portfolio can create a significant barrier to entry into a new technology area, discouraging both established competitors and those looking to move into the sector from attempting to copy your technology.

A strong IP strategy is also critical to a startup achieving its business goals and growth potential. All companies have a business strategy and technology led companies have an R&D strategy that supports the business strategy. The most successful technology led companies also have an IP strategy. You can read more about what to include in your IP strategy in our blog article here.

Ownership of patents, trade marks and designs is associated with better performance in terms of job creation and productivity (revenue per employee). And companies are active in obtaining IP rights are more likely than other companies to experience high growth in subsequent years. VC investors are looking for both.

IP rights can also be valuable business assets in and of themselves, which can also influence the funding amount that a VC is willing to offer in return for an equity holding in the company. It is also worth remembering that IP can be licensed, or used as the basis for strategic partnerships, both of which can generate income. VCs are looking for a plan to monetize the IP rights in a startup as both can potentially result in higher returns on their investment.

And finally, like everyone, VC investors want to avoid pain. Investing in startups can be a risky business, and VCs generally aim to mitigate those risks as much as possible. Strong patent and trade mark protection, as well as a good understanding of the IP landscape and Freedom to Operate (FTO) within it, mitigates those risks. Expect any VC worth their money to take a long, hard look at your portfolio and to ask difficult questions about FTO.

How can we help?

For startups, both IP protection and funding are critical – we can help you with getting appropriate IP protection. For VC investors, there is a need to be able to screen and evaluate startups that are developing original products – we can assess IP portfolio’s and advise on how strong they are.

Are you in the early stages of a start up business or a VC investor looking for expert help?

For guidance, support and advice from our team, contact us by email here or visit our website www.two-ip.com.

Are EPO ViCo proceedings a good thing for clients?

I think it’s safe to say that when it comes to conducting oral proceedings at the EPO, videoconferencing is here to stay.  However, despite some initial misgivings, are EPO ViCo proceedings actually a good thing for clients?

During the global pandemic the move to video was inevitable. 

It not only allowed us to circumvent the obvious travel restrictions, it also arguably improved the timeliness and efficiency with which oral proceedings in examination, opposition and appeal could be dealt with, albeit remotely.

As things slowly start to open up, it appears that attorneys want to retain the ability to attend hearings virtually.  This is a view supported by the EPO’s recent Progress Report.  It claims ViCo offers a range of tangible benefits including increase efficiency, accessibility, and inclusivity while reducing costs and the impact constant travel has on the environment.

The Chartered Institute of Patent Attorneys (CIPA) has responded to the report by putting forward the case for the urgent adoption of ViCo as they feel the technology has been proven to be fit for purpose and that ViCo promotes fairness, the right to be heard, and the right of access. 

They did add however that they “strongly oppose” hybrid proceedings; in CIPA’s view mixing in person and ViCo attendance is “inherently unbalanced”.

Why are EPO ViCo proceedings a good thing for clients?

In our view the main benefits of ViCo to the client are:

1. Lower cost

Obviously meeting virtually takes out the usual travel costs and disbursements which immediately represents a significant saving for the client.

There is also the question of the video conferencing platform the EPO uses.  All oral proceeding can be held by Zoom, which can be downloaded for free via Windows, Mac, iOS, and Android meaning even accessing the required technology carries no additional cost.

2. Greater accessibility

Anyone can access Zoom and there are almost no restrictions on the number of people who can join a virtual proceedings.  So as many people as need to can join from both the client side and from the attorney’s team, regardless of location.

Better still as everyone involved can easily attend, conversations can take place during the hearing.  This allows the applicant and their attorney/s to discuss and agree and changes to their strategy as required.  This is made even easier by the technology. 

This is particularly advantageous for opposition oral proceedings – during breaks in the oral proceedings, the team can gather in their own virtual meeting room and can use it to stay in constant contact during the proceedings itself, exchanging messages confidentially using the chat function.

There is also a greater flexibility in terms of start-times.  There have been a number of cases where the EPO has agreed to move the start-time to accommodate participants in different time-zones, most notably in the US.

3. Lower carbon footprint

Along with the reduction in travel costs, with less travel involved ViCo hearings will also have appositive impact on the environment with fewer people flying to Munich and The Hague.

4. Better attorney performance

As the hearings are conducted at the attorney’s desk (or at from the video conferencing room at their offices), they will be more comfortable, better rested, and raring to go having been able to side-step the energy sapping irritations of travelling. 

As they are operating from the office, they also have all the necessary files to hand.  Moreover, they can easily request anything that might be missing without having to worry about when or how that information would arrive if it had to be requested from an office in another country.

5. They are open to public

This means you can attend your competitors’ oppositions and find out more about their patents, their activities, and their plans.  Although admittedly, they will be able to do the same!

Two IP’s patent attorneys have enormous experience of successfully representing clients at oral proceedings at the EPO, both in person and via ViCo.  If you’d like to find out more, please email us.