Patents Bring Value to Startup Businesses

Intellectual Property & Patent Law Blog
Patents Bring Value to Startup Businesses

Patents Bring Value to Startup Businesses

As a startup owner, you should know that your ideas and intellectual property may become the chief source of wealth in your company. This has been the case for 80% of the value of public companies today.

Let’s look at how your startup can use its IP to strengthen its financial and strategic position.

Using Patents to Finance Operations

Recent research shows that a first patent issued increases employment growth an average of 36% over five years. That first patent also grows sales an average of 51% and increases the probability of securing venture capital (VC) funding by 53%. But VCs also want a startup to have a great service or product, strong market opportunities, and an effective team of leaders. That said, the chances of tapping into venture funding are greatly enhanced if your company has at least a limited portfolio of offensive and defensive patents.

That modest patent collection can define your startup’s property rights in your market, mark a defensible space in your industry, and serve as a guard against claims that your technology has infringed on the rights of other companies. By drawing some parameters around your patent rights, your startup can show potential investors that you’ve secured real protection for your business model and innovations. This will help you be more successful in establishing the company as a viable, growing business.

Leverage the Buyer’s Market in IP Acquisitions

An intellectual property acquisitions is a terrific way to quickly increase the commercial strength and financial value of your startup—especially in what experts say is a strong buyer’s market for patents.

But don’t buy IP without an expert advisor who understands the business and workflow of your startup, as well as your competition—one who can vet the opportunities and negotiate a deal that works to your advantage. Your IP expert should have a vast amount of actual experience in IP transactions with a proven track record and strong recommendations from former clients.

In addition, you’ll have to have a team with expertise in all facets of IP management and patent value optimization who can help you to strengthen your overall business position, as well as individuals with the expertise to assist you in fully leveraging the value of the acquired intellectual property after the transaction is complete.

Get Favorable Terms on IP-Backed Debt Financing

Banks understand that patents represent assets they can value and understand from a collateral point of view. When you consider patent-backed financing, you can grow and develop your startup without encumbrances on revenues or other corporate assets that are found with other types of debt financing. If you have strong intellectual property and require capital, investigate IP-backed financing as possible option.

License Your IP as a New Revenue Stream

Patent licensing can be a profitable way to tap into the value of unused IP, which is seen more frequently with larger, more established companies. Look at companies in non-competing markets to possibly use your patented technology in their own products and services. These licensing deals can result in millions of dollars in new revenue for your startup.

To determine if your intellectual property has licensing value and can generate a solid ROI, you should hire an IP expert to gauge the legal and technical caliber of your patents, along with the industry’s market conditions. It’s crucial to hire an expert who has high level networking ability to find lucrative licensing opportunities.

Invest Your IP in New Opportunities

Another way to release the hidden value of underutilized IP is to sell or “invest” in another company. Your startup could even spin out into a separate and distinct company. The value of the spun-out technology frequently experiences a significant increase when commercialized. There can also be powerful tax, financial, and strategic rationales for a spin-out or asset sale. Some large companies have “invested” their underutilized patents in startup companies through a partner which avoids the legal risk and negative PR that can come with licensing. Plus, the benefits may include an equity share in the startup receiving your IP.


The value of patents can be under-appreciated when compared to more tangible elements of a business such as sales, inventory, or marketing. But you should leverage the value of your patents with an IP expert. Meet with an experienced IP attorney and get the resources you need to guarantee all aspects of your IP will remain your own and to uncover Gidden value in your patents.

Attorney Michael Ahmadshahi, PhD, focuses on patents, intellectual property, copyright, and trade secrets in Irvine, California. The Michael Ahmadshahi, PhD, Law Offices are also located in Beverly Hills and Sherman Oaks. Call us toll free at (800) 747-6081 or direct at (949) 556-8800 or email and let us help you with your intellectual property questions and the IP strategy for your startup.

attorney Michael Ahmadshahi

Mr. Ahmadshahi’s area of practice is Intellectual Property Laws including Patent Prosecution and Litigation, Trademarks, Copyrights, Unfair Business Practices, and Business Litigation. He is also an entrepreneur and an inventor.

Practice Areas


Copyrights & Trademarks

Trade Secrets

IP & Business Litigation


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