Summary
This post provides a foundational understanding of how startups in India can leverage intellectual property to attract funding from venture capitalists and investors. It highlights the growth of the Indian startup ecosystem and the critical role IP plays in sustaining and scaling new ventures. The article outlines common obstacles startups face, such as lack of awareness and resources, and offers a structured, three-step approach for maximizing IP value. The importance of expert advice and strategic IP protection is emphasised as crucial for long-term business success. The post concludes by cautioning that neglecting IP can severely limit a startup's potential.
IP as a Tool for Raising Investment
This article was originally published on 9 December 2014. While certain statistics may reflect conditions at that time, the underlying analysis of how intellectual property supports start-up fundraising remains current.
Start-up funding activity in India has grown substantially in recent years. Reports from the period cited US$ 1 Billion raised by Flipkart alone in a single fundraising round, alongside 93 deals totalling INR 97,738 Million across various sectors. E-commerce businesses led the pack by proportion of start-ups funded.
A 2014 NASSCOM Report rated India as the fastest-growing start-up ecosystem and the third largest in the world. That report estimated the country had approximately 3,100 start-ups at the time, with around 800 new ventures being established each year. By 2020, it projected that India’s start-up population would grow to approximately 11,500.
Against this backdrop of growing entrepreneurial activity, business experts have estimated that approximately 90 per cent of all start-ups fail for various reasons. One factor that has consistently proved capable of sustaining, establishing, and growing a start-up is intellectual property.
The Role of IP in Fundraising and Exits
IP has, in several instances, enabled entrepreneurs to salvage value from an otherwise failed venture. Those with experience of multiple funding rounds consistently point out that IP — especially patents — plays a vital role in raising funds and in achieving profitable exits. Three reasons commonly prevent entrepreneurs from realising value from their intellectual assets:
- Lack of awareness and expert advice;
- Lack of resources, financial and otherwise; and
- Inability to appreciate the broader picture at a strategic level.
A Three-Step Approach
These obstacles may be addressed through three practical steps:
- Engage an IP expert: An intellectual property attorney or patent expert with experience of working with and growing start-ups should be consulted.
- Build broad protection: Working with the IP attorney, the start-up should ensure that its intellectual assets achieve the broadest possible protection consistent with its business objectives.
- Plan strategically: The creation and protection of intellectual assets should be planned to achieve maximum business value.
Cutting corners with IP is likely to result in a corresponding reduction in a start-up’s business value.
Disclaimer
This article is for general information and does not constitute legal advice. Readers should consult a qualified attorney before acting on any matter discussed here.