Does IP protection matter? Some investors won’t invest in startups without a patent, others don’t value it at all. So what does the middle of the bellcurve, the majority of the industry, believe?
To make a sweeping statement, IP protection doesn’t matter for most businesses and for most investors. Great IP without a killer team, a market, a willingness to pay, etc usually never becomes worth anything. And many phenomenal tech companies have been built without defensible IP — Salesforce outexecuted, outsold and outdelivered — nothing about their success is due to a patent. For most tech companies, doing what you do better than anyone else is your competitive advantage. Winning companies are rarely about what you can do that nobody else can — they’re about what you accomplished that nobody else did. So if your company doesn’t have defensible IP, that’s probably OK — and if it’s not OK to some investors, they’re not the right fit for you.
There are, however, some notable exceptions:
-If you’re a deep tech business, where you’re doing something that depends on groundbreaking tech (hardware that nobody else has, algorithms that are unique to you, novel software that nobody else has developed, etc), then IP protection is important. These are rare — businesses where the tech alone is your differentiator and what is supposed to win — but in those cases, it’s important that nobody else can duplicate the tech.
-If your business is in an extremely crowded space where there’s worry that you could be infringing on the patents of others, gaining IP protection will give investors faith that you can’t be infringing, since you had your own patent awarded.
-If your sales are going to be predominantly through channel sales. Since your own execution and sales aren’t going to be a key factor, it means product is going to be the key success determinant. And if your channels are going to evaluate the whole market (which they will), then it’s important that you have the best product and the protection to ensure that nobody else can compete.
So the overall message seems to be — don’t worry about IP protection, and don’t listen to investors who tell you businesses can’t succeed without patents. Most businesses win on team and execution, not on IP. But if your business has certain key characteristics it can’t help.
At the end of the day, remember this: 50 patents may still equate to a worthless business. The best product in the world that doesn’t penetrate the market never sees the light of day, and never builds business value.