Investors look for innovative businesses with well defined intellectual property
- Investors want to understand the extent to which a business ensures its freedom to operate, establishes certain barriers-to-entry and meets a real market need.
- The main barrier smaller businesses face is asymmetric information – namely they have better information about the business, and the likelihood of success, than potential investors.
- Patents can overcome this with an ability to convert idiosyncratic inventions into a standardised format with a known set of technical and commercial qualities.
- Once investors have confidence in the technical and commercial aspects of an invention, the likelihood of investment increases.
The protection of ideas goes beyond infringement concerns towards helping form the basis of a business plan
- Patents grant exclusive operating rights to owners, protecting the source of income.
- A patent provides the economic confidence to invest in research and development as there is assurance in the exclusivity of results.
- A patent creates operating room for a company, increasing the quality of revenues and helping facilitate a 'high-margin' pricing model.