The Essential Asset that Separates Start-up Success from Failure
A new study by Harvard examining over 2,000 companies that received venture funding between 2004 and 2010, found that most start-ups fail.
The biggest challenge is bringing a new product to market.
When a big company brings a new product to market, it spends months or years and millions of dollars doing market research to find out if it will gain traction. These companies leverage their brand awareness and have big marketing budgets for promoting it. A big company will also use its existing relationships with customers and partners to help boost the new product sales. Even with all that, a new product launch is not a sure bet.
Start-ups don't have that much time, and they don't have that much money. They can't do market research, so failure becomes their market research.
So what attributes separate the 25% of successful start-ups from their less successful counterparts?
Very often, the difference between success and failure for a start-up is the ability to raise additional capital. Most start-ups have little or no revenue, large upfront expenses, and few tangible assets. The primary and most valuable asset for a start-up is their intellectual property (IP) ---patents, trade secrets, trademarks, or copyrights.
The importance of IP assets to attract start-up funding is supported by a recent white paper from the World Intellectual Property Organization ("WIPO"). Its findings concluded that intellectual property is now an essential element in obtaining venture funding.
If you are a start-up, your IP is directly linked to the future success and revenues of your company. No matter which business cycle you're in (e.g., early, growth or late stage), capitalizing on your intellectual property must be part of your long-term strategy.
Licensing your IP shifts the risks of launching a new product to your licensees, giving your start-up a lower risk profile. With this move, your start-up gains low cost licensing revenues, higher profit margins and increased company value.
Your intellectual property is a powerful tool for competition, and, when strategically applied, your IP assets increase your market value and the likelihood of obtaining investor financing.
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