No, You Don't Need Patents To Raise Money

from the exaggerations dept

One of the common "defenses" of patents that we often hear is that "investors require them." That's simply not true. There are, certainly, some short-sighted investors who require patents, but more and more of the most respected investors have spoken out against the patent system, acknowledging that it does more harm than good. The latest example of this comes from Rob Pegoraro, who spoke to a bunch of startups presenting at a "Demo Day" and asked each of them about their patent strategy.

While some of them are filing for their own patents, a key point was that their investors definitely didn't require it or push them in that direction.

None said their investors had pushed them to file for patents.

Even more to the point, investors seem to recognize that patents can take a big chunk of money out of early investment if startups file for a patent. Fortify Ventures managing director Jonathon Perrelli pointed out:

“When they’re raising $50,000 to pay for ramen and hosting services and their desks, $15,000 doesn’t have to go to intellectual property.”

The article also asked the startups if they were worried about patent trolls, and, unfortunately, many of the startups seemed fairly naive about the whole thing, suggesting that they're okay since they're not copying anything. That's not how patent law works, of course. Patent trolls pop out of the woodwork claiming you violate some tiny thing all the time. The one company that Pegoraro spoke to that insisted it was impossible that they violated a patent is likely in for a big surprise if it ever gets big enough to attract patent troll attention.

Filed Under: entrepreneurship, investment, patents, startups, venture capital