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Fundraising For Start-ups Through Patents – A Complete Guide

Fundraising for Start ups
| Updated: May 26, 2021 | Category: Patent

Sometimes, start-ups may run out of money and have not enough money to run the business since they face an insufficiency of finance more often, which may harm their upcoming prospects. Hence, it is generally desirable for start-ups to first make sure the finance availability, upon which rests of all other concerns of an organisation. The sources of fundraising for start-ups, apart from friends and family, are different, to angel investors, crowdfunding, to name a few and business network. However, these days, Patents are also considered to be a capable source of fundraising for start-ups.

An Overview of Patent

A Patent is an imperative type of Intellectual Property (IP[1]) that allows owners sole rights to limit the sale, use or marketing of their invention. In simple words, Patents offer control to the inventor for the operation of the product in the market for a particular period. A Patent has different benefits such as:

  • Patents stop others from using an invention, thereby keeping challengers at bay;
  • Patenting aids the inventor in making money by licensing the Patent to others for their use or sale with another asset.

Different Types of Patents

There are three different types of Patents, and you can check the same below:

  1. Design Patents: Allowed to safeguard the distinct appearance or design of manufactured objects like the complete design of the thing or the surface ornamentation.
  2. Utility Patents: The most ordinary type of Patent, these are allowed to chemicals, new machines, and processes.
  3. Plant Patents: Allowed for the invention and asexual reproduction of new and unique plant varieties, consisting of hybrids (the meaning of asexual reproduction) is reproduced by means other than from seeds like by rooting or grafting or cuttings).

Fundraising for Start-ups

One of the main reasons an inventor has to get Patent Registration because it’s a vital source for creating revenue, and as such, it will more helpful in introducing the invention to the market without the fear of violation. Patents are considered to be an essential source of fundraising on account of the following reasons:

  • It makes sure that there is no opponent infringement;
  • It makes sure a continued circulation of revenues in the form of profits;
  • Moreover, the priority dates will make sure that Patents are offered in overseas countries as well. Which is a plus sign for the start-up invention having the market potential abroad;
  • Further, the Government scheme to promote inventors to file for Patents. They also deliver attractive tax rebates and quick processing of documents;
  • An invention that has been patented already will attract investors huge time as it represents that the invention has an encouraging future, thereby obtaining the investors’ trust;
  • Assisting a Patent will protect the invention position in the international market faster and sooner. As the allowance of the Patent will boost its creation.

An application of Provisional Patent will work for twelve months or a year within or after which one has to file a complete Patent Provisional Specification without which the application of Provisional Patent will be considered abandoned. The specifications of Provisional Patent given in such provisional application will not be removed after complete patent filing. But, it is cautioned that the application has to be well-written and in agreement with business objectives.

It may obtain an increased continuum in the near future as provisional patenting can deliver insights into product success. And the standing of the start-up after one year and as to whether one must proceed with a full Patent. The benefits also consist:

  • Costs of filing an application of Provisional Patent are low;
  • It gives an extra year of protection;
  • It stops from the filing of any Patents subsequently concerning that field;
  • It serves as a trial for the invention before it goes for a complete Patent in the market.

Different Stages of Fundraising for Start-ups

Following is the four different stages of fundraising for start-ups:

Stages of Fundraising for Start-ups
  1. Seed Funding: You may or may not have prototypes; however, you are operating towards improving your products to fundraise;
  2. Series A: Your product or services has been improved; however, you need to encourage it in the market for awareness and create public demand;
  3. Series B: You have obtained credibility within the industry, however in order to grow more, you need to broaden your operation;
  4. Series C: You look at ways to create or innovate and improve your products to capture new markets.  You may also idea for an IPO.

Conclusion

It is crucial to know that it is possible to fundraising for start-ups through Patents; however, only after protecting it, which, otherwise will be subjected to infringement. An invention can be sold, and enormous profits can be achieved but only for the short term. However, Patenting is means of creating revenues for years to come in the longer run. The inventor can always license the Patent to those who are eager to use the invention, and in that way, the inventor shall receive royalties with every usage of the product.

Read our article:What is the Concept of Patent Compulsory Licensing?

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A legal writing enthusiast, a wanderer, and a zealous reader. After gaining a lot of knowledge about the diverse legal topics and developing research skills, Karan joined the league of legal content writers to deliver quality-rich blogs.

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