Does IP Have a Role in Investment and Commercial Success?

A study of over 9,000 Venture Capital backed companies shows that Intellectual Property is an Important Component of Value:

• Venture Capital “Winners” are at Least Two Times as Likely to Hold Intellectual Property than Losers

• Winners Score 21% Higher in IPVision Ratings

• Highly Rated Companies were Over Six Times More Likely to be Winners than Losers

 

This downloadable case study, “IP in Early-Stage Commercial and Investment Success,” was published in Intellectual Asset Management magazine. It discusses the results of IPVision’s study of more than 9,000 venture capital backed companies’ intellectual property positions based on publicly available data about those companies’ U.S. patents.

These assessments demonstrate a marked correlation between “success” (with “Winners” measured by a company having achieved an IPO or having been acquired) and a company having developed (or possessed) intellectual property.

Here are the highlights reported in the IAM Article:

Sample: 5 Top Tier Venture Capital Funds.

Because there was no publicly available data about the Internal Rate of Return (IRR) for all of the companies in these VC portfolios we selected 639 companies that had either had gone public or had been acquired (“Winners”) and those companies that were no longer in business (“Losers”).

We ran IPVision IP Analytics algorithms on the publicly available patent data for these companies to determine for each company: (1) the amount and quality of its IP, (2) the company’s position in the IP landscape and (3) how well it was managing its IP.

Using these factors we assigned scores from 1 (Best) to 5 (Worst). We compared the scores of the Winners with those of the Losers:

• For companies with high IPVision ratings, 6 out of 7 (86%) were Winners.
• Winners had an average IPVision rating that was 21% higher than Losers.
• These results were consistent across all industry sectors where technology is a value driver.

Of course, Correlation is NOT Causation but the results are striking. At its heart, the IPVision analytics provide insights into a company’s management of its technology and IP strategies. Those that develop, manage, and execute technology and IP strategies well are more likely to be Winners. That is what our ratings show.

Conclusion: If you are an Investor and you are not looking at IP in your investment decision making process, you are missing a crucial piece of the determination of valuation and financial success.

 

For the full report, download now.