Fund Raising of Start-Ups Through Patents - IMC Group
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Fund Raising of Start-Ups Through Patents

Fund Raising of Start-Ups Through Patents

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Start-ups often run out of the fuel due to shortage of funds. Their future prospects go in the dark when they lack finances. Therefore, most start-ups are advised to begin the business only when they are sure that there would not be any financial crunch because the functionality of the business majorly depends upon capital. The s tart-ups can source their financing from friends or family, angel investors, crowdfunding, business network, etc. Another source of finance that is getting very popular these days is raising funds through patents.  In this article, you will learn how patents are an important source of finance.

Let us first learn about the meaning of patents.

Meaning of Patents

A patent is an intellectual property. The owner i.e. the inventor of the patent has the right to restrict the marketing, sale or use of the product or service. Therefore, the inventor of the patent has a monopoly over the operation of the product for a specific period of time. The main advantages of patent are as follows:

  • Patent keeps competition away as others cannot use your invention.
  • Patent acts as a source of finance. The inventor can sell the license of the patent to others or sell the patent in exchange for another asset.

Let us now learn how a patent can help in fundraising.

Fundraising Through Patent

The inventor has to patent his invention so that it becomes a source of revenue and help him in developing new inventions for the market without worrying about infringement. Patents are important source of finance for the start-ups because of the following reasons:

  • Patent ensures that the competitors cannot infringe your product.
  • Patent ensures higher profits and a regular flow of revenue.
  • If the patented invention has a promising future then it will attract a large number of investors who can acquire your patent.
  • If the invention gets a good public response abroad, patent opens a potential market in foreign countries.
  • Patent secures the position of your invention in the global markets.
  • To increase investors to file for patents, the government provides many tax rebates and enables faster processing of documents.

There is a provision even to get the incomplete invention patented through a provisional application. The provisional application defines the field of the invention and its scope. This gives protection to the inventor against unlawful use of his idea.

The validity of the provisional application is for 12 months. After the period of 12 months is over, the inventor has to file a complete specification, otherwise the provisional patent application will then be considered as abandoned. After the filling for a full patent, the provisional specification given in the provisional application shall not be removed. The inventor must take care while writing a provisional application. It should be to the point and in context of the business objectives.

The provisional patent application can play a big role in the success of the business. The start-ups must file for provisional application before they proceed with a full patent. There are many advantages of filing a provisional patent application, they are as follows:

  • Provisional application can be filed at a very low cost.
  • It prevents competitors from filing patents related to that particular field.
  • Before applying for the full patent, the inventor can conduct trials of the product.
  • It gives protection of 12 months to the inventor of the patent.

One thing that is clear from the above is that a start-up can raise funds through patent only after securing it. A patent has the potential to generate huge profits in the long run.

If you are a start-ups looking for company registration in India or need help with patent registration, you can contact IMC Group. We understand the importance of patent registration for start-ups and therefore, we provide the service of patent, copyright and trademark registration in India. To know our quotation or if you have any query that you want us to answer, just drop us an email.

Author bio information

Piyush Bhandari

Mr. Piyush Bhandari is a fellow member of ICAI (Indian Institute of Chartered Accountants of India) since 2003 and masters in Commerce. He has worked with the corporate finance division of the Sanmar Group – a leading business conglomerate in India, for over 3 years. He was also awarded the ‘Young Managers Award’ by Madras Management Association in 2005.He has wide experience in Assurance & Advisory, International Taxation, Corporate Finance and Strategic Planning. With over a decade of experience, he spearheads the Cross Border Advisory and International Taxation vertical.

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