Right now I have yet to patent my product. I’ve prepared a pitch deck and included some of the solid progress I have made in the last 18 months. I’d like to get venture money as soon as possible, but do I need the patent first to be taken seriously by investors? Will they consider investing if I tell them that it’s in the pipeline, or does it need to be a done deal?
I disagree. You can be taken seriously without a patent, or with just a provisional patent filing (in the US). Getting a patent is expensive and takes a long time. If you get it, often it is much less broad (especially today) than you think or hope for. Additionally, your product may not be able to be patented, as many are not. Setting aside that it may be "obvious" (the patent killer phrase), or others have already similar patents, if you have commercialized it - at all in the EU, or for more than 12 months in the US with no filings (in the US you can do a provisional patent but must convert it to a full filing in less than 12 months) you will have lost the ability to patent. You need to buy two hours of a good patent lawyer's time (meaning, not your brother in law the divorce attorney, or the guy in his office that wants to learn patents) to figure out if it may be patentable, what the process is so you can talk about it with confidence, and if it is not patentable, what steps you can take to keep the technology secret. A VC will appreciate you being knowledgeable and have taken steps to protect the technology. But it is not a requirement. It is critical to understand most VCs do not really care about the product and the technology (so do not waste a lot of time explaining it - they know it will change). They care about the team and market potential. Mostly, it is the team.
This is an age old question. When a VC asks: do you have a patent? Here are the two answers:
You say: No. VC says: well you need one or I won't invest.
You say: Yes. VC says: Patents don't matter anyway.
I have heard both. So it will depend on your lead in the market, your idea overall (how unique etc) and then the VC themselves.
Another aspect of getting VC money: everyone can say no, but very few can say yes.
I recommend you start with a seed investor. Be careful with your equity etc, but that is a good place to start.
A patent in your pocket is always a plus.
But that is not the only factor that determines whether you receive funding or not. If by 'solid progress' you mean market traction, I would suggest you start meeting people who can help you with fundraising.
If you so decide, let me know and I can help you get connected with such people.
Most of the time when a VC asks if you have a patent 9 out of 10 will say yes... Patent Pending. It takes so long for a patent to be awarded. File if you are able and you think will get it. But what VC's will look for more than anything is a business, or a model. If you have traction on what you have done over the last 18 months and have something built then there may be interest. Do you need VC funding to help scale the company? Everyone wants VC money. Not everyone needs it. Look for other alternatives unless you are OK giving up the equity. Do you have a team involved with your product? VC's look not just at the product/business case but also the team they are investing in. If its just you, have you started a company before? How impressive is your (and your partners if you have any) resume.
Having the patent is always an advantage for you. Not only that the valuation also changes with it. For your stage, if the average valuation is say $1.5m, then with a patent on your side, you can get another $1m.
Dane. such solid advice.!
I think it depends on many variables and is not a yes or no question.
Is the product in a hotly contested marketplace?
Can you afford to get it done right at this point in time? A good patent attorney can be expensive to a start-up struggling for cash.
Is the product still at the MVP or a fully developed product on the market bringing in cash.
How defensible is the idea/product and can you afford this kind of expense for the competitive edge?
Here is how one VC answered the same question when asked by a start-up bio-pharma CEO; The VC said "a patent is nice but it's only as good as your ability to fund it's defense." I tend to agree with the VC.
Most new ventures don't need a patent, and in fact usually the idea isn't patent worthy. Investors usually are not investing in the idea, but in you. That's generally true even if the idea is patent worthy.
There are of course exceptions. I always file a provi (provisional patent application) just in case. $100 if you do it yourself.
The real reason most entrepreneurs should file a provi imho is just so they feel more free to discuss the idea and not have to bring up the dreaded kiss-of-death NDA.