Patents aren’t key to venture capitalism

(Amy, Professor of Law, Drexel University Thomas R. Kline School of Law, “The Antipatent: A Proposal for Startup Immunity,” pg online @ https://digitalcommons.unl.edu/cgi/viewcontent.cgi?article=2808&context=nlr //pa-ef)

Nonetheless, one comprehensive study observed that there is “some ambiguity about the role played by patents in securing funding,” and that “patenting may not be a necessary condition for access to entrepreneurial capital.”366 Venture capitalists do not use a uniform strategy, and their methods and criteria for assessing financing decisions vary.367 Other indicators of quality exist beyond intellectual property, including management education and experience, the earning potential of the proposed concept, reasonable capital requirements, and a unique product that will likely manifest a significant competitive advantage, among other things.368 Moreover, the importance of patents to investors varies between different technology sectors.369 For example, patents are more important to venture capitalists investing in biotechnology companies compared to software and Internet startups.370 This same distinction exists for angel investors and other funding sources.371 Significantly, studies have reported that a significant percentage of venture-backed software firms do not hold any patents.372 For those firms that do hold patents, it has been difficult to ascertain whether those patents attracted venture funding, or alternatively whether the cash infusion was used for patent-application fees and attorney time.373