Alternative Sources of Capital

The Patent as a Funding Resource

As important a resource as VC and angel investors are, this type of startup financing is accessible to a very small population of entrepreneurs. Only about 0.05% of startups raise venture money or .91% of young companies raise angel money. Or putting it another way, ONLY 1 out of 100 startups get funded by either VC’s or Angel Investors.

This stat is important for any aspiring entrepreneur to keep in mind as they attempt to fund their entrepreneurial pursuits.

It highlights the fact that if you are the average startup founder, you need to look at and plan to leverage multiple funding sources other than VC and Angel investors as the likelihood of you getting VC or Angel funding is infinitesimally small.

It is why from time to time the Exponential Podcast explores and discusses alternative sources of capital.

And in this podcast, we are exploring one of them – a more esoteric financing method, but one that has interesting ramifications if you can utilize it. Today we talk with Russ Krajec author, investor, and financer of all things related to patents. Russ is the CEO of BlueIron.

Sidenote: BlueIron finances, insures, and loans money using patents as collateral.

Russ’s book “Investing in Patents, Everything Startup Investors need to know about Patents” looks at patents from an investor’s perspective and analyzes the value an Investment grade patent that is the value an investment-grade patent can bring to the right startup organization.

Key takeaways from the podcast and the exploration of patents as a financing resource

  1. Most patents issued are worthless and only Investment grade patents matter.
  2. An investment-grade patent has a defined scope that can be analyzed and valued
  3. Some investors will fund the patent process if they think the patent is an investment grade, and once you have an investment-grade patent you have a fundable asset.
  4. Startups can get an incredible amount of value from an issued investment grade patent in that many can be leveraged to do all sorts of deals
  5. Startups can get a lot of value out of a patent that is issued quickly
  6. If you have an investment-grade patent don’t forget to look at patent insurance to protect your IP – and give leverage in the market

For more about Patents from Russ Krajec – listen to the Podcast Patent Myths –