While venture capital investments slowed for Chicago startups in 2022, new data suggests that the more patents a startup has, the better off its fundraising will be. In fact, protected intellectual property continues to be a strong indicator of value in today's funding climate.
National data from 2011 to 2020 suggests that startups with patents or patent applications in progress raise disproportionately more capital than their nonpatent peers, according to a recent PitchBook analyst report.
They were also shown to raise capital at higher valuations, especially when it comes to angel investors, and achieve larger exit values on average. From 2011 to 2020, patent startups represented nearly 31% of startup deal count on average but 58% of annual deal value.
Investors prefer to write larger checks for patented or patent-seeking startups, and patent startups raise more money than their nonpatent peers at all funding stages, the report found, with deal sizes for patent startups running 40% to 60% larger than those for nonpatent startups. Deal sizes for patent startups were on average more than 45% larger at the angel stage, 51.5% larger for seed rounds, 73% larger for early stage, 71% larger for late stage.
In Chicago, QualSights, an insights technology platform that helps brands grow using patented technology that captures consumer insights data, is one startup that raised a $7.7 million Series A last year, thanks in part to the patents it secured prior to fundraising.
