If you’re familiar with venture capital, then you probably know how hard it is to transform an idea into a profitable and successful project. This is because new ideas, regardless of how promising they are, are associated with all kinds of risks that must be thoroughly monitored at all times to avoid losing the money invested.
Statistics show that 3 startups out of 4 don’t survive. While the challenges that newly formed businesses face have been well documented, it’s quite interesting to analyze how the 25% remaining startups are able to succeed in the same business environment where the others have failed. The case of high-tech startups is particularly compelling given the way their business model is set. Indeed, unlike their peers, high-tech startups have huge R&D costs and almost no revenues. But despite that, they’re able to secure financing and even experience a sometimes-surprising level of success in highly competitive markets.
The ability of such startups to secure financing essentially lies in their capacity to come up with quality IP assets and convince investors that those assets will ultimately give them an edge over industry rivals. Assuming that they’re successful in convincing investors, they’ll go through a number of business stages. For each given stage, those entities will receive funding and will get additional financing for the next stage depending on whether they’re able to develop their ideas further. Financing will keep on coming as long as investors are able to see that the idea is progressively taking concrete form, and will generate revenue in the foreseeable future. Under this rationale, the borrowing costs initially set high will progressively decline as the startups survive and get closer to the marketable stage.
Here is a chart showing how intangible assets (including intellectual property) have grown in size over the years.
This chart shows that IP assets play a decisive role in the successful development of companies, and S&P 500 companies' valuations are largely due to intangible assets. Venture capitalists are well aware of the value of IP assets, and you should be too at this point.
So what do you do with this information? We have a free assessment that gets you started on understanding initial business risks you may not realize you're causing. Then, upgrade to the full ID your IP tor receive an in-depth IP strategy (the real investability-raiser).