Got a Patent? Sell the Company! Element8 Angel Conference, Seattle

BY Basil Peters

This is an excerpt from a talk I gave at the Element8 angels workshop in Seattle: Investing a World With Few Exits.

Some of the key points from my talk:

  • I believe only 25% of all companies that could have been sold actually end up successfully exiting
  • If a company misses the ideal time to exit, then the most likely result is that it will fail completely
  • I’ve identified five failure mechanisms
  • This talk describes the failure mode driven by intellectual property infringement
  • Patents have become a much more valuable tool for entrepreneurs and angels
  • Patents are a “Double Edged Sword” and create serious risks for smaller companies
  • Many big companies take the attitude that they will just use the IP and let the lawyers figure it out later
  • Defending your patent could cost $10 million and take ten years
  • Big companies know that many times a small company can’t even afford to start the suit, so they will win by default
  • If you have a good patent, the only reasonable strategy is to sell the company as soon as possible after the patent is granted
  • Or when you have disclosed the technology – whichever is sooner
  • The risks of not selling early just aren’t a good business, or investment, decision