Patents, an argument for fund-raising!

Any company founder, entrepreneur or manager may have to consider the possibility of raising capital.

Fund-raising is generally aimed at companies with a high-potential project that is expected to develop over 3 to 5 years. However, some start-ups with a solid project may be able to attract investors, thanks in particular to R&D or technical exclusivity and a patent.

When you decide to set up a fund-raising campaign, you need to be prepared for all the negative eventualities, but you also need to emphasize the strengths of your project or company. Unfortunately, fund-raising isn’t that simple: a lot of companies are called upon, but very few are chosen.

The principle of “fundraising” can be roughly summarized in two possibilities.

You need seed capital to meet your initial needs and launch your business. Secondly, you need development capital to finance and develop your company and its growth phase.

In this article we’ll look at how to prepare your pitch and present your company, and then we’ll see how you can use patent registration as a powerful argument for successful fundraising!

How to make a good pitch for successful fund-raising?

Your pitch is your opportunity to show everyone, and especially those who can invest, that your project is worthwhile! A term used for oral presentations to investors, you only have a few minutes to convince them. The pitch is the delicate exercise of presenting your project, your work and the time you’ve devoted to it. Pitch competitions are regularly organized to help you communicate your project.

“Pitcher” is an extremely complicated oral exercise, as it doesn’t simply require you to present, but to convince your audience. Challenges conducted a very interesting interview with Phil Waknell, co-founder of Ideas on stage. He shares some of his magic recipe for a successful pitch.

Here are a few of these elements:

• Keep three words in mind: Magic, Vision, Passion.
• Understand your customer and the market opportunity they offer
• Present your team as the team to succeed in this challenge
• Standing out from the crowd
• Use the first 30 seconds for the “Wow” effect
• Keep it short
• Understanding these contacts
• Have a presentation that blows your mind

How do you introduce fund-raising to investors?

It’s often a bit complicated, even indirectly taboo, to talk about money in a pitch. Some entrepreneurs therefore present an incredible project with a good business case, but neglect the financial part, which is unfortunately a mistake difficult to make up for.

The investors in front of you aren’t naïve, they know why you’re here and what you’re looking for, so talk numbers. Be precise and avoid trick questions.

Here’s the method we’ve defined to help you approach your fundraising in your pitch:

1. Explain your project again. Investors have read your project, but they don’t know it in detail, so explain it again.
2. Explain your vision, your innovation, your future, avoid short-termism.
3. Go into detail about the market, your team, your business model, your strategy and your differentiating factor.
4. Then tackle the thorny question. How much money do you want to raise for your company, why and in what form?

Patents, the key to successful fund-raising

In practical terms, raising capital means giving investors access to your company. You will release and issue shares in your company, then sell them to these investors. These investors will then become shareholders, attend shareholders’ meetings and benefit from a share in your company’s profits .

As mentioned above, there are 4 possible types of investment.

• Seed funds finance the “start-up” of a company or project.
• Business angels, often former managers themselves, are real people who are often more sensitive to the “human side” and the character of managers than to financial figures.
• Venture capitalists, correlated with an investment fund, are involved in mature projects with a certain degree of stability.
• Development capital funds: this player finances companies that are already growing fast, with solid foundations and high profitability.

Using patents as an argument for successful fund-raising

A patent is proof of the innovative aspect of your project, certified by an independent office (INPI, EPO), which grants you a monopoly on this innovation, providing a means of defense against copies, reassuring your investors and making it easier for you to develop your business abroad.

According to a study by Mines ParisTech, start-ups with a patent survive three times better than those without. The same study shows that 30% of these young companies with a patent have either merged, been bought out or gone straight to the stock market! In contrast, only 8% of other start-ups have reached this stage.

An article in Les Echos.fr gives another figure: out of 114 projects supported by Genopole®, 90% of project leaders who succeeded in raising funds had previously invested in a patent.

The rigor and exacting standards of theINPI and theEPO push projects and innovations to be better and better. This rigor and exacting standards are an important guarantee of security for your future investors.

Too many French entrepreneurs still regard patents as a financial burden, rather than as an asset that can be used to develop a business.

Here are some good reasons to invest in a patent for your company:

1 – Security against copying

Registering a patent gives your investors the reassurance that when you launch your product on the market, no one will come along and copy your product, plundering your R&D and taking market share from you, unless they risk an infringement suit.

You therefore guarantee your company and your investors a 20-year monopoly on the innovation they invest in.

2 – Research tax credit

TheResearch Tax Credit (CIR) is a support measure for companies engaged in fundamental research and experimental development. If your R&D work leads to the filing of patents, it will be much easier to obtain a Research Tax Credit, as it immediately proves the innovative aspect of your research. It therefore enables you to reduce the cost of your R&D and facilitates the development of innovation.

3 – Deterring the competition

With a patent in your company’s name, your competitors will ask themselves several times before taking action against your project, at the risk of being sued for infringement. Most of the time, they’d rather turn to another market or an alternative solution than take this risk.

4 – Generate income

You can add value to your company and generate income with a registered patent. Whether you decide to market your product yourself or license it to third-party companies, with royalties paid on sales, you’re a winner!

Patents are still too rare among French entrepreneurs, yet they are a real option for convincing investors and finding financing for your project or business.