Patents, trade marks
and startup financeFunding and exit performance of European startups
October 2023

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Foreword
In a set of joint studies carried out over the past ten years, our two organisations have highlighted the importance ofintellectual property for the European economy, whether on the level of the entire economy, sectors or individual firms.
The macro-level studies have shown that industries that use IP rights intensively account for a high and increasing shareof Europe’s economic output, employment and trade.
On the level of individual companies, ownership of patents, trade marks and designs is associated with superior
performance in terms of job creation and productivity (as measured by revenue per employee). This relationship is evenstronger when the IP rights registered by the company are European-level rights.
The link between IP rights and company performance is especially clear in the case of small and medium-sizedenterprises (SMEs). We have also shown that companies that are active in the area of IP rights are more likely than othercompanies to experience high growth in subsequent years.
The present study adds a further dimension to the body of knowledge on the importance of IP. It focuses on how
newly started, innovative companies obtain the financing that allows them to develop their ideas into products in themarketplace. It also examines how IP rights facilitate successful exit of the providers of initial financing through sale toanother company or a flotation on the stock market.
The evidence adds up: IP rights are a crucial underpinning of the modern economy.
Innovation, and the need to support it, will play an even more important role in the future. Europe is facing challenges
from climate change, possible future pandemics and strategic competition with other regions of the world, but at
the same time needs to create future growth and jobs. IP rights facilitate this innovation by making it possible for theinventors and creators to protect their inventions and creations, helping them to access financing and later earn theirrewards through a successful exit.
Europe still lags behind other regions, including the US, when it comes to financing innovative startups. The actions
needed to meet this challenge are varied, but making the IP system more accessible to newly started, innovative
companies is part of the solution. EU trade marks and European patents appear to be instrumental in this, and as ofthis year the Unitary Patent also paves the way for deep-tech ventures to scale up in a much larger market. Making IP
even more accessible is also what drives the vision behind the strategic plans of both the EPO and the EUIPO in theirprogrammes to support SMEs, as well as initiatives such as the IP Action Plan of the European Commission.
We hope that this report contributes to a better understanding of the role of IP in EU’s society and economy, driving
home the fundamental message that IP is for everyone.

António Campinos
President, European Patent Office< Table of contents | Executive summary | Content | AnnexJoão Negrão
Executive Director, the EUIPO

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Acknowledgements
This report was prepared by a joint EPO-EUIPO team, led
by Yann Ménière, Chief Economist of the EPO, and Nathan
Wajsman, Chief Economist of the EUIPO. Other membersof the project team were Muzio Grilli, Ilja Rudyk and Karin
Terzić of the EPO and Michał Kazimierczak of the EUIPO.
The authors would like to thank Meindert Flikkema of
the Vrije Universiteit Amsterdam, Hanna Hottenrottof the Technical University of Munich, and Eiman
Maghsoodi and Delia Horst of the Swiss Federal Instituteof Intellectual Property for their helpful comments on an
earlier draft of the report.
< Table of contents | Executive summary | Content | Annex

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PATENTS, TRADE MARKSAND STARTUP FINANCE

Table of contents
Foreword

02

List of tables and figures................................................................................................................................................................................................................................................................................................... 06
List of abbreviations................................................................................................................................................................................................................................................................................................................07
List of countries............................................................................................................................................................................................................................................................................................................................. 08
1.

Executive summary

09

2.

Introduction

15

2.1

The challenges of startup funding and exit ........................................................................................................................................................................................................................15

2.2

Startups and IP rights .........................................................................................................................................................................................................................................................................................16

2.3

IP rights as a signal for investors ........................................................................................................................................................................................................................................................16

2.4

About this study ....................................................................................................................................................................................................................................................................................................... 18

3.

Data and methodology

3.1

Data on VC financing and exit ...............................................................................................................................................................................................................................................................19

3.2

Data on IPR status of startups ...............................................................................................................................................................................................................................................................20

3.3

Econometric estimations ..............................................................................................................................................................................................................................................................................20

3.4

Control variables .......................................................................................................................................................................................................................................................................................................21

19

CASE STUDY: OXEON

22

4.

The IPR profile of European startups

24

4.1

Use of IPRs by European startups ......................................................................................................................................................................................................................................................24

4.2

Use of European IPRs by the startups ..........................................................................................................................................................................................................................................28

CASE STUDY: MARINOMED

30

5.

IPR and funding

32

5.1

Funding record of European startups ..........................................................................................................................................................................................................................................33

5.2

IPR use at different funding stages .................................................................................................................................................................................................................................................35

5.3

IPR use and odds of funding .....................................................................................................................................................................................................................................................................39

CASE STUDY: BLUBRAKE<< Table of contents | Executive summary | Content | Annex43

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PATENTS, TRADE MARKSAND STARTUP FINANCE

6.

IPR and exit performance

45

6.1

IPR use at exit ................................................................................................................................................................................................................................................................................................................45

6.2

IPR use and odds of successful exit ................................................................................................................................................................................................................................................ 50

7.

Discussion

7.1

Limitations .........................................................................................................................................................................................................................................................................................................................52

Annex 1

Additional details

References<< Table of contents | Executive summary | Content | Annex

52

54
57

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List of tables and figures
TablesTable 1

Cox proportional hazard models with time-dependent IPR variables (seed stage)..............................................................................39

Table 2

Cox proportional hazard models with time-dependent IPR variables.
Focus on geographical scope of IPR (seed stage)................................................................................................................................................................................... 40

Table 3Cox proportional hazard models with time-dependent IPR variables (early stage).............................................................................41

Table 4Cox proportional hazard models with time-dependent IPR variables.
Focus on geographical scope of IPR (early stage)...................................................................................................................................................................................42

Table 5

Cox proportional hazard models with time-dependent IPR variables (exit).................................................................................................. 50

Table 6

Cox proportional hazard models with time-dependent IPR variables.
Focus on geographical scope of IPR (exit).........................................................................................................................................................................................................51

FiguresFigure E.1

Share of startups with patents or trade mark applications by sector......................................................................................................................10

Figure E.2

Share of startups with IPR at different stages of financing.................................................................................................................................................... 11

Figure E.3

Increase in odds of funding for startups with prior patent or trade mark applications................................................................ 12

Figure E.4

Increase in odds of funding for startups with European versus national patent or trade mark applications.................13

Figure E.5

Increase in odds of exit for startups with prior patent or trade mark applications..............................................................................14

Figure 1

Share of startups filing IP rights per country...............................................................................................................................................................................................25

Figure 2

Share of startups filing IP rights per sector....................................................................................................................................................................................................26

Figure 3

Comparison of trade mark and patent use by sector.......................................................................................................................................................................27

Figure 4

Comparison of patent intensity with share of European patents users...............................................................................................................28

Figure 5Comparison of trade mark intensity with share of EUTM users.......................................................................................................................................29

Figure 6

Funding events in the dataset..........................................................................................................................................................................................................................................33

Figure 7

Participation of startups at different stages of financing........................................................................................................................................................ 34

Figure 8

Share of startups with IPR at different stages of financing.....................................................................................................................................................35

Figure 9

Relationship between general patent intensity and share of European patent usage among patent
users at the sectoral level...................................................................................................................................................................................................................................................... 36

Figure 10

Relationship between general trade mark intensity and share of EUTM usage among trade mark users
at the sectoral level.........................................................................................................................................................................................................................................................................37

Figure 11

Relationship between IPR status and amount of financing obtained at different stages of funding.........................38

Figure 12

Startups with successful exit by sector.............................................................................................................................................................................................................. 46

Figure 13

Distribution of startups by IPR use in the initial sample and at exit..........................................................................................................................47

Figure 14

Relationship between IPR intensity and share of firms with successful exit at the sectoral level.................................. 48

Figure 15

Relationship between IPR status and exit value.....................................................................................................................................................................................49

Figure A1

Share of startups with IPR at different stages of financing. Sectors using patents intensively.......................................... 54

Figure A2

Share of startups with IPR at different stages of financing. Sectors using trade marks intensively.............................55

Figure A3

Share of startups with IPR at different stages of financing. Digital sectors.................................................................................................... 56<< Table of contents | Executive summary | Content | Annex

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List of abbreviations
EUIPO

European Union Intellectual Property Office

EPO

European Patent Office

EUTM

European trade mark

FTO

Freedom to operate

IPIntellectual property

IPO

Initial public offering

IPR

Intellectual property rightOEM

Original equipment manufacturerPE

Private equity

R&D

Research and development

SME

Small and medium-sized enterprise

TTETime to event

TTO

Technology transfer office

VC

Venture capital<< Table of contents | Executive summary | Content | Annex

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PATENTS, TRADE MARKSAND STARTUP FINANCE

List of countries
AL

AlbaniaAT

AustriaBE

Belgium

BG

Bulgaria

CH

Switzerland

CY

CyprusCZ

Czech Republic

DE

Germany

DK

Denmark

EE

Estonia

ES

Spain

FI

Finland

FR

FranceGB

United Kingdom

GR

GreeceHR

Croatia

HU

Hungary

IE

IrelandIS

Iceland

IT

Italy

LI

LiechtensteinLT

Lithuania

LU

Luxembourg

LV

LatviaME

Montenegro

MK

North Macedonia

MT

Malta

NL

Netherlands

NO

NorwayPL

PolandPT

PortugalRO

Romania

RS

SerbiaSE

SwedenSI

SloveniaSK

SlovakiaSM

San MarinoTR

Türkiye<< Table of contents | Executive summary | Content | Annex

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PATENTS, TRADE MARKSAND STARTUP FINANCE

1. Executive summary
The spectacular growth of the European startup
ecosystem in recent years has been a major boost for
the European economy. Startups are increasingly seen
as engines of economic growth, with strong potential
to address the key European challenges of digitalisation,
sustainability and industry competitiveness throughinnovation. Nevertheless, Europe still faces significant
challenges in bridging its funding gap with respect tothe US.

These questions are especially relevant today, after
the shock of COVID-19 and the recent monetary policy
tightening led to a decline in investment in European
startups in 2022. As reduced VC spending and weaker
growth forecasts are putting an end to an era of easy
access to venture capital, IP rights deserve strong
attention as a means not only of capturing the value
potential of their intellectual assets but also of signalling
this value to investors.

This study examines the role of intellectual property(IP) rights ‒ specifically patents and trade marks ‒ infacilitating access to finance for European startups. To
this end, it assesses the links between the filing of IPRs by
startup firms and their success in raising venture capital(VC), as well as the signalling power of patents and trade
marks as predictors of successful exit strategies forinvestors.

< Table of contents | Executive summary | Content | Annex

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PATENTS, TRADE MARKSAND STARTUP FINANCE

Main findings
On average, 29% of European startups have filed
for registered IP rights, though there are significant
differences between industry sectors. Biotechnology is
by far the most IP intensive sector, with nearly half ofstartups using patents or registered trade marks. Other
IP-intensive sectors include science and engineering(with patent users at 25% and trade mark users at 38%),

healthcare (patent users at 20% and trade mark users
at 40%) and manufacturing (patent users at 20% andtrade mark users at 36%). Startups with registered IP
rights exist in all sectors, with a stronger reliance on
trade marks in sectors that are not IP-intensive, whereas
startups that use patents tend to be more concentrated
in a smaller number of technology-related sectors.

Figure E1

Share of startups with patents or trade mark applications by sector

50%

Biotechnology

Share of startups with any patent

40%

30%

Science and engineering
Manufacturing
20%

Health care

Artificial intelligence
10%

Data and analytics
SoftwareFood and beverage
Financial services

0%
0%

10%

20%

30%

40%

50%

Share of startups with any trademark
Note: The Figure compares shares of patent and trade mark applicants by sector in the initial sample. The size of the circles represents the number of firms from the sector in theinitial sample.

< Table of contents | Executive summary | Content | Annex

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PATENTS, TRADE MARKSAND STARTUP FINANCE

Startups increasingly make use of IP rights as they grow,with a strong focus on European IP rights at all growthstages. While 10% of startups that were invested in by
VCs in seed stage rounds have filed a patent application,
this proportion rises to 28% in the early growth stage and
44% in the late stage rounds (Series C and beyond). The
share of trade mark users similarly increases from 28% in
the seed stage rounds to 53% in the early stage rounds
and 72% in the late stage rounds. More than 80% ofstartups with a patent in the seed stage financial rounds
have filed a European patent application. The share ofstartups with a trade mark that have filed for an EU trade
mark increases from 47% in the seed stage rounds to 81%
in the late stage rounds.

Figure E2

Share of startups with IPR at different stages of financing

Seed

Number of rounds

56 307

Early stage
Late stage
0

IPR users (overall)

28%

10%
5%

12 362

Uses TM

47%

18%

53%

28%

Uses patent

60 000 0%

25%

64%

88%

60%

35%

40 000

81%

47%

1 942

20 000out of which European rights users

44%

50%

72%

81%
75%

75%

100% 0%

25%

50%

75%

92%

100%

Uses TM and patent

Note: The first panel presents the number of events in each stage of financial round. The second panel shows the share of startups having applied for various combinationsof IPRs prior to the date of the financial round. The third panel presents the share of startups within each category that applied for protection in the form of an EUTM, a European
patent or both prior to the date of the financial round.

< Table of contents | Executive summary | Content | Annex

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PATENTS, TRADE MARKSAND STARTUP FINANCE

The filing of patent and trade mark applications in theseed or early growth stage is associated with a higher
likelihood of subsequent VC funding. This effect isparticularly important in the early stage, with a 4.3 times
higher likelihood of funding for startups that filed for
trade marks, and a 6.4 times higher likelihood of funding
for startups that filed for patents. Startups that filed forboth trade marks and patents show the highest likelihoodof funding in both the seed and the early stage.

Figure E3

Increase in odds of funding for startups with prior patent or trade mark applications

10.2

10

8

6.4

6

4.3

4

2

3.5
2.5

2.9

0
Only trade marks

Seed stage

Only patents

Patents and trade marks

Early stage< Table of contents | Executive summary | Content | Annex

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The filing of European patent and trade markapplications is associated with an even higher likelihoodof subsequent VC funding for startups. Although thisresult can already be observed in the seed stage, it isespecially strong in the early growth stage. Startups with
an EU trade mark application have a 6.1 times higher
likelihood of obtaining early-stage funding, comparedto 2.8 times for those that only filed for a national trade
mark. European patents are associated with a 5.3 times
higher likelihood of early-stage funding, compared with
3.8 times for the relatively smaller number of startups
that have only national patents.

Figure E4

Increase in odds of funding for startups with European versus national patent or trade mark applications

6.1

6

5.3

4

3.8
2.8

2

2.4

2.2

2.7

2.8

0
Trade markPatentSeed stage

National

Trade markPatent
Early stage

European< Table of contents | Executive summary | Content | Annex

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PATENTS, TRADE MARKSAND STARTUP FINANCE

The filing of patent and/or trade mark applications is
associated with a more than twice as high likelihood of
successful exit for investors. The highest likelihood of
initial public offering (IPO) or acquisition is observed forstartups that filed for both patents and trade marks. A
higher likelihood is also observed for startups that filedfor European IP rights than for those that make use ofnational-level rights only.

Figure E5

Increase in odds of exit for startups with prior patent or trade mark applications

3.2
3

2.4
2

2.1

1

0
Only trade marks< Table of contents | Executive summary | Content | Annex

Only patents

Patents and trade marks

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PATENTS, TRADE MARKSAND STARTUP FINANCE

2. Introduction
Recent years have seen a spectacular growth of thestartup ecosystem in Europe – with a venture capital(VC) deal value reaching EUR 110.8bn in 2021, compared
to EUR 9.4bn in 2013 (PitchBook, 2023). A new generationof European ventures has emerged on the world stage
as a result. This development, which resulted in theemergence of a more mature European VC industry,along with growing interest from non-European
investors, has yielded a major boost for the European
economy. Startups are viewed with growing interest by
policymakers as engines of economic growth, with strong
potential to address the key European challenges ofdigitalisation, sustainability and industry competitivenessthrough innovation and the leveraging of cutting-edge
technologies. As a result, various policy schemes havebeen established at the national and EU levels to further
support this ecosystem.
Nevertheless, Europe still faces significant challenges
in bridging its funding gap as compared with the US.
Besides a specific lack of support for university spinoffs and the persistent challenges of scaling up acrossEuropean countries, the relative scarcity of funds large
enough to support high-growth companies throughtheir successive growth stages remains an important
issue (Quas et al., 2022). Difficulties are compounded
for so-called “deep-tech” startups that develop newtechnologies and engineering approaches. Indeed, such
ventures typically have both a high R&D intensity anda high asset intensity. As a result, they require highamounts of long-term capital to bring novel technology
to market, with few investors being prepared to embracesuch risks (EIC, 2022; Hello Tomorrow and BCG, 2021).
Against this backdrop, this study assesses the role ofintellectual property rights (IPRs) ‒ specifically patents
and trade marks ‒ in facilitating access to finance forEuropean startups. This question is especially relevant
today, after the shock of COVID-19 and the recent
monetary policy tightening led to investment in European
startups reverting in 2022 to its level in 2020 (Sifted,2022). As reduced VC spending and weaker growthforecasts are putting an end to an era of easy access toventure capital, IP rights deserve strong attention as ameans not only of capturing the value potential of theirintellectual assets but also of signalling this value toinvestors.

< Table of contents | Executive summary | Content | Annex

2.1 The challenges of startup funding and exit
Because their lean organisation allows for creativity andagility, startups are particularly suited to innovation.
However, they also face specific challenges in converting
innovative ideas into market success. Their businessmodels are riskier ‒ thus reducing their access tocapital markets (Lee et al., 2015), both by limiting thescope of potential lenders and by increasing the cost offinancing. Moreover, the intangible assets developed
by innovative startups are a source of information
asymmetry with investors, making it all the more difficult
for the traditional financial sector to value and support
such innovative ventures (Lerner, 2002; Colombo, 2021).
According to some estimates, only one in thousand
achieve successful financial exit for investors such as
an initial public offering (IPO) or high-value acquisition(Catalini et al., 2019), but those that do achieve such anexit have a disproportionately high impact on
the economy.
Due to the higher risks and information asymmetries
involved in their business ventures, startups tend to rely
more on equity finance from VC funds than on debt (Hall,2010). VC funds can be defined as equity-linked financial
investments in private companies, where the investor
performs an active advisory role in the management of
the financed entity (Kortum and Lerner, 2000). A deeper
insight into the strategy of financed firms, coupledwith market expertise, allows VC investors to reduce
information asymmetry gaps and enables them toprovide finance for ventures that may be too risky forother investors (Lerner, 1995). They can also reduce therisks related with early-stage investments by remaining
actively involved in the management of the financed
company (Lerner, 2002) and facilitating access to key
complementary assets (Park and Steensma, 2012) toincrease the odds of subsequent innovation (ArquéCastells, 2012) and its implementation (Kortum andLerner, 2000).
Only a small fraction of startups reach maturity with theoriginal founder still exerting control over the company.
Entrepreneurial exit through an initial public offering(IPO) or acquisition may be the best solution for further
growth of the company by providing funds for R&D
investments and market expansion. In some sectors,
due to prohibitive costs of placing new products on
the market, exit is the only viable option for small-scale

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startups to further finance innovation (Renko et al., 2022)
while offering liquidity and freeing up resources that theentrepreneurial founder can use for other innovative
ventures (Aggarwal and Hsu, 2014). As such, a successful
exit is a key indicator of entrepreneurial success, and is ofvital importance not only for the entrepreneurial founder
but also for investors.

2.2 Startups and IP rights
Small innovating firms typically have few assets early onin their lives, apart from their foundational intellectual
assets. In particular they lack complementary assets, suchas expertise and infrastructure for product development,
manufacturing, legal matters, sales, distribution andcustomer service activities (Arora et al., 2001). In thiscontext, decisions regarding intangible assets and related
IPRs may be key drivers of the entrepreneur’s success andexit options in the longer term.
There are various ways in which formal IPRs such as
patents and trade marks can support the developmentof innovative startups. Patents give the right to prevent
others from using the invented technologies, while
trade marks are a legal safeguard for investment inintangibles and unique product characteristics appealing
to consumers. The protection that patents and trade
marks confer is primarily needed to secure the exclusive
exploitation of innovative ideas in the market, thereby
enabling the startup to generate sufficient returns
on risky investments (Arora et al., 2008). Results fromsurveys of European patent applicants show, for instance,that “commercial exploitation” and the “prevention ofimitation” are the two key motives for filing a patent,
and that these two motives are even more important forsmall and medium-sized enterprises (Torrisi et al., 2016;
EUIPO, 2016; EPO, 2019; EPO/EIB, 2022). Importantly, IPRs
also help ensure freedom to operate (FTO) by protecting
ongoing or future development and providing a leverto negotiate cross-licensing agreements in the case of
infringement of third-party IPRs (Torrisi et al., 2016;
Walsh et al, 2016).
Besides these fundamental functions, well-managed
IPRs can generate an even wider range of benefits, suchas setting up collaborations and licensing arrangements,
securing investment and facilitating technology
transactions (Brant and Lohse, 2013; Castaldi, 2019; deRassenfosse et al., 2016). These benefits are particularly
significant for innovative startups, as a means tocompensate for their resource constraints.
< Table of contents | Executive summary | Content | Annex

Engaging in collaborations with other companies or
research organisations is a way for startups to leverage
their strengths while using their partners’ assets to fillgaps in expertise and resources (Park et al., 2002; Leeet al., 2010; Zeng et al., 2010; Hsu and Ziedonis, 2013).
IPRs play a pivotal role in this. Besides protecting theintellectual assets initially contributed by the parties,
they are used to organise the exploitation of joint results
and to share the associated benefits. Licensing out
IPRs is likewise an effective means for small businesses
to leverage the partners’ assets and expertise with aview to rapidly scaling up their activities, reaching out
to new markets and generating additional revenues
from innovation (Arora and Ceccagnoli, 2008). Available
evidence indicates, for instance, that European SMEs arewilling to license up to 48% of their patented inventions,as compared with 16% for large companies, and that they
actually license about a third of these inventions, whilelarge companies license only 9% of theirs (Gambardella
et al., 2005).
Appropriating a startup’s intellectual assets andleveraging them to seize growth opportunities requires
a proactive and resource-effective approach to IPRmanagement (EPO, 2017). Rather than focusing on the
short term, a startup must anticipate the interplay
between IP management and commercial success inorder to formulate an effective IP strategy early on(Neuhäusler, 2012). Failure to do so can create problems
subsequently, such as foreclosing partnership or funding
opportunities, or exposing the startup to litigation risks.
Developing an IPR strategy is especially challenging forsmaller firms that are scaling up their activities beyond
their domestic market (OECD, 2010; Hall et al., 2013). To
secure effective protection in future strategic markets,
firms must indeed be prepared to invest significant
resources in building an international IPR portfolio at an
early stage of their development process.

2.3 IP rights as a signal for investors
IP rights play an important role in facilitating accessto finance for innovative startups. Public information
on IPRs granted by independent authorities conveys
valuable information about technological and marketing
activities of a startup (Long, 2002), thus reducing
information asymmetries between the innovative
entrepreneur, business partners and the prospective
financiers (Veugelers and Schneider, 2018). As a result,
early investment in securing IP protection may constitutea credible signal of otherwise unobservable value to VC

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PATENTS, TRADE MARKSAND STARTUP FINANCE

managers and investors (Colombo, 2021; Spence, 1973),
helping them make decisions under uncertainty (Long,
2002; Hottenrott et al., 2016; Farre-Mensa et al., 2016).
IPRs help secure higher returns for investors by reducing
competitive pressures, achieving price premiums overthe competitors or increasing revenue through licensing
agreements (Hsu and Ziedonis, 2013). Recent research on
US startups concludes, for instance, that a patent grant
generates on average 55% higher employment growthand 80% higher sales growth five years later, and thatthe patent owner also pursues more, and higher-quality,
follow-on innovation. (Farre-Mensa et al., 2020). Available
evidence from Europe likewise points to a higher turnover(EPO/EUIPO, 2021; OHIM, 2015) and higher chances ofachieving (high) growth (EPO/EUIPO, 2019) for small firms
owning IP rights. A proprietary product or technology
for which a startup has an exclusive right may thus be a
key argument for a VC to invest in a company or to get
the best exit terms. Control over critical IPR may also
increase the bargaining power of startups for securing
the financial resources necessary for their business plan
implementation and help them getting access to such
resources. Patents have also been found to be associatedwith a reduction in time to IPO for startups (Stuart et al.,1999). Conversely, lack of patent protection over crucial
technologies may be seen as an important limiting factor,
reducing startup odds of market success in the future(Lerner, 2002).
Patents and trade marks play different but
complementary roles in this context.
Patent filings are effective indicators of the technicalcapabilities of the firms and their employees, which
can facilitate access to finance for both small and large
firms (Hottenrott et al., 2016). Once granted, patents
certify the novelty and scope of the invention, as well as
giving it legal protection. They may involve significant
costs but also lengthen the time needed to market
new products, thus lending credibility to the founders’claims about the long-term growth prospects of theirventures (Kleinert, 2023). A number of studies provide
consistent evidence of the effectiveness of such signals
in attracting VC investors in Europe (Häussler et al., 2012:
Colombo et al., 2023), the US (Hsu and Ziedonis, 2013;
Hoenig and Henkel, 2015; Farre-Mensa et al., 2016), China(Chen et al., 2018; Zhang et al., 2019) and Israel (Conti et1al., 2013; Colombo et al., 2023). The use of patents as aprotection mechanism and a signal mainly concerns hightechnology startups, in sectors such as the life sciences,medical devices, semi-conductors and informationand communication technologies, although patented
inventions also may prove particularly valuable assets
in sectors where they are usually scant. Recent evidence
underlines the active role of VC investors in exploiting
patent information, with the most experienced funds
being better able to deal at an early stage with radical
inventions, both with more earning potential and morerisks (Colombo et al., 2023).
Trade mark protection, due to its relatively lower
costs, is especially attractive to small firms, including
startups. It provides information on the commercial
potential of startups (Renko et al., 2022; Gruber, 2004),
while demonstrating their founders’ awareness of theimportance of marketing assets protection (Block etal., 2014). Trade marks reinforce the benefits from otherforms of formal and informal IP protection, such as thefirst mover advantage or trade secrets. Like patents,
they are signals of innovativeness (Flikkema et al.,2014), especially in sectors where patents and other IPR
protection mechanisms have limited use, such as services(Schmoch, 2003; Block et al., 2014). New trade markfilings may be particularly strong signals of the maturityof “scale-up” companies which have overcome theexploratory phase of their development, found suitable
market niches and are ready to scale up their activities.1
Importantly, both patents and trade marks survive
beyond bankruptcy, therefore providing further
security to investors and lenders (de Rassenfosse andFischer, 2016). Available evidence shows that in theUS, patent-secured venture debt was used to finance
36% of technology startups in the sectors of computer
software, semiconductors and medical devices, and thatstartups with patent-backed loans tend to raise more
equity capital than those without (Hochberg et al., 2018).
Another study finds that almost 70% of patents fromfailed US startups have been sold (Serrano and Ziedonis,2018), thus highlighting the need for a market for IPRs
to enable IPR-backed loans for startups. Another recent
study focusing on France finds that firms from diverse
industries use selected trade marks (72%) and patents(26%) as collateral assets to secure loans, with large
positive effects on debt financing, in particular for small,

Such companies are defined in the academic literature as those that have passed the seed and series A stages and are ready for the series B stage or higher stages(Duruflé et al. 2017)< Table of contents | Executive summary | Content | Annex

epo.org | 17

PATENTS, TRADE MARKSAND STARTUP FINANCE

financially constrained firms, and a positive impact on
firm-level growth (Ciaramella et al. 2022). Studies also
found that venture capitalists are more likely to fund,or value highly, those ventures that could alreadyclaim (plans for) the commercialisation of their productthrough trade mark ownership (Block et al., 2014; Zhou
et al., 2016).
Against this background, Häussler et al. (2012) find thathaving at least one patent application reduces the timespan from application to the first VC investment. In
addition, startups with higher patent quality appear toreceive financing faster than other ventures. Previous
studies have confirmed that firm governance choices atbirth, including decisions on IPR protection strategies,
are indicative of the underlying quality of the firm, andthus are related to the probability of obtaining VC financeand equity growth (Catalini et al., 2019). Patents werealso found to matter more for startups that do not havealternative means for demonstrating their quality, andin earlier stages of financing (Hsu and Ziedonis, 2013).
However, Block et al. (2014) find that trade marks may
be an even better predictor of VC financing than patentapplication stocks, as pending patent applications do not
yet secure legal exclusivity.

< Table of contents | Executive summary | Content | Annex

2.4 About this study
In the present report, the signalling value of the IPR
portfolio for bridging information gaps between
entrepreneurial founders and the financial market will
be tested empirically. The main purpose of the study is
to examine whether there is a link between the filing ofpatent and trade mark applications by startup firms and:— access to finance, in particular through investment
vehicles (venture capital funds, corporate venture
funds, etc.)— successful exit strategies of innovative startups
This study complements our previous reports, which
focused on the relationship between IPR behaviour
on one hand with turnover and growth on the other.
Those performance metrics are less relevant in case oftechnologically oriented startups, as the most successful
startups are often acquired or go public even before
they break even or achieve substantial sales (Renko
et al., 2022).
The IP rights considered in this study are patents andtrade marks, both at the national level and the European
level. The literature summarised above has shown thatthese two IP rights are good indicators of innovation
and are often complementary, with patents signalling
technological innovation and trade marks indicating
the development of new products and services aswell as the likelihood of entry into new markets. It is
those characteristics of a startup that are of interest to
providers of financing.

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PATENTS, TRADE MARKSAND STARTUP FINANCE

3. Data and methodology
The purpose of this study is to investigate the link
between the filing for IP rights by startups and theiraccess to finance. To that end, data on patent and trade
mark applications are combined with data on startup
financing at their seed, early (Series A or B) or late (Series
C and beyond) funding stages.2
The link between IPR and financing is explored using
descriptive statistics as well as econometric analysis. Thissection explains the data sources and the methodology
used.

3.1 Data on VC financing and exit
Basic demographic and financial information about
startups was sourced from Crunchbase.3 Crunchbase is
a commercial database that provides data on startups ofpotential interest for financiers or acquirers. A distinctive
feature of Crunchbase is the inclusion of information
about startups’ funding and subsequent public listings or
acquisitions. However, only a fraction of firms available
in Crunchbase participated in any financial rounds orexperienced acquisition or IPO. Crunchbase data is
generated by an active community of contributors,
including the venture capital community, with morethan 4 000 members, and subsequently verified by
Crunchbase staff.4
The funding information in Crunchbase includes the typeof financial round which a startup participated in andthe date on which the financial round was announced
and, in some cases, the amount of finance obtained by
the startup. Crunchbase also provides information aboutacquisitions and initial public offerings (IPOs), with thedate on which the exit events were announced and, insome cases, the exit value of a firm. Crunchbase classes
a firm in one or several sectors. This classification is
unique to Crunchbase and does not follow standard
industry classifications used by Eurostat or otherstatistical offices.5

Crunchbase covers firms active in all countries of theworld. The final sample of startups used in this study
is restricted to firms available in Crunchbase that were
founded after 1999 and have a registered office in one of
the member states of the European Patent Organisation.
Overall, the project sample includes information on
298 665 firms meeting those criteria. The final sample
used in econometric models includes both firms thatparticipated in financial rounds or experienced exit andfirms that did not experience such events.
Previous research suggests that the signalling powerof IPR is most effective at the initial stages of startup
development. Hsu and Ziedonis (2013) have shown thatthe importance of patents as a signal of startup quality
diminishes over time. Block et al. (2014) establishedthe same pattern for trade mark signalling. IPRs playa more important role in earlier funding rounds when
the information asymmetries between founders and
VCs are most pronounced. In subsequent rounds, more
information about the startup’s prospects is revealed
via other mechanisms. In fact, staged financing rounds
have been institutionalised to reduce the uncertainty
around the performance of the company being financed.
At earlier stages the financial resources involved
are relatively low. The amount of financing rises insubsequent rounds as the startup gains experienceand a track record, making for greater availability of
information related to its prospects (Stuart et al., 1999).
Additionally, the seed and early-stage financial rounds are
more numerous than later-stage events. As seen in Figure
6, the data set used in this study contains many more
observations for seed and early-stage financial rounds
than for later stage rounds.
Therefore, seed and early-stage financial rounds are oneof the two focus areas of the present study. However,since a successful transition from startup to a selfsustaining business often involves an exit event such as
an IPO or the sale of the company, exit is the other focus
area for the analysis in section 5.

2

See section 5 for a more detailed description of the funding stages.

3

For more information, see https://www.crunchbase.com/.

4

Although the inclusion of firms in the Crunchbase database is a rigorous process and the data quality is frequently monitored, the subset of newly founded firms that areadded to this repository may not be complete and the criteria used for adding new firms are not fully transparent. The database coverage may therefore differ depending on
the country of registered office and sector. Nevertheless, a comprehensive assessment of Crunchbase performed by the OECD has shown that aggregate statistics on VC
funding “tend to be reasonably similar to the same figures produced with an alternative and more established source” (Dalle et al., 2017). Crunchbase data have been used
as a source of data on startups in numerous academic papers in recent years.

5

A full description of sector classification in Crunchbase is available athttps://support.crunchbase.com/hc/en-us/articles/360043146954-What-Industries-are-included-in-Crunchbase.

< Table of contents | Executive summary | Content | Annex

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PATENTS, TRADE MARKSAND STARTUP FINANCE

3.2 Data on IPR status of startups
The two IP rights whose relationship to funding isanalysed in this study are patents and trade marks.
Häussler et al. (2012) argue that due to the length of theexamination process, VCs may be willing to base theirdecisions on patent applications rather than on patent
grants. VCs often have access to the documentationdelivered by patent attorneys and have the expertise
allowing them to assess the probability of patent grant.
Due to the skewed distribution of patents’ values,
patent quality assessment ability is crucial for the VCs
investing in high-technology sectors. This was confirmed
by Häussler et al. (2012), who found that VCs are able todetect high-quality patent applications even before theavailability of additional information, such as forward
citations or a positive examination result. The grant event
does not contribute to the probability of obtaining VC
financing, as the pertinent information has already beenaccounted for by VCs (Häussler et al., 2012).
Given these arguments, in the present study, the IPR
activity of startups is measured by applications forpatent and trade mark protection at national IP offices,
the European Patent Office and the European Union
Intellectual Property Office. The EPO’s patent databases
were the principal source of data on national andEuropean patents. Information on national patent status
includes the first patent application filed in any national
office, including offices located outside Europe. The
EUIPO’s trade mark register was the source of data on
European Union trade mark (EUTM) applications filed bystartups. Information on national trade mark applications
was sourced from TMview records.6 Since the data stored
in TMview is limited in scope, the project team was able
to examine startup filings at national offices only in the
country where the startup in question is registered.
The main variables of interest in this study relate to astartup’s record of patent and trade mark applications– or “IPR status” – at a given point in time. This isdetermined by the date of filing of the first patent or
trade mark application, distinguishing between national
and European filings.

The IPR databases were matched with the Crunchbase
database in order to obtain as complete a picture as
possible of the IPR activity of and the financing obtainedby the startups in the sample.

3.3 Econometric estimations
The data gathered for the present study contains not
only information on whether a startup participated in afinancing round or underwent a successful exit, but also
includes information about the exact timing of those
events. Such data are best analysed using the “timeto-event” (TTE) family of models. The Cox Proportional
Hazard model (Cox, 1972; Fox and Weisberg, 2002) is themost popular time-to-event regression model, capableof analysing associations between the event incidence
and a set of background variables. In the traditional
proportional hazard model, the variables of interest are
set at the baseline time and do not change during theobservation period. However, the IPR variables in ourdataset are time-dependent. Most often firms start
as non-owners of IPR, and apply for IPR protection at
different stages of their development. Thus, during theobservation period, they may change their IPR statusseveral times. There are extensions to the basic Cox
model that are able to handle such cases (Therneau et al.,2017). In the present report, all the Cox regression models
are based on time-variant IPR status.7
The proportional hazard model takes the following form:h(t|X)=h0 (t) exp( ß’ X)(1)where h(t|X) is the hazard function (the probability
function of a funding or exit event) at time t given
the matrix of background variables X, and h0(t) is thebaseline hazard function. β is the vector with estimatedregression coefficients. In all such models, the IPRvariables of interest are dichotomous variables, denoting
the IPR activity of a startup. The model coefficients canbe interpreted as measuring the increases in the oddsof the “hazard” related to IPR activity in comparison tofirms that are not IPR-active. In this context, the “hazard”
is interpreted as the likelihood of participation in afinancial round or a successful exit (through sale of the6

TMview is a database maintained by the EUIPO that contains trade mark information on more than 114 million trade marks filed in Europe and beyond. For more detail, see:https://www.tmdn.org/tmview/welcome#/tmview.

7

In the case of IPR applicants, the period of observation is divided into sub-periods related to changes in IPR status. Each sub-period is treated as a new observation in thedataset, with its start and end related to IPR application events. A firm that has been financed or has experienced exit is observed until participation in a financial round or
exit. In such cases the value of the variable status is updated to 1. For the majority of firms in the sample that did not experience such events, the end of observation isassociated with the date of the last information update in Crunchbase. In such cases, the value of the variable status remains 0 throughout the whole period from founding
to the last update in Crunchbase.

< Table of contents | Executive summary | Content | Annex

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PATENTS, TRADE MARKSAND STARTUP FINANCE

company or an IPO). The hazard function is capable ofgauging the strength of the tendency to change a status(obtaining finance or undergoing a successful exit) at
any time point given the characteristics of the startup,
including its IPR status, at that time point (Tuts andSchmid, 2016). Therefore, it is a tool that is capable ofcapturing the underlying dynamics of interplay between
IPR activity, the odds of obtaining finance and the odds ofa successful exit.
Some startups might have participated in several
financing rounds of the same type, or they may havebeen subjected to more than one acquisition. The
standard proportional hazard models are not able tohandle multiple events. There are alternative models thatare able to handle such cases. However, since the numberof such cases in the dataset is relatively low, the decision
was taken to consider only the first event of a particular
type for each startup, and to estimate the models using
Cox proportional hazard models with time-dependent IPRvariables.

< Table of contents | Executive summary | Content | Annex

3.4 Control variables
In a regression analysis, it is necessary to take into
account additional variables besides the variables ofprincipal interest (in this case, IPR status of the startup).
Such control variables, when specified correctly, allow
the effect of the variable of interest on the dependent
variable to be isolated. In this study, the main control
variables are the sector in which the startup operates
and the country in which it is based.
As seen in Figure 2 in section 4, the different sectors
are not equally represented in the dataset. Also, theIPR profiles of firms differ considerably, depending on
their sectors of activity. Figure 7 and Figure 12 illustratethat firms’ propensity to participate in various stagesof financing and firms’ probability of exit may be
determined to a large extent by the firms’ sectors ofactivity.
The presence of venture capital, the availability offunds and the strength of the capital market are alsocharacteristics that vary across the countries present in
the dataset. Therefore, controls for the sector of activity
and for the country where the startup is registered areimportant aspects of the analysis.

epo.org | 21

PATENTS, TRADE MARKSAND STARTUP FINANCETEXTREME spread tow carbon fabrics

Case study: OXEON
Company:
Locations:Founded:No. of employees:
Products:

Oxeon ABBorås, Sweden
2003
34
Tape-woven textiles, weaving technologies< Table of contents | Executive summary | Content | Annex

epo.org | 22

PATENTS, TRADE MARKSAND STARTUP FINANCE“Securing patent protection allowed us to have several
options when developing our business.”
Nandan Khokar, R&D manager and main inventor, Oxeon
Oxeon, a startup co-founded by Dr Nandan Khokar in
2003, has revolutionised the textile industry with its
innovative weaving technology. Recognised as Sweden’s
fastest-growing company in 2010, Oxeon’s success isrooted in the patented tape-weaving technologies
acquired from Tape Weaving Sweden, a holding company
for the patents. This acquisition allowed Oxeon to license
the required IP, forming the basis of their unique tapewoven textiles. These textiles, designed for extreme
conditions, have found applications in a wide range ofmarkets and industries, including sports, industrial andaerospace sectors.

Revitalising the textile industry
Weaving and textile industries have almost vanishedin many advanced economies, since these activities areoften outsourced to emerging nations. Oxeon emerged
from the ashes of the 19th-century Swedish textile capitalBorås, developing 21st-century textiles using carbon
fibres. The company’s unique “spread tow” technologies
offer better mechanical performance, very low areal
weight and ease of fabric handling. They can employ
different types of fibres and tapes in the production
process, resulting in a variety of products for different
industries. Initially, sports equipment was seen as a goodmarket segment, open to experimentation. This strategy
has paid off in the long run – Oxeon’s TEXTREME fabric is
now used to reinforce the rotor blades and other parts ofIngenuity, NASA’s first Mars helicopter.

Innovation through intellectual property

Driving innovation through licensing
Oxeon’s business model includes both licensing andproduct sales in different market segments. Thishybrid business model has allowed Oxeon to handle
its patented technologies as a portfolio of commercial
opportunities to support business growth throughdifferent development phases. The early evaluation of
selling machinery led to the idea of licensing the process
technology as a parallel commercial avenue. This earlylicence agreement became a good source of revenue
for Oxeon, enabling the co-financing of technology andbusiness development in other application areas.

Benefitting from the local innovation
ecosystem
Oxeon’s creation was not managed by a university
technology transfer office (TTO). Instead, the firm
benefited from other structures within the Chalmers
University innovation ecosystem, including the
Chalmers School of Entrepreneurship (CSE) for businessdevelopment support and Chalmersinvest (now Chalmers
Ventures) for financial investment.

A holistic approach to IP
Oxeon follows a strategic approach when it develops
its IP portfolio. It always considers different options,analysing the pros and cons and choosing the mostsuitable IP rights. In some cases, Oxeon has chosen not
to patent certain inventions and instead keep them as
trade secrets. This strategy is typically used for somemanufacturing processes that are difficult to reverseengineer from end products and for which infringement
is difficult to detect and prove.

Oxeon’s IP strategy has been instrumental to its
growth and success. The company has several patented
inventions, reflecting the continued development of its
technologies. The firm’s broad patent portfolio protects
its production methods as well as its unique tape-woven
materials. The company has also registered the trade
mark TEXTREME for its materials. This trade mark is
registered mainly as a word trade mark for different
classes of goods and services in many countries, including
Australia, China, Japan, Russia, Turkey and the US, aswell as in the EU. Trade mark protection is important for
consumer goods, for example for sporting equipment,
where TEXTREME is visible and contributes to brandrecognition.
< Table of contents | Executive summary | Content | Annex

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PATENTS, TRADE MARKSAND STARTUP FINANCE

4. The IPR profile of European startups
This section presents statistics on the filing of trade
mark and patent applications by our sample of European
startups. While other studies have shown that in general,
only a small fraction (about 9%) of European SMEs own
IP rights,8 the proportion is significantly higher for thestartups in the Crunchbase database, since the focus
of Crunchbase is on innovative firms aiming to set up
and validate a scalable business model, and such firms
have a greater need to protect their innovations byregistering IPR.

8

See, for example, EPO/EUIPO, 2021.

9”Any” refers to the fact that both national and European IP rights are considered.

< Table of contents | Executive summary | Content | Annex

4.1 Use of IPRs by European startups
Table 1 presents the sample used for the present study bycountry. The first column shows the number of startups
from each country, while the subsequent columns show
the percentages of filers of any9 IP right, any trade mark,any patent, or a bundle of trade marks and patents.
In the entire sample, 29% of the startups applied fora patent or a trade mark at some point, with 27%
having applied for trade marks, 6% having filed patentapplications and 2% having filed both patent and trade
mark applications. However, there is significant variation
among the countries in the sample, as shown in thetable. Startups based in Austria, Switzerland, the Czech
Republic, Germany, Denmark, Finland, France, Italy,
Luxembourg, Norway and Sweden are more likely than
average to have applied for any IP right. Companies
from those countries are also the most likely to file trade
mark and patent applications, and to bundle the two IP
rights. This is especially true for startups from Austria,
Switzerland, France and the Nordic countries.

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PATENTS, TRADE MARKSAND STARTUP FINANCE

Figure 1

Share of start-ups filing IP rights per countryN

Any IPR

AL 98

AT

21%
28%

1 227
1 055

CZ

2 928

EE

23%

GR

1 495

16%

42%

40%

18%

18%

2 071

21%

18%

IE

5 512

1 259
889

LV

728

36%

MK 12231%

33 630

NL
NO

4 456

PL

5 230

37%
29%
21%

20%

21%

20%

RS

724

9%
22%

1 272

24%

SM 6

3%

100 000

20%

60%

20%

40%

6%
3%

5%

23%

In addition to the variation across countries, there isalso great variation among sectors of economic activity
with regard to IPR application propensity, as shown in
Table 2. As in Table 1, the first column shows the numberof startups in the sample from each sector, while thesubsequent columns show the number of IPR applications
filed by startups from that sector.
< Table of contents | Executive summary | Content | Annex

1%
9%

2%

1%

50% 0%

0%

1%

0%

13%
40%

2%
1%

2%

50%

50 000

2%

1%

20%

13%

6%

4%

31%

34%

SI 9091%
9%8%

11 420

0%

27%

3 133

5 265

0%

33%

2 973

TR

0%
3%

PT

SK

0%

13%

RO
SE

2%

0%
1%

24%

14%

2%

3%

1%
24%

1%
4%

25%

1%

0%

2%

27%

13%

MT 453

5%

5%

33%
26%

2%

8%

14%

13%

3%
10%

28%

ME 23

1%

6%

39%
19%

LT

1%
4%

9%

12 274

LU

3%
0%

2%

13%

17%

LI 79

5%
3%

805

10%
6%

8%

26%

HR

IT

2%
15%

14%

HU

IS 484

4%
37%

17%

6%
2%

3%

42%
28%

81 484

GB

6%

9%

21%

29 179

FR

8%

20%

4 475

FI

2%

3%

30%

22%

6%
1%

37%

34%
21 090

ES

29%
40%

2 153

1%
10%

1%

31%

6 248

DK

5%

3%
28%

16%

30 969

DE

8%

7%

12%
32%

16%

CY

0%
12%

25%

14%
13 705CH

IPR bundle

0%
36%

40%

6 297

Any patent

21%

2 545

BE
BG

Any TM

60%

5%

10%

15%

20%

5%

10%

15%

20%

In terms of presence in the sample, the three sectors withthe most startups are software, information technology
and internet services. Other digital economy sectors, aswell as service sectors such as commerce, finance andmedia and entertainment, are also well represented.

epo.org | 25

PATENTS, TRADE MARKSAND STARTUP FINANCE

Figure 2

Share of start-ups filing IP rights per sector
N
Administrative services

Apps

28 10320%
41%

15 2697 648

Biotechnology

6 467

Clothing and apparel

7 433

2%

1%

25%

2%

Content and publishing

13 63921%

Data and analytics

19 981

27%

30%

Government and military 1 855

48 1468 207

15 9473 745

Natural resources

4 446

5 024

Platforms

3 304

Privacy and security

8 568

Professional services
Real estate

6%

30%

26%

25%

3%

2%

30%

29%

2%

1%

Sports

6 965

Sustainability

8 441

Transportation

13 327

5%

3%

36%

21%

22%

13%

3%

2%
3%

28%

27%

5%

32%

29%

7%

4%

6%

4%

25%
35%

34%

30%

29%

27%

27%

52 148

22%

18%

30%

3%

4%

2%

26%

1%

4%

3%

2%

1%

38%

25%

31%

29%

6%

31%

30%

6%

16%
4%
4%

17%

37%
33%

36%

5%

7%

21%

43%

3%

4%

2%

26%

47%

8%

4%

23%

28%

11%

11%

32%

32%
46 24891 72213%28%

23 828

Software

8%

20%

30%

25%

17 682

4%

13%

39%

33%

Sales and marketing
Science and engineering

29%

35%

42%
35 589

Other
Payments

1%

32%

27%

Navigation and mapping 1 591

2%

4%

23%

3 483

1%

3%

43%

39 365

Music and audio

34%

12%

1%

3%

19 220Media and entertainment

1%
19%

30%

46%
61 910Internet services

2%

30%

22 075

Information technology

2%

5%

31 584

Hardware

6%

3%

24%

31%

Mobile

1%
9%

36%

24%

4 910

Messaging and telecom.

2%

26%

GamingManufacturing

20%

43%

36%

Lending and investments

3%

19%

9 192

Health care

4%

32%

21%

9%

14%

24%

35%

Food and beverage

2%

30%

35%

30 323

31%

23%

26%

Financial services

48%

25%

11 874

5 734

8%

12%
47%

24%

Consumer goods

Events36%

1%

12 977

13 92711%2%

2%

Consumer electronics

8 614

16%

23%

12 18233 0812%
1%24%

Community and lifestyle

Design2%

4%65%
44 850

IPR bundle

1%
36%

27%

29%
40%

Commerce and shopping

EnergyAny patent

27%

21%

2 402

Artificial intelligence

Education

Any TM28%

13 121Advertising
Agriculture and farming

Any IPR

11%

8%

6%

Travel and tourism

7 308

27%

26%

2%

1%

Video

6 988

26%

25%

5%

3%

50 000100 000

40%

80%

20%

40%

60%

20%

40%

60%

20%

40%

Note: This Figure is based on the industry classification established by Crunchbase.

< Table of contents | Executive summary | Content | Annex

epo.org | 26

PATENTS, TRADE MARKSAND STARTUP FINANCE

Differences among sectors when it comes to firms’
propensity to apply for IP rights are driven partly by theinherent characteristics of each sector, and partly by
the patentability of the innovations generated by thestartups in that sector. While all products and services
can be branded, and those brands can be protectedby trade mark registration, there are many sectors,
particularly in services, whose innovations are notpatentable.
The IPR intensities – defined here as the share ofstartups that have been filing for registered IP rights –of different sectors are reported graphically in Figure 3.
The sectors whose startups use patents and trade

marks most intensively are highlighted in the Figure.
The biotechnology sector is the most intensive userof both patents and trade marks, with close to half ofthe startups in that sector applying for one or both of
those IP rights. Other sectors intensive in their use ofboth rights are manufacturing, health care, artificial
intelligence, and data and analytics. Software, food andbeverages, and financial services are not patent-intensive,
but the startups from those sectors make intensive useof trade marks.
Startups from the highlighted IPR-intensive sectors are
the subject of the in-depth analysis in sections 5 and 6.

Figure 3

Comparison of trade mark and patent use by sector

50%

Biotechnology

Share of startups with any patent

40%

30%

Science and engineering
Manufacturing
20%

Health care

Artificial intelligence
10%

Data and analytics
SoftwareFood and beverage
Financial services

0%
0%

10%

20%

30%

40%

50%

Share of startups with any trademark
Note: The size of each circle represents the number of firms in the sector in the initial sample.

< Table of contents | Executive summary | Content | Annex

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PATENTS, TRADE MARKSAND STARTUP FINANCE

4.2 Use of IPRs by European startups
While section 4.1 considered any patent or any trade mark(national or European), in Figures 4 and 5 the focus is on
European-level rights.
Looking first at patents (Figure 4), the biotechnology,
science and engineering, health care and manufacturingsectors have high propensities to use patents in general,and European patents in particular.

Figure 4

Comparison of patent intensity with share of European patents users
50%

Biotechnology

Share of startups with European patent

40%

30%

Science and engineering
20%

Health care

Manufacturing

10%

Data and analytics

Artificial intelligence

SoftwareFood and beverage
Financial services

0%
0%

10%

20%

30%

40%

50%

Share of startups with any patent
Note: The Figure compares general patent intensity of a sector with its European patent intensity. The size of the circles reflects the size of each sector in the initial sample.

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PATENTS, TRADE MARKSAND STARTUP FINANCE

Figure 5 shows the corresponding information for trade
marks. A difference in behaviour compared to patenting
emerges. While the most patent-intensive sectors in
Figure 4 have roughly equal propensities to apply fornational and European patents, in Figure 5 thetrademark-intensive sectors have relatively lower ratesof EUTM activity. For example, 36% of manufacturing
startups have applied for a trade mark, but only about
17% have applied for an EUTM. In the same sector, 21% ofstartups have applied for a patent, compared to about
17% that have applied for a European patent, a muchsmaller difference.

Figure 5Comparison of trade mark intensity with share of EUTM users
40%

Biotechnology

Share of startups with EUTM

30%

Science and engineering
Manufacturing
20%

Health care

Food and beverage
Artificial intelligence
SoftwareData and analytics
Financial services

10%

0%
0%

10%

20%

30%

40%

50%

Share of startups with any trade markNote: The Figure compares general trade mark intensity of a sector with its EUTM intensity. The size of the circles reflects the size of each sector in the initial sample.

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PATENTS, TRADE MARKSAND STARTUP FINANCE

Marinomed develops therapies against respiratory diseases based on an anti-viral respiratory technology platform.

Case study: MARINOMED
Company:
Locations:Founded:No. of employees:
Products:

Marinomed Biotech AG
Vienna, Austria
200625
Anti-viral and immunological treatments< Table of contents | Executive summary | Content | Annex

epo.org | 30

PATENTS, TRADE MARKSAND STARTUP FINANCE“Marinomed is an IP-driven company. It is vital that we
own and manage the IP associated with our products.”
Andreas Grassauer, CEO, Marinomed
Marinomed is a biopharmaceutical spin-off fromthe Veterinary University of Vienna. The company
was founded in 2006 to commercialise a proprietary
technology platform based on Carragelose. This naturalpolymer is isolated from red algae and is used in various
therapies against respiratory diseases. Drug discovery
companies like Marinomed rely heavily on IP rights toprotect their technology and to secure vital funding tobridge the gap between research and commercialisation.

Sea of possibility
Derived from red algae, Carragelose works by forming aprotective barrier that prevents viruses from infecting
mucosal cells. It is used in treatments such as throat
sprays, nasal sprays and lozenges, making it easy andconvenient for patients to use. While these over-thecounter products are subject to shorter regulatory
approval processes, it can still take around three tofive years and cost several million euros before they
can be marketed.
The initial research was funded with public money
and conducted at the university. When the company
was spun out, it set up an agreement under which
Marinomed would retain all IP rights and award theuniversity a share in the business. Marinomed’s patentportfolio is built upon three core inventions: the main
patent family which relates to the use of Carragelose
against cold-causing rhinoviruses, a second family tocover the use of the compound against other respiratory
viruses, and a third related to a different polymer.

The firm’s IP portfolio has helped it to establish two
distinct business models: licensing and distribution
partnerships. Marinomed offers a classical licenceagreement which gives licensees the rights to produce,
market and distribute the product in certain countries.
In addition, their distribution deals enable partners topurchase Marinomed products and sell these in defined
geographical territories. The products can be tailored toonly include the partner’s name and logo.
Marinomed owns a trade mark for Carragelose and its
licensing partners have their own trade marks. Whilethese partners do not need the Carragelose mark, under
the distribution partnership, the licences for the patents
are sometimes combined with a trade mark licence. This
enables partners to capitalise on the international use of
the brand. The decision to file for a trade mark is based ona cost/benefit analysis, taking into account the needs ofthe partners.

IP portfolio review
The company has invested heavily in its IP portfolio
and carefully manages the intellectual assets included.
In cooperation with the business development unit, themanagement team reviews the portfolio at least once
each year, and adjusts its IP strategy to streamline patentrelated expenditure. For example, the firm may abandon
a patent in countries where it is no longer needed, orabandon a patent altogether. Licensing and distribution
partners are included in these decisions and, to retain
patent protection, may agree to bear the costs.

Global coverage
The three key patents are validated in almost 100
countries and supported by a trade mark registered in
more than 30 countries. Marinomed has chosen suchbroad coverage for several reasons. Medical compounds
are relatively easy to copy and patents can be effective
in fending off generic producers or copycats. While
Marinomed has experienced patent infringement, it wasable to resolve these cases without lengthy and costly
court battles.

< Table of contents | Executive summary | Content | Annex

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PATENTS, TRADE MARKSAND STARTUP FINANCE

5. IPR and funding
This section explores the relationship between the abilityof startups to obtain financing and their IPR profile,as evidenced by their filings of patent and trade markapplications. As the previous section showed, one canobserve a strong correlation at the sectoral level between
the use of trade marks and patents, suggesting a strong
complementarity between the two IP rights.
Funding of startups usually occurs through successive
financing rounds. Seed funding refers to the money raisedby a startup in the very initial stages of development,
when the company does not yet have a track record. The
goal of seed funding is to help the startup develop its
business plans and refine its ideas to the point of being
able to attract larger sums from investors in subsequentfunding rounds.

In the late-stage funding rounds, known as Series C, D, E,
and later (although Series D and beyond are quite rare),the objective is to provide funds for the already successful
business to expand into new markets or to develop new
products.
Finally, the investors in the earlier funding rounds willseek a successful exit from their investment, usually
through an IPO or the sale of the startup to anothercompany. This stage of the life cycle of a startup is crucial,since the investors in the funding rounds describedabove would be reluctant to provide funding without
the prospect of realising gains on their investment. The
relationship between IPR and successful exit events isthe subject of section 6.

Early-stage funding (Series A and Series B) is sought bystartups that have already established themselves with
viable products/services and business models, and that
now need funds to scale up their operations and achievesustainable growth. While seed capital may come fromprivate sources or from the founders themselves, Series
A/B funding will typically come from VC or private
equity (PE) investors. The amounts invested will also be
considerably larger than those invested at the seed stage.

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PATENTS, TRADE MARKSAND STARTUP FINANCE

5.1 Funding record of European startups

In Figure 7, the information on funding of startups ispresented by sector. The first columns show the total
number of startups in the sample by sector, while thesubsequent columns show the proportion of startups ineach sector that obtained the respective funding round
financing.

Figure 6 shows the number of funding events in thesample at different funding stages, grouped into seed,
early-stage and late-stage funding. The chart includes
only those startups that obtained funding at each specificstage.

The sectors in which startups were most successful inobtaining seed financing include artificial intelligence(41% of startups in this sector received such funding),
biotechnology (27%), data and analytics (27%), navigationand mapping (26%) and payment services (26%). However,in subsequent funding rounds the most successful
sector is biotechnology, with 10% of biotech startups
obtaining early-stage financing and more than 3% goingon to late-stage financing. Other sectors with startups
relatively successful in obtaining early-stage and latestage financing include health care, artificial intelligence,
payments, and science and engineering.

By far the most frequent type of funding in the sample
is seed financing, with more than 56 000 observations.
Within that category, the most common category is seedfunding, with almost 36 000 events. There are 12 000
early-stage financing rounds, with Series A funding being
the most frequent type.
Only a relatively small number of startups make it to thelate stage; in our sample there are just under 2 000 latestage rounds, with funding rounds beyond Series C being
quite infrequent.

Figure 6

Funding events in the dataset
Total

By type
4 239

Angel

Seed

1 775

Convertible note

3 116

56 307

Equity crowdfunding
11 060Pre-seed299

Product crowdfunding
35 818 Seed

Early stage

9 024

Series A

12 362
3 338

Series B

Late stage

1 271

0

1 942

20 00040 00060 000

Series C

437

Series D

145
51
24

Series E

113

Series H

0

Series F
Series G
Series I
10 000

20 00030 00040 000Note: The first panel presents the total number of funding events by stage of funding. The second panel presents the distribution of funding events by specific funding types
within each of the three categories.

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PATENTS, TRADE MARKSAND STARTUP FINANCE

Figure 7

Participation of startups at different stages of financing
N
Administrative services

13 121

Apps

4.75%

2 402
7 648

Biotechnology

6 467

Clothing and apparel

7 433
44 850

0.44%

2.87%

0.25%

Content and publishing

13 639

8.78%

1.83%

13 92711.80%

8 614

12.42%

Events

5 734

10.31%
20.80%
21.24%
31 584

Hardware

61 91048 1468 207
19 220

Manufacturing

39 365Media and entertainment
Messaging and telecommunications
MobileMusic and audio
Natural resources
Navigation and mapping

3 483

0.41%

13.88%

3.22%

12.89%

4.12%

9.58%

3.19%

0.45%

10.44%

2.11%

0.25%

0.40%

3.62%

0.63%

52 148

5.66%

3.84%

0.53%
0.17%

2.44%

0.20%

1.34%

0.15%

23.32%
91 722

0.18%

1.37%

10.21%

23 828

Software

1.53%

3.06%

11.61%

17 682

Sales and marketing

0.33%
7.74%

26.15%

5.83%

0.69%

2.81%

15.68%
46 248

0.80%

3.34%
6.41%

12.18%

8 568

0.49%

5.24%

9.87%

Professional services

0.78%

4.05%

26.15%

5 024

1.32%
0.31%

1 591

3 304

0.66%

7.60%

22.04%

35 589

0.33%
0.16%

4.22%

16.98%

Platforms

Science and engineering

0.62%
0.47%

2.75%

3 745

Payments

Real estate

4.11%
3.56%

10.68%

15 947
4 446

0.74%
0.30%

4.42%

14.27%

Other

Privacy and security

0.12%

20.56%

Information technology
Internet services

1.87%

1.94%

14.20%

22 075

0.15%

1.62%

9.00%

Health care

0.63%

1.20%
4.42%

14.60%

Government and military 1 855

Lending and investments

6.88%

5.64%

Energy

4 910

0.15%

26.66%

30 323

0.67%
0.29%

2.09%

19 981Gaming

0.35%

3.99%

13.46%

33 081

3.31%

2.72%

16.20%
8.32%

Design0.78%

16.10%

11.77%

12 977

9 192

10.20%
2.25%

11 874

Financial services

0.42%

11.68%

Consumer goods

Food and beverage

0.54%

3.44%
41.20%

Consumer electronics

Education

0.27%
0.12%

26.95%

12 182

Data and analytics

2.23%
5.91%

20.13%

Commerce and shopping

Late stage

1.22%
22.69%

15 269Artificial intelligence

Community and lifestyle

Early stage

10.53%

28 103Advertising
Agriculture and farming

Seed

8.96%

17.48%

4.20%
3.09%

1.40%
0.49%

Sports

6 965

18.46%

Sustainability

8 441

17.69%

5.14%

Transportation

13 32717.60%

5.17%

20.03%

3.94%

0.51%

3.08%

0.36%

Travel and tourism

7 308

Video

6 988
50 00012.42%
100 000

20%

40%

60%

10%

0.24%
0.86%
0.89%

20%

2%

4%

Note: The first panel shows the number of startups in the initial sample by sector. Subsequent panels present the shares of startups in the initial sample that obtained financing ineach stage of funding rounds.

< Table of contents | Executive summary | Content | Annex

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PATENTS, TRADE MARKSAND STARTUP FINANCE

5.2 IPR use at different funding stages
On average, only about a third of all startups file IPRs
before the seed stages. In most of these cases, the firms
have applied for a trade mark before these funding
rounds (28%), while only 10% have already filed a patent.
The proportion of startups that file patents increases
significantly during the series A and B stages, reaching
about 45% by the late stages. The same pattern can beobserved for trade marks, which have been filed for by
70 to 80% of startups at late stages. The more frequent
use of patents and trade marks by relatively maturestartups probably reflects their progress in developing
technologies and products that qualify for IPR protection.

Among those startups that apply for IPR prior to eachfunding round, the percentage that applied for European
rights is shown in the last panel of the Figure. In thisrespect, there is a difference between trade mark andpatent users. Of the 28% of seed funding recipients that
had filed for a trade mark before the funding event, 47%
had filed for an EUTM. In the case of patents, 81% of thepatent filings were at the European level already at thisearly stage. By the late-stage funding rounds, 92% of
patent filers had filed for a European patent, comparedto 81% of trade mark filers that had filed an EUTM
application.

Figure 8

Share of startups with IPR at different stages of financing
IPR users (overall)

Seed

Number of rounds

Late stage

Early stage

56 3070

5%

12 362

10%

18%

1 942

20 000Uses TM

28%

47%

Uses patent

60 000 0%

25%

81%

47%

53%

28%

64%

88%

60%

35%

40 000out of which European rights users

44%

50%

72%

81%
75%

75%

100% 0%

25%

50%

75%

92%

100%

Uses TM and patent

Note: The first panel presents the number of events in each stage of financial rounds. The second panel shows the share of startups having applied for various combinations of
IPR prior to the date of that financing round. The third panel presents the share of startups within each category that applied for protection of EUTM, a European patent or bothprior to the date of the relevant financing round.

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PATENTS, TRADE MARKSAND STARTUP FINANCE

Additional charts showing the distribution of IP rights ineach funding round by sector and by IP rights is shown inAnnex A.
Figures 9 and 10 present scatterplots showing thecorrelations between applications for patents (Figure 9)
and trade marks (Figure 10), and European patents and
EUTMs, respectively, at each of the three funding stages.
While, for both IPR types, the proportion of startups
with both trade mark and patent filings increases asfirms progress through the funding rounds, there are
significant differences among sectors. These differencesmean that in the econometric analyses in the next
sections, the sector of activity of the startup must be
taken into account.

Figure 9

Relationship between general patent intensity and share of European patent usage among patent users at thesectoral level
Seed

Early stage

Late stage

Share of European patent users among patent users

100%

Biotechnology
Health care
Science & engineering

Biotechnology

Health care

90%

Health care
Science and engineering
Manufacturing

Biotechnology

Manufacturing
Science and engineering

80%

Data and analytics
SoftwareFood and beverage

70%

Software

Manufacturing

SoftwareFood and beverage
Financial services

Data andanalytics
Artificial intelligence
Food and beverage

Data and analytics
Artificial intelligence

Financial services

Artificial intelligence
Financial services
60%

50%
0%

25%

50%

75%

100%

0%

25%

50%

75%

100%

0%

25%

50%

75%

100%

Share of patent users among startups
Note: The Figure compares general patent intensities of sectors with the share of patent users that have filed for at least one European patent.

< Table of contents | Executive summary | Content | Annex

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PATENTS, TRADE MARKSAND STARTUP FINANCE

Figure 10

Relationship between general trade mark intensity and share of EUTM usage among trade mark users at the sectoral
level
Seed

Early stage

Late stage

Share of EUTM users among trade mark users

100%

80%

60%

40%
0%

25%

50%

75%

100%

0%

25%

50%

75%

100%

0%

25%

50%

75%

100%

Share of trade mark users among startups
Note: The Figure compares general trade mark intensities of sectors with the shares of trade mark users that have filed for at least one EUTM.

< Table of contents | Executive summary | Content | Annex

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PATENTS, TRADE MARKSAND STARTUP FINANCE

Finally, Figure 11 shows the amount of funding received
by the median startup in each funding round, by the IPR
status of the company. Among the startups that received
seed financing, those that had applied for either a trade
mark or a patent prior to funding received considerably
higher sums than those that had not applied for either IP
right. Those startups that had applied for both a patent
and a trade mark received the highest amount of seedfunding, more than EUR 900 000. The same patternholds for early-stage financing, while in late-stage
financing rounds trade mark users receive the mostfunding, perhaps reflecting the fact that companies atthis stage are already quite successful and their value(hence also their funding) is more driven by marketing
success than by technological innovation at this point.

Figure 11

Relationship between IPR status and amount of financing obtained at different stages of funding

MedianN
26 457590 007

2 117

Uses TM and patent

912 475

2 028

Uses TM only

649 101

5 271 093

3 599
1 084

Uses TM and patent

7 429 765

Uses TM only

6 454 723

1 879
3 708

No IPR

16 213 614

326

Uses patent only

16 675 940

154
604

20 222 637

Uses TM and patent

643

40 048 777

Uses TM only
0

Early stage

4 282 023

9 535

20 000 000

Late stage

No IPR
Uses patent only

Seed

No IPR 263 435
Uses patent only

40 000 000

60 000 000

010 000

20 00030 000Note: Panels present median values and the number of financing events by stage of financial round and type of IPR use.

< Table of contents | Executive summary | Content | Annex

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PATENTS, TRADE MARKSAND STARTUP FINANCE

5.3 IPR use and odds of funding

Tables 1 and 2 show the regression results for the seedfunding rounds. The coefficients can be interpreted as
the increase in the odds of obtaining funding (compared
to a startup that has not filed any IPR application). The
first column in Table 1 shows that a startup that hasapplied for an IPR has 2.6 times higher odds of obtaining
seed funding than a startup that has not applied for
any IPR. The second column repeats this analysis, now
distinguishing between the two types of IPR and a
combination of them. The analysis shows that the odds
of obtaining funding increase significantly for startups
with trade marks, but even more so for startups withpatents. Startups with both patents and trade marks
experience the highest increase in odds of obtaining
seed funding.

In section 5.2, a descriptive analysis of the relationshipbetween IPR and funding was presented. Significant
differences were found among sectors and funding
rounds, calling for an econometric analysis of the impact
of prior IPR use on the likelihood of funding while
controlling for relevant factors, in particular the country
in which the startup is based and the sector in which itis active. This analysis is presented below for the seedand early-stage funding rounds, while section 6 considers
the exit events.
The methodology of the econometric analysis is
described in sections 3.3 and 3.4 above. In all cases, thedependent variable is the occurrence of a funding eventat a given point in time, and the main independent
variables are variables indicating whether or not thestartup has applied for the IP right indicated. Control
variables are used for the startups’ respective countries
and sectors (the corresponding coefficients have no
intrinsic interest and are therefore omitted in the Tables).

Table 1

Cox proportional hazard models with time-dependent IPR variables (seed stage)(1)

Uses any IPR(2)2.614***
p = 0.000

Uses only TM

2.463***
p = 0.000

Uses only patent

2.916***
p = 0.000

Bundles TMs with patents

3.464***
p = 0.000

Country controls
Sector controls

Yes
Yes

Yes
Yes

Observations

383,363

383,363

R2

0.064

0.064

−366,887.800−366,835.600

Log likelihood
Wald test
LR testScore (logrank) test

28,113.220*** (df = 86)
25,415.670*** (df = 86)

32,454.060*** (df = 86)

Note:Original coefficients exponentiated to represent odds of getting finance as compared to reference value< Table of contents | Executive summary | Content | Annex

28,344.670*** (df = 88)

25,520.210*** (df = 88)
32,863.650*** (df = 88)* p<0.1; ** p<0.05; *** p<0.01

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PATENTS, TRADE MARKSAND STARTUP FINANCE

In Table 2, the analysis focuses on whether the IP rights
applied for by the startup are national or European-levelrights. The first column shows that while patent filings
increase the odds of funding, the increase is more
pronounced when the startup has filed for a European
patent. The same is true for trade marks: as shown in thesecond column, filing for an EUTM is associated with asignificantly higher increase in odds of seed funding than
filing for a national trade mark application. It appears
that seed investors value a startup’s intention to expand
internationally, as evidenced by its trade mark andpatent filings.

Table 2

Cox proportional hazard models with time-dependent IPR variables. Focus on geographical scope of IPR (seed stage)(1)

Uses national patent only

2.436***
p = 0.000

Uses European patent

2.651***
p = 0.000(2)

Uses national TM only

2.191***
p = 0.000

Uses EUTM

2.816***
p = 0.000

Country controls
Sector controls

Yes
Yes

Yes
Yes

Observations

383,363

383,363

R2

0.057

0.062

Log likelihood−368,292.700−367,390.000

Wald test (df = 87)

25,046.790***

27,156.730***

28,907.050***

31,320.700***

LR test (df = 87)
Score (logrank) test (df = 87)

22,606,000***

Note:
Original coefficients exponentiated to represent odds of getting finance as compared to reference value< Table of contents | Executive summary | Content | Annex

24,411.300**** p<0.1; ** p<0.05; *** p<0.01

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PATENTS, TRADE MARKSAND STARTUP FINANCE

Tables 3 and 4 show the results of the analysis of the odds
of early-stage (Series A and B) funding. The increase inodds of a successful funding round associated with IPR
activity is much greater than was the case in the seedfunding models. For example, a startup that bundles
patents with trade marks has a ten-fold increase in theodds of obtaining early-stage funding, compared to a
tripling of the odds of obtaining seed funding.

It should also be noted that all estimated coefficients are
statistically significant at the 99% confidence level. In
addition, three test statistics confirm the overall validityof the models (by rejecting the hypothesis that all thecoefficients in the model are zero): the Wald test, thelikelihood ratio (LR) test and the score logrank test.

The same is true when analysing the differential impactof European versus national-level rights in Table 4. Here,the increase in odds of funding associated with Europeanlevel rights is significantly higher than the corresponding
increase seen in Table 2 for seed funding. Investors
in early-stage financing seem to value international
expansion prospects even more than do investors in theseed funding stages.

Table 3Cox proportional hazard models with time-dependent IPR variables (early stage)(1)

Uses any IPR(2)5.200***
p = 0.000

Uses only TM

4.349***
p = 0.000

Uses only patent

6.410***
p = 0.000

Bundles TMs with patents

10.188***p = 0.000

Country controls
Sector controls

Yes
Yes

Yes
Yes

Observations

394,249394,249

R2

0.034

0.035

−98,849.180−98,594.580

Log likelihood
Wald test
LR testScore (logrank) test

14,742.910*** (df = 86)
13,646.400*** (df = 86)

20,004.540*** (df = 86)

Note:Original coefficients exponentiated to represent odds of getting finance as compared to reference value< Table of contents | Executive summary | Content | Annex

16,053.760*** (df = 88)

14,155.620*** (df = 88)
23,511.240*** (df = 88)* p<0.1; ** p<0.05; *** p<0.01

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PATENTS, TRADE MARKSAND STARTUP FINANCE

Table 4Cox proportional hazard models with time-dependent IPR variables. Focus on geographical scope of IPR (early stage)(1)

Uses national patent only

3.826***
p = 0.000

Uses European patent5.267***
p = 0.000(2)

Uses national TM only

2.808***
p = 0.000

Uses EUTM

6.091***
p = 0.000

Country controls
Sector controls

Yes
Yes

Yes
Yes

Observations

394,249394,249

R2

0.028

0.032

Log likelihood−100,051.600−99,229.180

Wald test (df = 87)

14,344.070***

15,255.690***

19,665.710***

20,667.950***

LR test (df = 87)
Score (logrank) test (df = 87)

11,241.570***

Note:
Original coefficients exponentiated to represent odds of getting finance as compared to reference value< Table of contents | Executive summary | Content | Annex

12,886.410**** p<0.1; ** p<0.05; *** p<0.01

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PATENTS, TRADE MARKSAND STARTUP FINANCE

Blubrake’s integrated ABS system for e-bikes an e-cargos

Case study: BLUBRAKE
Company:
Locations:Founded:No. of employees:
Products:

Blubrake
Milan, Italy
2015
32
Integrated ABS system for e-bikes< Table of contents | Executive summary | Content | Annex

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PATENTS, TRADE MARKSAND STARTUP FINANCE“IP is important in two main respects. Firstly, it helps toattract investors when companies are mature enoughto grow. Secondly, it is important for exit purposes as itincreases corporate value.”
Fabio Todeschini, co-founder and general manager,
Blubrake
Blubrake is an Italian scale-up that develops andproduces advanced braking systems for the growing
global e-bike and e-cargo bike industry. The company
was founded through a collaboration between
researchers at Politecnico di Milano (Polimi) and e-Novia,
a startup accelerator that supports companies inrobotics, artificial intelligence and mobility. Blubrake’s
open-platform ABS solutions can be integrated withthird-party braking systems and battery kits, meeting theneeds of the original equipment manufacturers (OEMs).
The company both sells its ABS systems to OEMs, andprovides them with a technology platform that enables
Blubrake systems to be adapted to specific needs andbike models.

Kickstarting the innovation cycle
In 2015, a group of entrepreneurs established e-Novia toscale up promising technologies. Once they had identified
a potential breakthrough, e-Novia combined IP, expertiseand financial resources to establish spin-offs that had thepotential to achieve international success. In this businessmodel, company creation follows a clear path from
idea (generating innovation) to invention (transforming
innovation) to enterprises (transferring innovation).
At around the same time, Polimi Professor Sergio Matteo
Savaresi and his research group had been working
on braking control systems for vehicles. Some of thegroup’s researchers began collaborating with e-Novia
to develop braking systems for light electric vehicles.
This collaboration led to Savaresi and Fabio Todeschinico-founding Blubrake.

< Table of contents | Executive summary | Content | Annex

IP laid the foundation for the company throughunorthodox university-based technology transfer.
Ordinarily, universities will file for a patent as aprerequisite for testing technology and enabling scientificpublications. Blubrake was created from the outset
around a specific unique selling point and market. The
firm’s solutions were developed with IP in mind, with theteam identifying and using various methods to protect
new inventions early on. The company initially relied on
trade secrets, with Blubrake and Polimi filing for the firstjointly owned patent on a control system for e bikes, ABS,in 2016. In 2019, the company registered the Blubraketrade mark in Italy and the UK, with further registrations
at the EUIPO and in Japan and the US in 2020 and 2021.

Funding the journey
For deep-tech startups, early funding is essential as
it supports R&D and, in the case of Blubrake, enabled
the new company to thoroughly test its technology tomeet stringent safety standards. E-Novia helped attract
financing, negotiated with early backers and funding
the filing and maintenance fees for patent applications.
In return for this support, e-Novia was given a majority
share in Blubrake.
In addition to funding from e-Novia and other early
investors, Blubrake was supported by a grant from theEuropean Commission’s Executive Agency for Small andMedium-sized Enterprises. Towards the end of 2020, thecompany raised EUR 5.2 million from private investors.
This investment was used to develop the second
generation of ABS – a miniaturised system that can be
fully integrated into the bike frame. In their due diligence,
the investors emphasised the importance of proprietary
technology, IP protection and a technical roadmap thatwas matched by parallel patent protection.
Beyond financing, Blubrake’s IP portfolio ensures that it isrecognised as a skilled technology player. Since the firm’s
solutions are open-ended, IP here enables the company toretain control of its technology while collaborating withpartners and reinforcing its bargaining position in global
supply chains.

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PATENTS, TRADE MARKSAND STARTUP FINANCE

6. IPR and exit performanceThis section presents statistics on the interplay between
the filing of trade mark and patent applications by
European startups and the odds of successful exit for
their investors. Taking the perspective of the VC funds, a“success” is defined as the occurrence of an initial public
offering (IPO) or acquisition.
The assumption underlying this section is that filing for
IP rights denotes a specific focus of the startups on thedevelopment and protection of intellectual assets, which
may in turn be associated with higher odds of success.
Accordingly, the purpose of the analysis is to determine
whether the prior filing of IP rights can be exploited byinvestors as a predictor of the future chances of successof the startups. Importantly, this prediction effect should
not be interpreted as a direct causal one: the mere
filing for an IP right does not ensure a successful exit,
but it may signal a startup’s stronger ability to achievea successful exit through the creation, protection andexploitation of intellectual assets.

< Table of contents | Executive summary | Content | Annex

6.1 IPR use at exit
Figure 12 presents the population of startups that haveachieved exit, across sectors of economic activity. The
first column shows the total number of startups for eachsector. The subsequent columns present the percentagesof those startups that successfully exited through either
an acquisition (second column) or an IPO (third column).
In the entire sample, 7.32% of the startups report a
successful exit, most often through acquisitions (6.53%).
Biotechnology stands out with high exit rates withrespect to both acquisitions (10.62%) and IPOs (4.25%).
Natural resources, energy, gaming and health care also
report compounded shares of exiting startups above
10%. Other IP-intensive sectors should be noted whichshow above-average exit rates, including manufacturing(9.55%), science and engineering (9.25%), or food andbeverages (7.92%).

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PATENTS, TRADE MARKSAND STARTUP FINANCE

Figure 12

Startups with successful exit by sectorN
13 121

Administrative services

Artificial intelligence

7 648

Biotechnology

6 467

Clothing and apparel

7 433

2.88%
44 85012 977

Consumer goods

11 874

Content and publishing

13 639

4.22%

0.33%

4.46%

0.34%
6.80%

0.37%

4.22%

0.29%
7.03%

33 081
8 614

Events

5 734

3.51%

0.17%
8.21%

3.09%

1.50%

6.24%
7.03%

9 192
4 910

Hardware

0.54%
7.05%

31 58422 075

6.22%

61 910Internet services

0.30%

4.64%

1.82%
8.21%

19 22039 365Media and entertainment

4.74%

3 483

Music and audio

3 745

Natural resources

4 446

0.37%

0.51%
8.64%

5.87%

6.91%

5 024

Platforms

3 304

0.50%

5.02%

35 589

Other

0.49%
7.86%

0.62%

6.78%

17 682

Sales and marketing

0.33%

4.59%

1.79%

3.60%

52 148

0.21%
7.60%

23 828

SoftwareSports

6 965
8 441
7 308

Video

6 988

0.29%

4.81%

0.43%

5.39%

13 327

Travel and tourism

1.65%

6.23%

91 722

Sustainability

0.44%

4.21%

46 248

Science and engineering

0.15%

6.77%

8 568

Professional services

0

0.46%

5.05%

Payments

Transportation

0.43%

7.20%

1 591

Real estate

1.34%

6.57%

15 947

Privacy and security

1.71%
0.35%

5.54%

48 146
8 207

Manufacturing

0.62%
8.82%

Information technology

Mobile1.24%

10.04%

Health care

Messaging and telecommunications

0.89%

3.83%

1 855

Lending and investments

3.38%
0.19%

30 323Financial services
Gaming

0.31%
0.18%

2.04%

13 927

Energy

0.55%

3.30%

DesignFood and beverage

4.25%
0.39%

19 981

Education

0.33%

10.62%

Consumer electronics

Navigation and mapping

0.22%
6.49%

12 182

Data and analytics

1.54%

4.40%

Commerce and shopping
Community and lifestyle

0.19%

3.71%

15 269

Apps

0.35%

3.73%

2 402

Agriculture and farming

IPO

4.57%
28 103Advertising

Government and military

Acquisition

1.95%

7.12%

1.18%

7.48%

0.62%
0.57%

6.08%
50 000100 000 0%

4%

8%

12%

0%

3%

6%

Note: The first panel presents the number of startups in the initial sample by sector. Subsequent panels present the shares of startups in the initial sample that achieve successful
exit by type of exit.

< Table of contents | Executive summary | Content | Annex

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PATENTS, TRADE MARKSAND STARTUP FINANCE

The proportions of IP rights users among the startups
that successfully exited is in turn reported in Figure 13.
Those proportions are larger for trade mark users (39%for exits through acquisition, 40% for exits through anIPO) than for patent users (13% and 21% respectively). The
shares are in all cases significantly larger than the sharesof trade mark and patent owners in the entire populationof European startups (27% and 6% respectively).
Compared with other startups that filed for IP rights,
those that exited also have an above-average share ofEuropean IP rights, and they rely more frequently on abundle of patents and trade marks. Interestingly, therelatively small number of startups that exited via an IPO
show the highest score with respect to all indicators of
IPR intensity.

Figure 13

Distribution of startups by IPR use in the initial sample and at exit
Initial sample(N=298 665)
Uses any IPR

29%Uses any TM

27%

5%

Uses TM and patent

4%

0%

44%

46%
40%

21%

6%

Uses European patent

Exit sample
IPO (N= 2 268)

39%

12%

Uses EUTM
Uses any patent

Uses EU bundle

Exit sample
Acquisition (N= 18 169)

26%

13%

21%

11%

19%

8%

2%

15%

5%
25%

50% 0%< Table of contents | Executive summary | Content | Annex

11%
25%

50% 0%

25%

50%

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PATENTS, TRADE MARKSAND STARTUP FINANCE

Figure 14 provides a high-level view of the correlation
between the proportion of patents and trade markapplicants at the sectoral level and the share of exits
at the sectoral level. This comparison reveals a clear
correlation between the frequency of acquisitions ina sector and the proportion of patent users in that
sector. While patent users tend to be concentrated intechnology-oriented sectors, trade mark users are more
evenly distributed across sectors. As a result, there is noclear correlation between trade mark intensity and thefrequency of exit at the sectoral level. Further analysis
is thus needed to uncover such correlations at the firmlevel within given sectors.

Figure 14

Relationship between IPR intensity and share of firms with successful exit at the sectoral level

Patents

Trade marks

80%

Biotechnology

Share of IPR users in a sector

60%

Data and analytics
Biotechnology

Food and beverage
Artificial intelligence
Software

Science and engineering
40%

Science and engineering
Health care
Manufacturing

Manufacturing
Health careFinancial services

Artificial intelligence
20%

Data and analytics
SoftwareFood and beverage
Financial services

0%
0%

5%

10%

15%

20%

0%

5%

10%

15%

20%

Share of startups with successful exit

< Table of contents | Executive summary | Content | Annex

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PATENTS, TRADE MARKSAND STARTUP FINANCE

The Crunchbase data offer further interesting insights
into the exit value of startups. However, they should beinterpreted with caution, due to missing observations
and potential selection biases. The first column of Figure 15
shows the median exit value of startups as a functionof their IPR profile, with the number of corresponding
observations reported in the second column. It reveals
higher median values for startups that own patents ortrade marks prior to exit, compared to those without any
IP rights. Interestingly, the reported median values are
particularly large for startups that bundle patents andtrade marks – up to two to three times higher than for
those that own only one category of IP rights.

Figure 15

Relationship between IPR status and exit value
MedianUses TM only

50 069 531

Uses patent only

48 780 488

Uses TM and patent
No IPR
Uses TM only

866
209

99 851 461

367

84 731 401

93
106

109 508 880
31207 253 886

Uses patent only

384 678 318

Uses TM and patent
0

1 320

200 000 000

Acquisition

15 955 523

IPO

No IPRN

400 000 000

600 000 000

94
0

1 000

2 000

Note: The panels present median values and the number of exits by exit type and by the type of IPR use.

< Table of contents | Executive summary | Content | Annex

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PATENTS, TRADE MARKSAND STARTUP FINANCE

6.2 IPR use and odds of successful exit

The two model estimations reported in Table 5 make itpossible to assess the reliability of any IP right (model 1)
or of specific categories of IP rights (model 2) as a signalof their owners’ chances of exit. They show, in all cases,
a positive and significant effect of IP ownership on theodds of exit. In model 1, filing for any registered IPR is
associated with 2.265 higher odds of exit in periods,
compared with startups without IPR applications. The
results of model 2 make it possible to further decomposethat effect. The filing of trade mark applications onlyis associated with an increase of the odds of exit by afactor of 2.112. Patent applications are in turn associatedwith a 2.408 increase in the odds of exit. The bundlingof trade marks and patents yields the largest effect, withan increase of the odds of exit by a factor of 3.156.

This section presents further empirical analyses on
the potential value of IP rights as a signal of increased
chances of successful exit. The results complement thedescriptive analyses of the previous section with an
econometric estimation of the signalling effect of IPRs
at the firm level.
The predictive power of IPRs as a signal of likely exit
was assessed using the Cox Proportional Hazard model
introduced in section 3. Therefore, the dependent variableof interest is the occurrence of an exit at a given point
in time. In line with the econometric results reported in
section 5, different regression models are estimated toaccount for different types of IP rights or bundles thereof,
taking into account the time at which the patent or trade
mark applications took place. Besides those IPR variables,
the estimated model takes into account other factorsthat may influence the chances of exit, including thesector and country in which the startups operate (thecorresponding coefficients have no intrinsic interest
and are therefore omitted in the Tables).

Table 5

Cox proportional hazard models with time-dependent IPR variables (exit)(1)

Uses any IPR(2)2.265***
p = 0.000

Uses only TM

2.112***
p = 0.000

Uses only patent2.408***
p = 0.000

Bundles TMs with patents

3.156***
p = 0.000

Observations

394,874

R2

0.028

0.029

−229,536.900−229,445.600

Log likelihood
Wald test

10,493.530*** (df = 86)394,874

10,885.120*** (df = 88)

Score (logrank) test

11,373.490*** (df = 86)

11,544.190*** (df = 86)

11.556.090*** (df = 88)

Country controls
Sector controls

Yes
Yes

Yes
Yes

LR testNote:
Original coefficients exponentiated to represent odds of exit as compared to reference value< Table of contents | Executive summary | Content | Annex

12,201.670 *** (df = 88)* p<0.1; ** p<0.05; *** p<0.01

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PATENTS, TRADE MARKSAND STARTUP FINANCE

The models reported in Table 6 in turn compare theeffect of national versus European IP rights as predictorsof increased chances of future exit. Model 1 focuses onpatents and shows a positive effect of both national
and European patents, with odds of exit increased
by, respectively, a factor of 1.985 and a factor of 2.301,
compared to startups that do not own any patent. The
effect is significantly stronger for European patents.
Model 2 shows similar results in the case of trade marks.
Both national and European trade marks are associatedwith a significant increase in the odds of exit (by a factorof 1.627 and a factor of 2.860, respectively). The effect isparticularly strong in the case of EU trade marks, which
are usually filed for less frequently and later than for
national trade marks. Econometric estimations therefore
point to a strong signalling effect of both European
patents and EU trade marks, reflecting the broader
market potential of startups that are filing for such
European IP rights.

Table 6

Cox proportional hazard models with time-dependent IPR variables. Focus on geographical scope of IPR (exit)(1)

Uses national patent only

1.985***
p = 0.000

Uses European patent2.301***
p = 0.000(2)

Uses national TM only

1.627***
p = 0.000

Uses EUTM

2.860***
p = 0.000

Country controls
Sector controls

Yes
Yes

Yes
Yes

Observations

394,874

394,874

R2

0.024

0.029

−230,385.400−229,485.000

9,038.690*** (df = 86)

11,017.140***

10,101.170*** (df = 86)

12,321.010***Log likelihood
Wald test (df = 87)
LR test (df = 87)
Score (logrank) test (df = 87)

9,676.335*** (df = 86)

Note:Original coefficients exponentiated to represent odds of exit as compared to reference value< Table of contents | Executive summary | Content | Annex

11,477.180**** p<0.1; ** p<0.05; *** p<0.01

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PATENTS, TRADE MARKSAND STARTUP FINANCE

7. Discussion
In the EPO/EUIPO (2019) study of high-growth firms,
a strong correlation was found between an SME’s useof IP rights and its subsequent growth performance.
This relationship was especially strong for firms that
registered not only national but also European-levelrights, and for firms that bundled patents andtrade marks.
The study of high-growth firms did not delve into themechanisms through which IP rights could contributeto enhance a firm’s growth prospects; it merely foundthat such a correlation exists. The present study goes
one step further and looks at one possible mechanism:
the registration of patents and trade marks by a startup
increases the odds of obtaining financing. The study has
indeed shown that startups that register IP rights are
considerably more likely than other startups to obtainseed and early-stage financing, and are also more likely to
reward the early investors through a successful exit via
an IPO or a sale to another company.
The odds of obtaining seed financing and achieving a
successful exit rise even more for startups that apply
for European-level rights and those that bundle patents
and trade marks. Such activity is a signal to potential
financiers that the company has created one or more
intellectual assets that are eligible for formal IPR
protection, and that the firm intends to legally protect
and exploit those intellectual assets in the marketplace.
A patent is an indication that the startup has created atechnological innovation, and trade mark registration
signals the intent and ability to bring new products andservices to the marketplace. Registering those rights on
the European level signals to investors that the startup
plans to expand outside its home country, further
enhancing its growth prospects and increasing its
attractiveness to the venture capital community.
The implication for startups is then that IPR protection
choices have an impact on their future prospects, both interms of access to finance and value harvesting throughsuccessful exit.
European policymakers have established the goal todecarbonise the continent by 2050, while at the sametime creating growth and jobs to ensure continued
prosperity for European citizens. Many of the startups
that are the subject of the present study contributeto these objectives through their innovation and< Table of contents | Executive summary | Content | Annex

subsequent growth. But in order to achieve that, thesecompanies need access to financing, in particular
venture capital, that is prepared to assume the inherent
risks. The challenge for policymakers is thus to foster
an environment that is conducive to VC activity and to
make IP protection attractive to the startups througha strong IP system from registration to enforcement.
The challenge for IP offices is to make the IPR systemeven more accessible to small companies and to raiseawareness among entrepreneurs and the general
population of the important economic role played by
IP rights. Hopefully this report has made a contribution
to this goal.

7.1 Limitations
The data available to the research team had some
limitations.
The national trade marks repository does not include
applicants’ address information, which might be helpful
for improving the quality of the matching of the various
databases concerned. In particular, there may be false
positive cases where a startup has been associated witha trade mark applicant even though the two firms are notrelated. A random check of the matched data has shownthat due to the requirement for an exact match of names,
the number of such cases is relatively low, and that theymainly concern firms that are relatively frequent in agiven country.
The data lacks some potentially important control
variables which, if included in the models, could help
to more precisely assess the relationship between the
IPR activity of startups, their access to venture financeand exit. In particular, the dataset does not contain dataon founders, their previous experience, education or
specific skills. Those characteristics may be correlatedwith the propensity of firms to protect their intellectual
assets by applying for patents or trade marks, as well aswith the probability of participating in financing rounds
and a successful exit. Future studies may improve theestimations by including such founder-related variablesin their models.
The present study spans over 20 years of startup activity
in Europe. During this time, VC activity and the number ofacquisitions and IPOs has gone through various periodsof ups and downs. VC funding or better exit terms may

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PATENTS, TRADE MARKSAND STARTUP FINANCE

be more easily accessible for startups during periods ofhealthy economic growth than during a recession. Also,
various policy programmes have been established during
recent decades to incentivise VC activity in different
European countries. Controlling for those economic
conditions or policy initiatives may allow future research
projects to better capture the relationship between IPRapplications and the odds of participation in VC financial
rounds or exit.
There are also other firm-related variables that may be
useful for more precisely estimating the relationshipbetween IPR and access to finance or exit, such as firms’
employment or sales. However, those variables are notavailable in sufficient detail, and for that reason they
could not be included in the models.

< Table of contents | Executive summary | Content | Annex

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PATENTS, TRADE MARKSAND STARTUP FINANCE

Annex 1

Additional details

Shares of startups with IPR at different stagesof funding by sector and by IP right
Figure A1

Share of startups with IPR at different stages of financing. Sectors using patents intensively
Number of rounds

IPR users (overall)
30%

2 756

Seed

Early stage

Biotechnology

17%

71%
67%

64%

67%

Science and engineering

Late stage

3 228

54%
55%

63%

Uses patent

25%

50%

90%

60%

64%
12 000 0%

89%

85%

46%

33%

8 000

73%
45%

74%

4 000

79%

85%

29%
24%

551

0
Uses TM

11%

90%

60%

151

9 533

99%

86%

45%

38%

Seed

Early stage

78%
51%

71%
Late stage

78%

90%

55%
60%

883

95%

63%

32%
31%

14%
Manufacturing

64%
70%

39%

2 906

Seed

92%

48%

336

Late stage

Early stage

49%

39%

49%

1 605

out of which European rights users

75%

80%
95%
77%

84%

100% 0%

25%

50%

75%

100%

Uses TM and patent

Note: The first panel presents the number of events in each stage of financial rounds. The second panel shows the share of startups having applied for the various combinationsof IPR prior to the date of the financial round. The third panel presents the share of IPR users within each category that applied for protection of EUTM, European patent or bothprior to the date of the financial round.

< Table of contents | Executive summary | Content | Annex

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PATENTS, TRADE MARKSAND STARTUP FINANCE

Figure A2

Share of startups with IPR at different stages of financing. Sectors using trade marks intensively
Number of rounds

7 884
Financial services

Seed

Early stage

Food and beverage

45%

68%

56%

Health care

10%

22%

2 514

52%
73%
64%

4 000
Uses patent

12 000 0%

25%

50%

87%
79%

89%

52%
52%
57%

58%
8 000

83%

48%

31%

33%

81%

74%

41%

466

0

72%

45%

33%

21%
15%

7 348

Late stage

Uses TM

74%

17%
14%

92

82%

66%

7%
4%

476

69%

62%

14%
12%

Seed

Early stage

45%

9%
6%

3 148

Late stage

48%

58%

1 882

Seed

out of which European rights users

32%

4%
2%

345

Late stage

Early stage

IPR users (overall)

65%
65%
70%
77%

75%

94%

78%
99%
79%
100% 0%

25%

50%

75%

100%

Uses TM and patent

Note: The first panel presents the number of events in each stage of financial rounds. The second panel shows the share of startups having applied for the various combinationsof IPR prior to the date of the financial round. The third panel presents the share of IPR users within each category that applied for protection of EUTM, European patent or bothprior to the date of the financial round.

< Table of contents | Executive summary | Content | Annex

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PATENTS, TRADE MARKSAND STARTUP FINANCE

Figure A3

Share of startups with IPR at different stages of financing. Digital sectors
Number of rounds

5 782
Artificial intelligence

Seed

Early stage

Late stage

1 153

61%
51%

Data and analytics
Software

5 501

9%
4%

Uses patent

30 000 0%

25%

77%

89%
87%
82%

75%

46%

27%

75%

45%
64%

56%

81%

45%

50%

81%
88%
76%

75%

37%
31%
20 000

63%
52%

22%
16%

734

10 000

75%

58%

45%
38%

75%

87%
82%
78%
45%

29%

210

0

82%

42%

21%

27 232

61%

27%

11%
5%

2 005

72%

41%

56%
49%

9 504

Late stage

Uses TM

43%

30%
22%

Seed

Early stage

28%

12%

110

Late stageout of which European rights users

5%

Seed

Early stage

IPR users (overall)

75%

100% 0%

25%

50%

75%

100%

Uses TM and patent

Note: The first panel presents the number of events in each stage of financial rounds. The second panel shows the share of startups having applied for the various combinationsof IPR prior to the date of the financial round. The third panel presents the share of IPR users within each category that applied for protection of EUTM, European patent or bothprior to the date of the financial round.

< Table of contents | Executive summary | Content | Annex

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PATENTS, TRADE MARKSAND STARTUP FINANCE

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DesignEuropean Patent OfficeISBN 978-3-89605-355-8< Table of contents | Executive summary | Content | Annex

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