Raising funds for startups through patents

Last Updated at: Jul 06, 2021
Raising funds for startups through patents
SID07 Designs, a Jammu-based start up is fighting the COVID-19 pandemic with its cost-effective healthcare solutions. It has developed a reusable plastic band and a protective face shield to help doctors wear masks comfortably for long hours and stay safe from Coronavirus.


A start-up may run out of money mid-way, since they face a lack of finance more often, which may damage their future prospects. Thus, it is generally advisable for start-ups to first ensure the availability of finance, upon which rests all the other functions of an organization. The sources of raising funds apart from family and friends, are various, to name few, angel investors, business network and crowdfunding. However, nowadays, patents are also considered to be a potential source of raising funds for start-ups.

What is a patent?

A patent is an intellectual property that grants owners sole rights to restrict the sale, marketing or use of their invention. In simpler terms, patents provide a monopoly to the inventor for the product’s operation in the market for a specific period. A patent has various advantages such as:

i) Patents prevent others from using an invention, thereby keeping the competitors at bay.

ii) Patenting helps the inventor in generating money by licensing the patent to others for their use or sale with another asset.

Fundraising through patents

One of the reasons an inventor has to patent their invention is because it is an essential source for generating revenue and as such it will further help in introducing the invention to the market without the fear of infringement.  Patents are considered to be a vital source of raising funds on account of the following reasons:

  1. It ensures no competitor infringement 
  2. It ensures a continued flow of revenues in the form of profits
  3. An invention that has already been patented will attract investors big time as it shows that the invention has a promising future thereby acquiring the trust of the investors.
  4. Further, the priority dates will ensure that patents are provided in foreign countries as well. Which is a plus sign for the invention of a start-up having the market potential abroad.
  5. Availing a patent will secure the position of the invention in the global markets sooner and quicker. As the grant of the patent will accelerate its creation.
  6. Further, the scheme of the Government to encourage inventors to file for patents. They also provide attractive tax rebates and speedy processing of documents.

Even an incomplete invention can be patented through a provisional patent application. A provisional patent is an optional step. Wherein the provisional patent application only defines the field of the invention and its scope. It is a form of interim protection against the unlawful use of one’s idea while one is still debating whether they should pursue a full patent, when facing financial problems or when an invention is not complete in all aspects.

Patent Your Innovation Right Now

A provisional patent application will operate for 12 months within or after which one has to file a complete specification without which the provisional patent application will be considered abandoned. The provisional specifications given in such provisional application will not be removed after filing for a full patent. However, it is cautioned that the provisional application has to be well written and in consonance with business objectives.

It may gain increased continuum in the near future as provisional patenting can provide insights into the success of the product. And the standing of the start-up after 1 year and as to whether one should proceed with a full patent. The advantages also include:

  • Costs of filing such provisional application are low.
  • It prevents from the filing of any patents subsequently related to that field.
  • Serves as a test-drive for the invention before it goes for a full patent in the market.
  • It gives an extra year of protection.

4 Fundraising stages of a startup


It is pertinent to understand that a startup can raise funds through patenting but only after securing it which, otherwise will be subject to misuse. An invention can be sold and huge profits can be earned but only for a short-term. But patenting is a means of generating revenue for years to come in the longer run. The inventor can always licence the patent to those willing to use the invention. And in that way, the inventor will be receiving royalties with every usage of the product.