Patent vs. Market Penetration: Where Should Your Focus Be?
Q: As a VC, which holds more value to you: a patent or market penetration? I’d like to know since limited funds often force startups to choose one or the other.
- Jason Knott
A: As Apple and Samsung are proving in their ongoing litigation, a patent is only as valuable as your ability to enforce it.
For startups, a patent is a nice validation of your innovation, but it is certainly not a carte blanche defense against competition. The truth is that most startups may not have the resources to defend their patent nor the time to wait for a judgment. On the other hand, significant market penetration can:
1. Act as a barrier to entry to competition.
2. Validate your customer value proposition.
3. Prove out your sales model.
4. Provide a feedback loop to iterate and improve your product.
As an entrepreneur and VC, if I were given the choice between investing capital into a patent application of an idea that may or may not succeed versus gaining market share with a new product, I would choose the latter.
Related: Have a Killer Business Idea? Here’s How to Vet It http://www.youngentrepreneur.com/startingup/business-plan/have-a-killer-business-idea-hers-how-to-vet-it/
If I were you, I would use my early success in the market to iterate and improve my product so I could run faster and farther than my competition. Sometimes, a good offense (market penetration) is better than a good defense (patent).
Have a question for YE’s experts? Submit your questions in the comments section below and those with the most likes from other readers will be answered. On Twitter, use the hashtag #YEask. Include your first and last name, your location (city and state) and the name of your business.