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
Murray, Utah

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).

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