An Analysis for the Valuation of Venture Capital-Funded Startup Firm Patents


John Dubiansky


In an era where forces such as the Bayh Dole act and the rise of the venture capital industry are reshaping the manner in which innovations are brought to market, the role of intellectual property in the financing of new ventures is becoming increasingly important. The investment community requires a better understanding of the risks of patent-based transactions as such deals become more prevalent. This paper addresses that need by explaining an analysis for the valuation of startup firm-held patents. The paper considers the commonly employed methods of patent valuation, and offers an analysis which considers Legal, Technical, and Technology-Market factors. It employs legal measures of patent quality, statistical measures of patent scope and importance, and technology market structure-based measures of risk. The paper makes a series of simplifying assumptions based on the dynamics of venture capital-funded startup commercialization. Informed by these analyses, the paper offers a discounted cash flow analysis utilizing inputs gleaned from comparable technology transactions.


Banking and Finance Law | Intellectual Property Law | Internet Law | Science and Technology Law

Date of this Version

December 2005