European private equity and venture capital is a thriving investment ecosystem managing €1.15 trillion in capital for long-term investors (Invest Europe, 2024). Just as important as the capital that private equity and venture capital brings to companies is the expertise and skills. This combination of long-term investment and active management are the key to transforming companies and making them stronger and more sustainable.
The filing for intellectual property rights protection – specifically patents and trade marks – is an important marker of innovation at companies, and a signal of better businesses that have the potential to be more competitive and valuable over the long term. This report highlights how private capital firms identify valuable intellectual property and help companies to enhance their IP portfolios.
There appears to be a positive correlation between private equity and venture capital investments and intellectual property (IP) filings, suggesting those investments help companies secure patents and trade marks that protect their innovations and competitive positioning. Evidence suggests that private equity investments could increase the likelihood of companies engaging in IP activity, potentially enhancing the volume of patent and trade mark filings and encouraging the adoption of comprehensive IP strategies. Companies with a history of intellectual property protection may be more likely to continue and even expand these activities post-investment, suggesting a cumulative nature of IP management and a reinforcing effect of initial IP investments on subsequent filings.
This research also provides valuable insights into the distribution of intellectual property filings by private equity and venture capital-backed companies across Europe. It sheds light on the sectors where new patents and trade marks are being created and enhances understanding of the relationship between IP and investment at different stages, as well as the focus areas of different types of private equity and venture capital funds.
Innovation is crucial to the development of a more competitive and environmentally sustainable Europe. This importance is recognised and prioritised within the European Union’s agenda. It is also a core component of the private equity and venture capital industry. By fostering the creation and protection of patents and trade marks, the industry may enhance companies’ competitive edge, potentially aiding them in innovating and growing more effectively on a global scale. Therefore, private equity and venture capital investments appear to be aligned with European goals and may play a significant role in renewing Europe’s leadership in innovation for a better future.
d €1.15tn
European private equity and venture capital is a thriving investment ecosystem managing €1.15 trillion in capital for long-term investors
Limitations and future research
The data in question comes from the truncated sample. Participation in the sample is conditional on getting equity financing from private equity and venture which causes the sample to be non-random. Therefore, the findings from this study are valid for this particular subsample of companies that got equity financing from private equity and venture capital and cannot be extrapolated into wider group of companies.
The available data presented has further limitations, lacking potentially important control variables, such as founders’ previous experience, education, or specific skills. These characteristics may correlate with a firm’s propensity to protect intellectual property assets and secure financing. Future studies could improve estimations by incorporating these founder-related variables.
Additionally, the data only included European-level filings, excluding national filings, which are often a popular method for early-stage and smaller companies to protect their intellectual property. Other studies have shown that young and smaller firms tend to use national trade marks rather than European Union Trade Marks (EUTMs)7. The lack of information on national trade mark activity may introduce some bias into the results.
This study spans 16 years of company activity in Europe, a period marked by fluctuations in private company activity, acquisitions, and initial public offerings (IPOs). Private equity and venture capital funding and favourable exit terms may be more accessible to companies during periods of economic growth than during recessions. Additionally, various policy programmes have been established in recent decades to incentivise private company activity in different European countries. Accounting for these economic conditions and policy initiatives could enable future research to better capture the relationship between IPR applications and the likelihood of receiving private financing.
The results obtained open various avenues for further research. For instance, investigating the reasons behind the differences in the relationship between previous IPR activity and the amount invested at different stages of financing could provide valuable insights. The models used in this study present results for the ‘average’ firm, potentially obscuring interesting variations in the effect of previous IPR activity across the entire distribution of financial events. Alternative methods, such as quantile regression, may be better suited to disentangle these complex relationships. Additionally, future research could explore the connections between intellectual property activity and various investment domains. This could include a deeper analysis of the types of investors supporting companies and the divestment methods employed to sell acquired companies.
7. The preference of SMEs for IPRs from national offices over European ones can be seen on table 4 ‘IPR ownership by firm size’ of the study ‘Intellectual property rights and firm performance in the European Union, Firm-level analysis, February 2021’ EPO/EUIPO.