Strong IP portfolio important for fintech startups to acquire funding
20 May 2021
A strong, well-managed intellectual property portfolio will go a long way in helping a fintech startup acquire funding from investors, said some IP lawyers.
The era of fintech had arrived during pre-pandemic times. However, the onset of Covid 19 which saw people spending more time at home, sparked a fiercer explosion of fintech products and services. Now, more people are going cashless and using fintech apps and tools – a trend seen to continue even after the pandemic is over.
Because of this, fintech firms including startups, are generally on a growth trajectory.
Of course funding is needed to translate an idea to an actual enterprise and fast-track this projected growth. As the lawyers said, it may well help startups to have a strong IP portfolio to be granted funding by investors.
“A well-managed IP portfolio capturing all of a fintech startup’s competitive advantage will leverage such startup in seeking funding investment,” said Thomas J. Treutler, partner and managing director at Tilleke & Gibbins in Ho Chi Minh City. “The big ‘sharks,’ based on the IP portfolio, can predict and oversee whether a business is promising to thrive, and therefore make their decision to invest into such business or not.”
“The investors need to have the confidence that if they invest in a fintech startup, there is an assurance of returns and that they could sell their stake when they think the time is right. The investor would be convinced of the novelty and inventiveness of the subject matter of the fintech and therefore, would see value in investing in it,” said Dr. Mohaan R Dewan, a principal at R.K. Dewan & Co. in Mumbai and Pune.
“Having access to unique and exclusive technology, e.g. protected by patents, is an important factor to defining a startup's business proposition and commercial advantage,” said Victor Tse, a counsel at Bird & Bird in Hong Kong.
Treutler added that a strong IP portfolio makes a fintech startup stand out from the competition in an already saturated market. It can also lead to potential businesses, said Nont Horayangura, a partner at Baker McKenzie in Bangkok.
“It is completely logical for a fintech to have a strong IP portfolio of its processes and intellectual creations for funding purposes. The current trend is to consider IP as assets that have value and are capable of being as security or collateral for loans,” said Jose Gabriel R. Benedicto, a partner at Romulo Mabanta Buenaventura Sayoc & de los Angeles in Manila.
According to research by CB Insights, the first quarter of 2021 saw fintech firms across the globe raising $22.8 billion in investments via 614 deals. This is more than twice the amount raised by fintech firms in the last quarter of 2020. This also represents the largest venture capital-backed fintech funding quarter ever seen, outnumbering the figures for the second quarter of 2018 which included the $14 billion funding raised by Ant Financial.
Espie Angelica A. de Leon