Patent Collateral, Investor Commitment and the Market for Venture Lending

56 Pages Posted: 25 Aug 2023

See all articles by Yael V. Hochberg

Yael V. Hochberg

National Bureau of Economic Research (NBER); Rice University - Jesse H. Jones Graduate School of Business

Carlos J. Serrano

Universitat Pompeu Fabra; HEC Paris

Rosemarie Ham Ziedonis

Boston University - Questrom School of Business

Multiple version iconThere are 3 versions of this paper

Date Written: August 22, 2023

Abstract

This paper investigates the market for lending to technology startups (i.e. venture lending) and examines two mechanisms that facilitate trade within it: the ’saleability’ of patent collateral and financial intermediaries. We find that intensified trading in the secondary market for patent assets increases the annual rate of startup lending, particularly for startups with more re-deployable patent assets. Moreover, we show that the credibility of venture capitalist commitments to refinance and grow fledgling companies is vital for startup debt provision. Following a severe and unexpected capital supply shock for VCs, we find a striking flight to safety among lenders, who continue to finance startups whose investors are better able to credibly commit to refinancing their portfolio companies, but withdraw from otherwise promising projects that may have most needed their funds. The findings are consistent.

Keywords: fi nancing innovation, patent collateral, venture capital, market for patents

JEL Classification: L14, L26, G24, O16, O3

Suggested Citation

Hochberg, Yael V. and Serrano, Carlos J. and Ziedonis, Rosemarie Ham, Patent Collateral, Investor Commitment and the Market for Venture Lending (August 22, 2023). Banco de Espana Working Paper No. 1519, Available at SSRN: https://ssrn.com/abstract=4548049 or http://dx.doi.org/10.2139/ssrn.4548049

Yael V. Hochberg (Contact Author)

National Bureau of Economic Research (NBER) ( email )

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Rice University - Jesse H. Jones Graduate School of Business ( email )

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P.O. Box 1892
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Carlos J. Serrano

Universitat Pompeu Fabra ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain

HOME PAGE: http://https://sites.google.com/site/carlosjserranoweb

HEC Paris ( email )

Paris
France

Rosemarie Ham Ziedonis

Boston University - Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA MA 02215
United States

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