Patents, Venture Capital, and Software Start-Ups

18 Pages Posted: 13 Sep 2005

See all articles by Ronald J. Mann

Ronald J. Mann

Columbia University - Law School

Thomas W. Sager

University of Texas at Austin - Red McCombs School of Business


This paper analyzes the relation between the patenting behavior of startup firms and the progress of those firms through the venture capital cycle. Linking data relating to venture capital financing of software startup firms with data concerning the patents obtained by those firms, we find significant and robust positive correlations between patenting and several variables measuring the firm's performance (including number of rounds, total investment, exit status, receipt of late stage financing, and longevity). The data also show that (1) only about one in four venture-backed software firms acquired even one patent during the period of the study; (2) patenting practices very considerably among the sub-sectors of the software industry; and (3) the relationship between patent metrics and firm performance depends less on the size of the patent portfolio than on the firm's receipt of at least one patent.

Keywords: patents, venture capital, software, IP

JEL Classification: K29, L10

Suggested Citation

Mann, Ronald J. and Sager, Thomas W., Patents, Venture Capital, and Software Start-Ups. Research Policy, Vol. 36, 2007, U of Texas Law, Law and Econ Research Paper No. 57, Available at SSRN:

Ronald J. Mann (Contact Author)

Columbia University - Law School ( email )

435 West 116th Street
New York, NY 10025
United States

Thomas W. Sager

University of Texas at Austin - Red McCombs School of Business ( email )

Austin, TX 78712
United States

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