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!"# %"&'#& ("&" %)'(*+& &,' -.++'-- /0 -&")&1.

%-2


}une 2u14


This uocument is the final iepoit of a stuuy commissioneu by Fiance Bievets.




It has been piepaieu by }ustus Baion, Naiia Fayos Beiieia, Yann Nnieie anu
Tim Pohlmann (NINES PaiisTech) unuei the supeivision of Yann Nnieie,
piofessoi of economics at NINES PaiisTech.


"#$%&'%(
Yann Nnieie, Ceina, NINES PaiisTech.
E-mail : yann.menieiemines-paiistech.fi


3#&)/(.+&*/#

Recent yeais have seen an incieasing inteiest in Euiopean staitups companies as
a potential engine foi giowth in a sluggish economic context. Bespite its
stiengths (incluuing goou infiastiuctuies anu euucation), the Euiopean staitup
scene has yet some way to go befoie catching up with the 0S one. Funuing in
paiticulai is iegulaily pinpointeu as the main challenge. The lack of a fully
uevelopeu banking, vC anu financial community inueeu cuib potential Euiopean
technology entiepieneuis. Raising money foi a new vC funu is a long anu
uifficult piocess. Euiopean ventuie funus tenu to be about half the size of 0S
ventuie funus, anu they aie often ciiticizeu foi being excessively caieful.
0veiall, one neeus yet to consiuei the whole ecosystem in oiuei to coiiectly
assess the pioblem. In Euiope capital maikets foi innovative fiims aie 'thin
maikets': theie aie only limiteu numbeis of investois anu innovative giowth
fiims, anu these have uifficulties finuing anu contiacting with each othei
(Euiopean Commission, 2u12). Bue to the high level of iisk, investois seek SNEs
that can potentially geneiate a veiy high ietuin. Asymmetiic infoimation on
innovative piojects is a majoi challenge in this context. Euiopean entiepieneuis
oi inventois aie insufficiently awaie of investoi conceins, anu they may fail oi
be ieluctant to uisclose ciitical infoimation.
Impioving eaily-stage investois' insights into what uiives success can thus be a
poweiful leveiage foi Euiopean vC maikets. We show in this stuuy that the
staitups' intellectual piopeity positions, as measuieu by theii patent poitfolios,
pioviue excellent inuicatois in this iespect.
In touay's economy business success inueeu uepenus not only on cieativity anu
inventiveness but also on the effective anu piofitable tiansposition of new
piouucts anu seivices to the maiket. Intellectual Piopeity Rights (IPRs) such as
patents, tiauemaiks, uesigns, anu copyiight aie an essential tool foi enabling
business success baseu on innovation. Patents in paiticulai aie not only legal
fences against competitois: they make it possible to license out technology, to
builu up paitneiships oi negotiate access to potentially blocking positions of
competitois. They can also be solu on a stanu-alone basis, anu theiefoie pioviue
secuiity foi investois.
A few stuuies alieauy highlight the impact of IPRs on the suivival of SNEs.
Cockbuin anu Wagnei (2uu7) test whethei the patent poitfolio of companies
listeu in Nasuaq influenceu theii suivival aftei the buist of the uotcom bubble in
the late nineties. Belmeis anu Rogeis (2u1u) measuie how the patent anu
tiauemaik poitfolios of the 162,uuu LLC companies cieateu in the 0niteu
Kinguom in 2uu1 influenceu theii suivival iate aftei S yeais. In both cases less
than half of companies uiu own patents, anu these patent-owning companies
have a significantly highei suivival iate (of S4% in the fiist stuuy, anu 16% in the
seconu one). Inteiestingly, suivival iates aie even highei in the case of patents
with inteinational extensions, thus suggesting that not only IP owneiship but
also the stiength of IP positions mattei foi suivival.
In this stuuy we follow a similai appioach to assess whethei inuicatois baseu on
patent poitfolios can pieuict the futuie success of staitups. We consiuei a
population of 829 SNEs anu staitups in which one of the 9 most active vC funus
in Fiance investeu between 2uu2 anu 2u12. Taking the peispective of the vC
funus, we uefine success as the occuiience of an IP0, meigei, acquisition oi LB0
befoie the enu of 2u12. The questions we aim to auuiess aie twofolu:
)*+ ,&%+$%- & .##/ -0.$&1 2#* 3" 0$4+-%#*-5 0ui pioblem heie is to
ueteimine whethei patents pioviue a goou benchmaik inuicatoi foi vC
funus to make theii investment uecisions. To answei this question, we
consiuei the patent position of each staitup immeuiately befoie the vC
investment. We then estimate whethei holuing at least one patent at this
moment has an impact on the piobability of success in the post-
investment peiiou.
6- %7+*+ & 10$8 9+%:++$ ,&%+$% ,#-0%0#$- &$/ %7+ ,*#9&9010%; #2
-<''+--5 In this case, we aim to assess the pieuictive powei of vaiious
inuicatois of patent positions (existence, inteinational coveiage, size anu
quality of the patent poitfolio) foi staitups that aie alieauy backeu by vC
funus. Since vC funus then alieauy influence the staitup, they can no moie
inteipiet patent inuicatois as an exteinal signal of futuie success. A
positive impact of patent positions on subsequent success woulu
neveitheless highlight the impoitance foi vC funus of piomoting goou IP
management anu the builuing of stiong patent poitfolios within theii
poitfolio companies.
We finu stiong eviuence suppoiting positive answeis to both questions. We fiist
show that on aveiage a staitup has about 2.S moie chances of meeting success
within 1u yeais aftei the vC investment if it holus patents !"#$%" that investment.
This link between patent owneiship anu success is in fact paiticulaily stiong foi
staitups ielateu to Softwaie anu Biotechnology, while the signal effect is weakei
in othei sectois. We then finu that the pieuictive powei of patent owneiship
'#("% vC investment is even stiongei (it multiplies the piobability of success by
S.2 to S.6) anu consistent thiough all sectois. Noieovei, iefineu inuicatois of the
stiength of patent positions have a substantially bettei pieuictive powei on
success.
Befoie exposing these iesults in moie uetails, we biiefly piesent the uatabase
anu methouology in the next section.
4'&,/(/5/67

=7+ /&%&9&-+
We use an oiiginal uatabase of 829 Euiopean SNEs anu staitups that was
collecteu by Thomson Reuteis on iequest of Fiance Bievets. The population
coveieu by the uatabase coiiesponus to all the staitups iuentifieu by Thomson
Reuteis in which at least one of the 9 most active vC funus in Fiance
1
investeu
between 2uu2 anu 2u12. Accoiuingly, the sample of staitups that we consiuei
has been subject to a pie-selection: all these companies have been consiueieu as
piofitable investment taigets by establisheu vC funus, anu theiefoie constitute
moie likely canuiuates foi subsequent success than an aveiage staitup at the
seeu oi pie-seeu stage.
Table 1 below piesents summaiy statistics foi key vaiiables in the uatabase, at
the global anu sectoi level. 0veiall about one thiiu of the obseiveu staitups
expeiienceu a successful exit between 2uu2 anu 2u12, anu 2u% of them helu at
least one patent in 2uu7. The staitups belong to a laige vaiiety of sectois among
which the Softwaie, Nanufactuiing, Web, Telecom anu Biotech sectois aie the
most iepiesenteu anu aie theiefoie iuentifieu as such in the uatabase. It can be
seen in Table 1 that companies uiffei acioss sectois with iespect to theii iate of
success, the fiequency of patent owneiship anu the aveiage size of patent
poitfolios. In paiticulai, success iates aie highei in Softwaie, Nanufactuiing anu
Biotech, anu the shaie of patent holuing staitups is highei Nanufactuiing anu
Biotech.
Table 1: Summaiy statistics

><?9+* #2
-%&*%<,- @)A
B<''+--
*&%+
C&%+$% #:$0$.
'#?,&$0+- @DA
B7&*+
@)EDA
)4+*&.+
,#*%2#10# -0F+
&
)11 -+'%#*- 829 S1% 1S8 2u% S.7
!"#$%&'( 18u S7% 29 16% u.8
*&+,#&-$,'.+/ 1uS S8% S1 Su% 7.u
0(1 88 27% 9 1u% u.S
2(3(-"4 68 2S% 1S 19% 8.9
5."$(-6 Su 44% 1S 26% 6.S
7$6('8 SS8 26% 4S 1S% S.7
a
The aveiage poitfolio size is the aveiage ovei all staitups of the numbei of patents gianteu oi
applieu foi until 2u12.
The uatabase incluues infoimation on the type (IP0, meigei, acquisition oi LB0)
anu uates of successful exits that occui befoie the enu of 2u12. Impoitantly, it
also contains infoimation on the cieation uates anu funuing iounus of the
staitups. Availability of these uata is impoitant to iuentify anu neutialize othei
potential ueteiminants of the piobability of success.

1
These nine vC funus aie the following: Iuinvest Paitneis SA, Seventuie Paitneis SA,
Sofinnova Paitneis SAS, I-Souice uestion SA, XAnge Piivate Equity SA, Alven Capital
Paitneis SA, Innovacom SA, Tiuffle Capital SAS, anu ventech SA.

G-0$. +'#$#?+%*0' ?#/+1- %# 0-#1&%+ %7+ +22+'% #2 ,&%+$%-
The methouological challenge is to piopeily isolate the effect of patent inuicatois
fiom the effect of othei vaiiables - namely the companies' age, ieceiveu funuing
anu sectoi of activity - that may influence success anuoi the patent inuicatois
themselves. An oluei staitup may foi instance be moie likely to holu patents anu
to succeeu, thus making it uifficult to attiibute success to its age oi its patents.
In oiuei to uo so, we employ econometiics techniques that make it possible to
simultaneously estimate the iespective coiielations of all these vaiiables with
the piobability of success, anu thus to isolate the pieuictive powei of patent
inuicatois "all othei vaiiables being helu equal". We can then calculate the
piobability of success of a paiticulai staitup with given age, funuing anu sectoi
of activity in case it has patents oi not.
We use semi-paiametiic Cox piopoitional hazaiu iegiession mouels foi this
puipose. The Cox mouel is a class of suivival mouels that makes it possible to
estimate the likelihoou of an event (heie, success) within each shoit time
inteival ovei a long time peiiou. In oiuei to coiiectly account foi uiffeiences
between sectois, we use a stiatifieu veision of the Cox mouel that allows foi
uiffeient expecteu time-to-success in each of the main sectois coveieu by the
uatabase. 0ui iefeience mouel also accounts foi specific impacts of age, funuing
anu patent inuicatois within each sectoi.
8'-.5&-

)*+ ,&%+$%- & .##/ -0.$&1 2#* 3" 0$4+-%#*-5
We focus fiist on the patent poitfolio of staitups immeuiately befoie vC
investment, in oiuei to assess whethei patent owneiship can be a goou pieuictoi
of subsequent success. We thus auopt the peispective of the vC funu befoie it
makes an investment uecision. At this moment of time the funu has inueeu to
foim expectations about futuie ietuins, by using all infoimation available.
0bviously, it has no uiiect influence yet on the staitup's patent poitfolio.
We auuiess this question by estimating a "suivival" mouel ovei a panel of 749
uistinct staitups obseiveu annually between 1994 anu 2u12, with a success iate
of 29% on aveiage. Besiues patent owneiship, we use age, piioi funuing anu
sectoi of activity of the staitups as othei paiameteis to pieuict futuie success.
0ui iesults pioviue eviuence of a significant coiielation between patent
owneiship anu subsequent success.
To appieciate this patent effect, it is convenient as a fiist step to iepiesent it ovei
time. Figuie 1 below iepoits the cumulative piobability of success of a
iepiesentative staitup ovei the time of the stuuy, uepenuing on whethei it
owneu patents oi not befoie the vC investment. As an example, the uasheu
veitical line shows %7&% & -%&*%<, 0$0%0&11; +$/#:+/ :0%7 ,&%+$%- 7&- &9#<%
HIJ '7&$'+- #2 ?++%0$. -<''+-- :0%70$ KI ;+&*- &2%+* %7+ 3" 0$4+-%?+$%L
:701+ :0%7#<% ,&%+$% %7+ '7&$'+- #2 %7+ -&?+ -%&*%<, 2&11 %# &9#<% MIJ.
Noie geneially, we can see that ,&%+$% #:$+*-70, 0$/<'+- & -0.$020'&$%1;
70.7+* ,*#9&9010%; #2 -<''+-- 0$ %7+ H %# KH ;+&*- %7&% 2#11#: %7+ 3"
0$4+-%?+$%.
Figuie 1: Cumulative piobability of success of a iepiesentative staitup

Befining a "iepiesentative" staitup at the level of the entiie uatabase howevei
uoes not piopeily account foi uiffeiences between sectois. Inueeu, closei
analysis ieveals that the link between initial patents anu success is not unifoim
in this iespect. As iepoiteu in Figuie 2, ,&%+$% #:$+*-70, 7&- & 4+*; -%*#$.
'#**+1&%0#$ :0%7 -<9-+N<+$% -<''+-- 0$ %7+ B#2%:&*+ &$/ D0#%+'7$#1#.;
-+'%#*-: in these sectois staitup companies that own patents befoie the vC
investment aie iespectively 2.89 anu 2.99 times moie likely to succeeu
afteiwaius. By contiast, patent owneiship has a much weakei pieuictive powei
in the othei sectois, with a mouest (though statistically significant) success
factoi of 1.u2.
Figuie 2: Success factoi of patent owneiship

2.99
2.89
1.u2
u u,S 1 1,S 2 2,S S S,S
Softwaie
Biotech
All sectois
These iesults suggest that ,&%+$% #:$+*-70, /#+- ,*#40/+ & -%*#$. -0.$&1 #2
2<%<*+ -<''+-- 2#* 3" 0$4+-%#*-. This is howevei tiue mainly in the
Biotechnology anu Softwaie sectois - wheie patent owneiship almost tiebles
the chances of success. In othei sectois, patents have a much smallei uegiee of
coiielation with success. Accoiuingly, they cannot be seen as a stiong signal of
futuie success in these sectois.

6- %7+*+ & 10$8 9+%:++$ ,&%+$% ,#-0%0#$- &$/ %7+ ,*#9&9010%; #2 -<''+--5
We examine as a seconu step whethei active companies in vC funus poitfolios
aie moie likely to be listeu oi acquiieu if they own patents. To uo so, we consiuei
a subsample of S87 vC backeu staitups as of }anuaiy 2uu7, anu obseive theii
evolution until the enu of 2u12
2
. The main uiffeience with the pievious appioach
is that we now focus on a post investment stage: theiefoie a staitups' patent
poitfolio in 2uu7 is alieauy subject to the influence of the backing vC funus.
Besiues patent owneiship anu the sectoi of activity of the staitups, we now use
theii age anu total funuing as of 2uu7 as othei contiol paiameteis to pieuict
futuie success. 0ui iesults again pioviue eviuence of a significant coiielation
between patent owneiship anu subsequent success.
We fiist iepoit the cumulative piobability of success of a iepiesentative staitup
between 2uu7 anu 2u12 (Figuie S). Again, it cleaily appeais that success is moie
likely when this staitup has one oi moie patents at the beginning of the peiiou.
Noieovei, the iatio of success piobabilities with anu without patent appeais to
be iemaikably stable ovei the entiie 6 yeais peiiou.

Figuie S: Cumulative piobability of success



2
In that case the aveiage success iate is 1S%.
The estimation makes it possible to infei the piobability of success of a
iepiesentative staitup between }anuaiy 2uu7 anu Becembei 2u12, uepenuing on
whethei it owns oi not patents at the beginning oi the peiiou. As inuicateu in
Figuie 4, patent owneiship is associateu with a Su% likelihoou of success in the
six following yeais, against 8% without patents. C&%+$% #:$+*-70, %7<-
.+$+*&%+- & -<''+-- ,*+?0<? #2 OOJ #*L ,<% /022+*+$%1;L 0% ?<1%0,10+- 9;
OPQH %7+ '7&$'+- #2 -<''+-- 0$ %7+ $+R% S ;+&*-P
Figuie 4: Piobability of success between 2uu7 anu 2u12

Since we consiuei heie the "aveiage" staitup in the sample, this geneial iesult
uoes not coiiectly account foi sectoi heteiogeneity. A moie uetaileu appioach
accounting foi uiffeient expecteu time-to-success anu uiffeient effects of key
factois (age, funuing, patents) between the main sectois neveitheless confiims
oui geneial finuing. We finu in this case that ,&%+$% #:$+*-70, '#$-0-%+$%1;
&$/ -0.$020'&$%1; ?<1%0,10+- %7+ ,*#9&9010%; #2 -<''+-- 9; & 2&'%#* #2 MPS 0$
&11 -+'%#*-P 0ui estimations suggest stiongei effects in some sectois such as
Softwaie anu Biotechnology, but these iesults aie not statistically significant, uue
to the limiteu numbei of obseivations
S
.
As compaieu with the pie-investment analysis, these iesults inuicate that 0$ %7+
,#-%T0$4+-%?+$% ,+*0#/ ,&%+$% #:$+*-70, 0- -%*#$.1; *+1&%+/ %# -<''+-- 0$
&11 -+'%#*-L &1%7#<.7 0%- 0?,&'% 0- ,*#9&91; -%*#$.+* 0$ B#2%:&*+ &$/
D0#%+'7$#1#.;. This suggests that the management of IP policy is a poweiful
stiategic leveiage foi any vC backeu staitup to achieve economic success.
It is theiefoie inteiesting to have a closei look at the staitups' patent poitfolios
in oiuei to iefine the analysis. To uo so we estimate anothei set of econometiic
mouels wheie patent owneiship is ieplaceu by alteinative patent inuicatois. We
fiist use owneiship of tiiauic patents to appioximate the inteinational coveiage

S
We obseive foi instance only Su Biotech staitups in vC poitfolios as of 2uu7, of which
only S own patents. 0nly S out of these Su staitups succeeueu in the following 6 yeais,
anu 2 of these S successful staitups hau patents initially.
8%
Su%
22%
u% S% 1u% 1S% 2u% 2S% Su% SS%
Patent piemium
Without patent
With patent
of patent poitfolios in 2uu7
4
. We also constiuct two gioups of patent holuing
staitups with iespectively the top 2S% laigest patent poitfolios, anu the top
2S% poitfolio quality scoies in 2uu7. The lattei inuicatoi is baseu on the sum of
patent scoies calculateu by Thomson Innovation, baseu in paiticulai on the
numbei of subsequent citations among othei qualitative patent inuicatois.

Figuie S: Pieuictive powei of uiffeient patent inuicatois

The iesults of this analysis aie iepoiteu in Figuie S. They cleaily show that
*+20$+/ ,&%+$% 0$/0'&%#*- '&$ 9+%%+* ,*+/0'% %7+ ,*#9&9010%; #2 -<''+-- %7&$
?+*+ ,&%+$% #:$+*-70,. In line with oui pievious estimations, patent
owneiship multiplying the piobability of success by S.1, theieby geneiating a
success piemium of 21u%. By contiast, -%&*%<,- %7&% #:$ & %*0&/0' ,&%+$% &*+
MPH %0?+- ?#*+ 108+1; %# -<''++/ in the next 6 yeais. =70- 2&'%#* 0$ %<*$ .#+-
<, %# UPK &$/ HPK 2#* %7+ %#, OHJ ,#*%2#10# -'#*+- &$/ ,#*%2#10# -0F+-
*+-,+'%04+1;.
!/#+5.-*/#

0ui iesults cleaily highlight the stiong pieuictive powei of patent positions on
the chances of successful exit foi vC backeu staitups.
We fiist finu eviuence of a significant signaling effect of patent owneiship
piioi to vC investment: patents significantly inciease the likelihoou of
subsequent success, especially in the Softwaie anu Biotechnology sectois

4
A patent is uefineu as tiiauic when the unueilying invention is piotecteu by patents in
Euiope, the 0SA anu }apan. About S% of the active staitup in vC poitfolios as of 2uu7
own tiiauic patents. They iepiesent about Su% of the patent owning staitups at this
uate.
+422%
+S12%
+249%
+21u%
u 1uu 2uu Suu 4uu Suu
Poitfolio size (Top 2S%)
Poitfolio scoie (Top 2S%)
Tiiauic patent
Patent
wheie patent-holuing staitups aie iespectively 2.89 anu 2.99 times moie
likely to succeeu.
We finu as a seconu step that active staitups in vC poitfolios aie about S.S
times moie likely to succeeu in the next 6 yeais if they own at least one
patent. Inteiestingly, the impact on the likelihoou of success is even
stiongei when we consiuei iefineu patent inuicatois that bettei captuie
the stiength of the staitups' patent positions. The success piemium iaises
fiom +21u% to +2Su% when only tiiauic patents aie taken into account,
anu to iespectively +S12% anu +422% foi the top 2S% staitups in teims
of patent poitfolio iating (as measuieu by Thomson Reuteis) anu size.
Beyonu the meie neeu foi patent piotection, this cleaily highlights the
impoitance of being able to builu stiong IP positions foi staitups.
It is impoitant to keep in minu that we foimally establish the existence of
coiielations - not causal effects - between patent positions anu success. In othei
woius, filing a fiist patent will not automatically multiply the applicant's chances
of success by S.S! As a mattei of fact, theie aie othei impoitant uiiveis of success
that we cannot obseive, anu some of them (such as goou management anu
technology) aie likely to influence patent positions. The stiong coiielations that
we obseive piobably also ieflect theii influence - the unobseiveu factois being
then "captuieu" by patent inuicatois. This again implies that simply filing patents
is not sufficient: the key uiivei of success is in fact the staitup's ability to builu
stiong anu ielevant IP positions.
8'0')'#+'-

Euiopean Commission, 2u12. Repoit of the Chaiiman of the Expeit uioup on the
Cioss-boiuei Natching of Innovative Fiims with Suitable Investois
Chiistian Belmeis & Naik Rogeis, 2u1u. "Innovation anu the Suivival of New
Fiims in the 0K," Review of Inuustiial 0iganization, Spiingei, vol. S6(S), pages
227-248, Nay.
Wagnei, S. & Cockbuin, I., 2u1u. "Patents anu the suivival of Inteinet-ielateu
IP0s," Reseaich Policy, Elseviei, vol. S9(2), pages 214-228, Naich.

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