Data Stories

Thillai Rajan A. and Arushi Gupta

Imitation can be the highest form of flattery. But that is no comfort for an innovator, toiling to bring out a unique product, in the hope of hitting a financial jackpot at the end of it all. The scariest nightmare for an innovator is the fading vision of the promised land, when a competitor appears in the horizon and quickly snatches away the market.

Therefore, in ordert to sustain their competitive advantage, one of the strategies that start-ups adopt is patenting. In recent years, start-ups have realised the importance of patenting to protect their innovations with the government supporting this trend by offering various incentives to entrepreneurs, including attractive tax breaks and expedited documentation processing.

Patenting trends among start-ups

To analyse patenting trends among Indian start-ups, we created a dataset of over 8,300 patents published by about 2,600 start-ups since January 2010. A large majority of start-ups (55 percent) have published only one patent (Figure 1). The number of start-ups rapidly reduces with the increase in the number of patents published.

But, one swallow does not make a summer. The competitive advantage of start-ups would be better protected by having a portfolio of patents rather than just a single patent. Patent filing is an expensive process. Therefore, start-ups pursuing the patent route should be encouraged and supported to go beyond the first patent.

Bengaluru rules

There is a strong geographical concentration of start-ups that have published patents. Seventy eight percent of all start-ups with patents are from tier 1 cities. Nothing surprising here since it follows the general trend seen in start-up formation. However, the dominance of Bengaluru among Tier 1 cities is striking (Figure 2), as one-fourth of all start-ups having patents are from here. These results indicate that investments made over decades to set up strong research institutions in the city are bearing fruit, and the technology-led entrepreneurial ecosystem is playing a crucial role in the process.

The number of start-ups that are publishing patents has also picked up pace considerably in recent years (Figure 3). During a 35-month period Jan 2010–Nov 2012, the number of patents published by start-ups was 390, which rose to 3,664 (a growth of over 800 per cent) for the 35-month period ending August 2021. Sector-wise analysis showed that information technology and computing (62 percent) and manufacturing (26 percent) account for a lion’s share of published patents. And targeted incentives may be needed to step up patenting activity for startups in other sectors.

More than half the founders were 40 years or above at the time of filing the first patent for their start-ups (Figure 4). The higher average age of founders in start-ups with patents is an indication that entrepreneurship is increasingly being pursued by those having significant prior experience.

Chicken or the egg?

While the answer to the proverbial question of which came first, the chicken or the egg, remains elusive, our results do provide an answer to some questions, namely: Does more patenting result in an increase start-up activity or vice versa (Figure 5)? Sixty three percent of the start-ups publish their first patent within two years of incorporation, of which 41 percent publish their patent within 12 months of incorporation. Given the significant time, training and effort needed to publish a patent, our results indicate that it is the patent or a definite path to patenting an invention that encourages people to initiate a start-up and become an entrepreneur.

Thillai Rajan A. is Professor, Centre for Research on Start-ups and Risk Financing, IIT Madras; Associate, Harvard Kennedy School, Harvard University. Arushi Gupta is a PhD Research Scholar in Department of Management Studies, IIT Madras

Published on May 11, 2022