Abstract

This paper investigates how patents held by new ventures affect their ability to attract venture capital (VC) financing. For a sample of VC-seeking German and British biotechnology companies we have identified all patents filed at the European Patent Office. We find that in the presence of patent applications, VC financing occurs earlier. Our results suggest that VCs pay attention to anticipated patent quality and finance ventures with high quality patents faster. Revealed quality has a mixed effect. Whereas we find patent oppositions to increase the likelihood of receiving VC, we do not find that the ultimate grant decision spurs VC financing.

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