Do patents affect VC financing? Empirical evidence from the nanotechnology sector

This paper analyzes the importance given by Venture Capital firms (VCs) to the patent portfolios of start-up companies in their financing decisions. In particular, the contributions presented are twofold. First, we determine whether the amount of VC financing is associated with three elements related to technological portfolios: number of patent, patent scope and number of "core technology" patents (i.e., those patents related to core technological capabilities of the company). Second, we examine whether the relevance of patents for the financing decisions varies across different types of VC firms, depending on their industry specialization and affiliation. We provide empirical evidence from a sample of 332 VC-backed companies in the nanotechnology sector for the period 1985-2006. Our results confirm the importance of core technology patents in the VC investment decisions, especially for specialized VCs, when compared with generalist VCs. However, no differences are found between corporate and independent VCs.