How do VC firms evaluate startups' patent portfolios? The case of nanotechnology

In this paper, we investigate how different characteristics of new firms’ patents influence the VC financing process. More specifically, the purpose of the paper is twofold: on one hand, we determine whether the amount of VCs’ financing obtained by the company is associated not only with the size and scope of start-ups’ patent portfolios, but also with its technological focus, in particular for what concerns the share of patents belonging to core technological areas for the company. On the other hand, we examine whether the valuation of patent portfolios varies across VCs, depending on their affiliation and degree of industry specialization. We argue that the VC’s ability to assess the patent portfolios of the investee company should be better-off if the VC is specialized in the same industry of the investee company and if the VC is affiliated to a corporation.