The Spark Blog

Venture capitalists often seek formidable technological barriers when evaluating startups, yet surprisingly, patents don't always feature prominently on their checklists. Despite this, VCs are on a constant quest to pinpoint that unique set of criteria which could forecast a startup's meteoric rise.

The discourse around what fuels startup success isn't new. Back in 1998, I had the privilege of meeting Bill Gross, the founder of Idealab. His vision spurred me to establish Runway, Israel's first startup incubator, in 1999. Bill Gross's experiences with over 100 startups, which he eloquently shares in his TED talk, offer a wealth of insights into the drivers of startup triumphs.

Yet, in the realm of high-tech industries, such as cybersecurity, where the pace of technological advancement is relentless, what constitutes a reliable success indicator? What vital element might VCs be overlooking?

Curiosity led me to explore the relationship between successful Israeli cyber startups and the breadth and substance of their patent portfolios. From my perspective, patents are not the end-goal but rather the byproduct of relentless innovation—a tangible measure of a company's inventive pulse.

This perspective isn't universally held; some CTOs and founders underestimate the worth of patents. I've personally seen the value patents can hold; for instance, Finjan generated over $400 million from patents that were part of my early work and that of a dedicated team. Yet, many companies harbor rich seams of (unprotected) innovation.

A startup boasting a substantial patent collection, contributed to by a diverse group of inventors, is likely a beacon of a technology-centric culture and a robust technological moat—ingredients for sustainable success.

A casual survey highlighted a few examples:

1. Wiz: With revenues surpassing $300 million, they have 40-50 patents crafted by 8-10 inventors, under the guidance of their founder/CTO.

2. CyberArk: Boasting over $750 million in revenue, they hold 160 patents, developed by a team of 10 inventors, and propelled by their research team.

3. Armis: With revenues over $100 million, they've secured 20-25 patents, developed by 8 inventors, and are founder and CXO-driven.

The crux isn't merely the quantity of patents a company holds, but the vibrant innovation process within these organizations that breeds patents and attracts inventors. A startup with a team of 10 inventors not only benefits from their collective genius but also enjoys an environment that fosters continuous innovation, ensuring the company remains on the technological vanguard.

This creative vigor often permeates company culture, fueling motivation and a palpable sense of ownership among employees who believe in their power to revolutionize the customer's experience—and the company's destiny.

I welcome your insights on this topic. Are patents the unsung heroes of startup success, or is there more to the story?