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If you're doing a startup outside of software/web, one of the things VC's ask you about is IP protection. The development cycles are longer, the costs are higher, each prototype is precious. Once you have succeeded, the VC needs to know that a large company cannot swoop in and make the exact same product as you. Let's say I'm working at a university and come up with a new type of GPU, it's 10x faster than NVIDIA's & AMD's. If I have a patent, I can raise VC funding and take on NVIDIA/AMD because NVIDIA/AMD cannot make the same thing and sell it in the USA (a large market). Now there is NVIDIA, AMD, and QUANTICLES selling in the market. The products are improved because QUANTICLES is 10x faster, and NVIDIA and AMD have their own selling points. EDIT: The public benefits here because improved products are on the market and jobs are created in the USA. Let's say I'm working at a university and come up with a new GPU but cannot patent it because University Patents Are Evil. Now NVIDIA/AMD are free to pursue it, or not, if they chose. Likely they wont because there is a significant ground to cover between university project and actual product. Usually there are many issues and tradeoffs to solve, solving these issues/tradeoffs is risky, and NVIDIA/AMD cannot take on the risk or are not aware they should. Main point: startups are a proving ground for new ideas that big companies can't afford to take on, or choose not to. The university comes up with the idea and then the startup tries to prove that it works in a commercial environment. If there is no protection for that company after it's proven then investment is a losing bet. Software/Web companies have a different sort of protection than hardware companies: users. A user is a customer that gets entrenched in a product. For example, how often do you change email services? How often do you change online photo catalogs? Each year I do my taxes on the same site since I can import my settings from the previous year and I know how to use it. Hardware companies do not get entrenched as easily. Many times hardware can be switched in and out with other hardware (for example, GPUs). This also creates a feast or famine environment - you either have big sales because you're best product on the market, or you have none because you don't. If a startup cannot protect itself then it may not be worth investing in. |
http://www.technologyreview.com/featuredstory/531726/technol.... "According to Chris Benner, a regional economist at the University of California, Davis, there has been no net increase in jobs in Silicon Valley since 1998; digital technologies inevitably mean you can generate billions of dollars from a low employment base."