David Pridham / Forbes Contributor
CEO of the patent advisory and transaction firm Dominion Harbor Group in Dallas
I’ve written before about the decline in American entrepreneurship that we see reflected in a startling 36% drop in U.S. startup formation over the last decade. This startup slump has been accelerated by a steady erosion of our patent system, which is vital to protecting innovative young companies from the predations of larger market incumbents. When patents weaken, so do startups, job creation, the overall health of the U.S. economy, and our standard of living.
But finally there’s some good news on the horizon. Here are six reasons why 2018 could be a banner year for entrepreneurs.
1. Venture capital investment in startups has surged to its highest level ever — $148 billion last year alone. What’s more, in the last 12 months, more than 40 VC-backed companies achieved billion-dollar valuations and joined the unicorn club. At the same time, though, deal count and the number of VC-backed IPOs are down, suggesting that some of the froth in the tech market is falling away and startups are increasingly being required to earn into their valuations.
Combine this with solid expansion of the economy, steady job growth, adjustment of the business tax code, and a booming stock market, and you’ve got the most fertile soil for entrepreneurial companies to grow in that we’ve seen in years.
2. The patent system may finally be turning itself around. I’ve written at length about the “patent death squad” at the Patent Trial and Appeal Board (PTAB) that has destroyed a generation of patents — the hard-earned intellectual property of hundreds of innovative small and medium-sized businesses. But now there are hopeful signs that this government-sponsored IP tyranny against startups may be about to ease.
First off, in few months the U.S. Supreme Court will decide the most consequential case most people have never heard of — Oil States v. Greene’s Energy. This ruling will determine whether or not the PTAB can continue to arbitrarily destroy startups’ most precious assets — their intellectual property rights to the innovative new products and services they create — without due process and in violation of the law and the Constitution.
And second, the U.S. Senate will soon vote on the appointment of Andrei Iancu to be the next Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office (USPTO). We don’t know much about Mr. Iancu or the steps he plans to take to strengthen patent rights, especially for startups trying to protect their innovations from theft by large infringers, but we are hopeful. Our hope stems from the fact that, unlike the previous head of the patent office, Mr. Iancu is not a former employee of the very same Big Tech companies in Silicon Valley that have waged a decade-long campaign to destroy patent rights in order to bolster their own business interests.
More evidence that the patent system is recovering? My own company’s revenues as a patent transaction and advisory firm have doubled over the last year. That’s a sign the Fortune 500 firms and startups we work with are feeling more bullish about the future.
3. Artificial Intelligence (AI) is the biggest thing since the birth of the Internet. AI-themed ventures — including machine learning, advanced robotics, and autonomous vehicles — are expected to grow into a staggering $13 trillion market opportunity by 2025, says McKinsey.
Adds Daniel Burstein, managing partner of Millennium Technology Value Partners, which has significant investments in AI: “Artificial Intelligence and related next-generation technologies represent a quantum leap forward in the evolution of what humankind can do with machines, systems, software, sensors, data, and our own human bodies and brains. It is a true paradigm-shift that creates huge new opportunities for entrepreneurs — not least because so much talent is needed to create the software and solutions so badly needed now.”
The truth is, startup businesses have a big stake in AI no matter what business they’re in. “AI is now accessible to even the smallest of businesses through third-party tools,” notes Inc. Magazine. “In 2018, more small business owners will embrace AI as an important competitive tool, using it to automate mundane administrative tasks, unlock customer insights, and more.”
Adds the MicroVentures blog, “One field seeing the immediate impact of AI is customer service. Chat bots using enterprise AI present big opportunities for customer support, allowing startups to increase easy access to information and encourage dialogue between customers and sales staff.”
4. The “Gig Economy” is a huge boon to entrepreneurs. The rapid rise of freelancers and other on-demand workers is having a huge impact on small businesses, 42% of whom employ contract workers. It’s cheaper and more flexible for startups than having to add full-time employees, and if done right, enables them to hire talent with a more entrepreneurial bent.
Freelancers already comprise 35% of the U.S. workforce — or 55 million workers in the U.S. — and they are expected to reach 43 percent of the workforce by 2020. The new tax law offering discounted rates for pass-through business is likely to further accelerate the trend towards contingent labor.
In fact, a new report from Lawrence Katz of Harvard and Alan Krueger at Princeton found that “94% of net job growth in the past decade was in the alternative work category. And over 60% was due to the [the rise] of independent contractors, freelancers and contract company workers.” In other words, nearly all of the 10 million jobs created between 2005 and 2015 were freelance.
And remember, the rise of contingent labor itself creates new business opportunities. Freelancers, after all, have a great many unmet needs — job finding services, health insurance, tax advisories, to name a few — that savvy entrepreneurs would be wise to address.
5. A new “patent peace plan” may prevent a new round of wireless wars from breaking out in the auto sector. Connected and self-driving cars will be one of the hottest sectors of the economy in coming years. But the rapid and efficient roll out of this technology will require cooperation and transparent, rational licensing practices between sector manufacturers.
We have long advocated full transparency in licensing — meaning, the parties to licensing transactions should make the terms (including pricing) publicly available so that future licensees can understand and evaluate the price and terms of a given license. This transparency exists in other sectors of our economy – why not in the licensing of wireless technology, too?
To ward off the threat of a new smartphone-style patent war in auto, the head of one of the world’s largest wireless patent pools, Via Licensing’s Joseph Siino, has proposed a collective licensing solution built on transparent rational pricing and consistent terms for all licenses. And it has already been endorsed by some of the world’s largest wireless communications companies.
Via’s wireless patent pool also says it provides discounted rates for startups and other low-volume manufacturers, enabling them to acquire the rights they need early on and grow with the program. We have seen other licensing pools fail in the past, primarily because the transparency of licensing terms promised at the outset were not carried out. If Via’s pool and others are to be successful, their members will have to follow through on their pledge to make the licensing terms they agree to public so that everyone can benefit.
6. Intellectual property education is becoming crucial to your career as an entrepreneur. Intellectual property (IP) now accounts for a whopping 38.2% of total U.S. GDP — that’s over $6 trillion a year, or more than any other nation’s entire GDP except China’s — and a surprising 30% of total national employment.
Yet despite IP’s obvious significance to the U.S. economy, no major American university has offered a basic course in IP for entrepreneurial undergrads. Until now, that is.
The University of Southern California (USC) has stepped forward with a first-of-its-kind course for general undergraduates on the basics of IP. This new program, launched by the Greif Center for Entrepreneurial Studies within USC’s Marshall School of Business, will train tomorrow’s leaders in the skills they need to navigate our increasingly IP-driven economy. If successful, it will be rolled out to some 40 other colleges and universities nationwide.
As a recent Forbes column by fellow contributor Marshall Phelps put it, “Any young person who doesn’t grasp at least the basics of intellectual property may find him or herself at a major disadvantage in the world of tomorrow.”
With IP-protected innovation now the principal driver of corporate value and national economic growth, USC’s new IP course — hopefully just the first of many at American colleges and universities — is very good news for entrepreneurs.
Maybe, just maybe, we have turned the corner and started to emerge from the IP depression we have been suffering over the past few years. 2018 could well be a banner year for entrepreneurs.