If you rely on innovation to generate revenue, it is likely that you will turn to further innovation to grow your business; and innovation (almost) invariably leads to some sort of intellectual property (IP). Did you know that you can use innovation and intellectual property to fund business growth? Here are our top five ways in which to use innovation and intellectual property to fund business growth.
1. Investment
Finding investors to help you grow your business isn’t always easy. However, the Government has put a number of Venture Capital Schemes in place to try and make investment in start-ups and SMEs more attractive.
Enterprise Investment Scheme (EIS)
For example, the Enterprise Investment Scheme (EIS) is designed so that your company can raise money to help grow your business. by offering tax reliefs to individual investors who buy new shares in your company. Provided your company qualifies under the EIS rules, investors can claim 30% of their initial investment back as income tax relief.
The relief works by reducing the investor’s income tax bill, knocking off an amount equivalent to 30% of the EIS eligible investment. This can represent a massive income tax saving to many, and makes the scheme an attractive proposition for investors: not only do they stand to benefit from their investment in your company, but they also make significant income tax savings.
Help for Start-Ups
A similar scheme, known as the Seed Enterprise Investment Scheme (SEIS), is also available.
Both the EIS and the SEIS are among the four venture capital schemes devised by the government to promote and encourage innovation and economic growth.
2. Grant Funding
Government grant funding is offered by Innovate UK, which has a remit to develop the UK’s innovation capability and drive investment in research and development.
Innovate UK Edge
As part of part of the UK innovation agency’s investment in the pioneering businesses that drive economic growth, Innovate UK EDGE is a publicly-funded service available to all high potential small to medium sized innovation-driven companies. Innovate UK EDGE offers support to the most innovative and ambitious companies which are considered likely to accelerate the UK’s economic recovery and future growth.
Its fully-funded services are tailored to the needs of businesses it works with and are delivered regionally on a one-to-one basis through its specialist team of innovation and growth experts to help beneficiaries to exploit innovation, source funding and access new markets by focusing on key tactical and strategic areas including:
- Vision and Strategy
- HR
- Market Readiness and Alignment
- Internationalisation
- Innovation Process
- Internal Capability
- Collaboration
- Intellectual Property (IP)
- Finance and Grant Funding
For example, the RTO/catapult grant is available to eligible businesses. This grant assistance is being made available for businesses to benefit from the facilities and services provided by Research & Technology Organisations (RTOs) and the Catapult network. Innovate UK Edge clients can apply for grants for sector-specific advice, testing and/or development work provided by RTOs/Catapults.
Funding for Intellectual Property
There is even funding available toward intellectual property. The UK Intellectual Property Office (UKIPO) offers an IP Audits Plus programme which is aimed at small or medium sized companies. The programme provides a company with the opportunity to have an IP audit carried out by an IP professional to provide a detailed review of the existing IP assets of a business and provide advice on how to identify and maximise the value of the IP and how to manage it going forward.
On top of that, the IP Access Fund is available for taking forward some of the recommendations made in the IP audit report and implementing measures that will allow innovative companies to protect and use the valuable IP assets in their business.
3. Crowdfunding
Crowdfunding is a way of raising finance by asking a large number of people each for a small amount of money. Traditionally, financing a business, project or venture involved asking a few people for large sums of money, whereas crowdfunding switches this idea around, using the internet to talk to thousands – if not millions – of potential funders.
There are many crowdfunding sites available, often focusing on different types of innovation, and a review of these is way beyond the scope of this blog, but it is always worth considering if you need capital to grow your business using something innovative or creative that you think people may “buy into”…literally.
4. Borrowing
At the Autumn Budget 2017, the Chancellor unveiled a series of measures to help UK firms commercialise their ideas, including a proposal to: ‘Promote successful investment in all parts of the economy by… working with businesses, lenders, insurers, the British Business Bank and the Intellectual Property Office [will seek] to overcome the barriers to high growth, IP-rich firms, such as those in the creative and digital sector, using their intellectual property to access growth funding.’ (https://www.gov.uk/government/consultations/financing-growth-in-innovative-firms).
Since then, there has been an ongoing initiative to stimulate the supply of finance by supporting the use of intangible assets, including intellectual property, as collateral. There are, however, still barriers to using IP as loan collateral, including:
• Banking regulation
• Legal enforceability
• Valuation
• Liquidity
Nevertheless, high street banks are increasingly recognising shift in the UK economy from being manufacturing-led to service-led, and have tailored their financing options accordingly, allowing high-growth SMEs access to capital loans to obtain funding to invest in the growth of their business without the need to dilute your ownership, as would be the case with equity finance providers. Whilst your intellectual property will not usually offer a means of collateral, your ability to demonstrate growth in sales, profits and/or employee numbers and a strong management team, and a track record of sustainable cash generation and profitability, will.
5. R&D Tax Credits
There is an increasing awareness of the R&D Tax Credit provisions, and there has been an increase, in recent years, in businesses taking advantage of them. However, many businesses are still not claiming all they are entitled to under the scheme, and some not claiming at all. Apparently, there seems to be a general lack of understanding as to what ‘R&D’ actually means in relation to R&D tax relief claims.
To make a claim for R&D Tax Credits, your business must have:
- looked for an advance in science and technology;
- identified a technical uncertainty and tried to overcome it; and
- ensured that the technical uncertainty could not be easily solved by a competent professional in the field.
Your project may result in a new process, product or service, or improve on an existing one.
However, it does not need to result in a patentable invention nor does it necessarily need to have been successful. If any of the above conditions are true for your business, then you may be able to make a claim. It is important to invest time in gathering relevant information, especially technical reports documenting the R&D process and outcomes, focusing on the so-called “technical uncertainty”. Failing to produce these can seriously impact the value of your claim.
What you can do
Using a specialist R&D Tax Credit consultancy to oversee your claim with a fresh perspective, can help you to maximise your claim by ensuring that no important qualifying elements of your R&D spend are missed or erroneously left out because they are thought not to qualify.
However, making sure that, from the outset, you have a properly thought-out IP strategy, that takes into account your R&D and how it is managed, can be equally important. For example, you may be operating in a crowded technical field, and performing some patent searching and landscaping could help you to, not only clearly pinpoint the ‘technical uncertainty’ that will help to maximise your R&D Tax Credits claim, but also to keep a watch on what your competitors are doing in the same field.
If you have any questions about your intellectual property, please contact us to book a free initial consultation by emailing vicki.strachan@strachanip.co.uk or go to our website: https://strachanip.co.uk/contact/
