A transition across the global landscape toward knowledge-based economies has led policymakers to prioritise unlocking intangible asset funding. So what can you do to give yourself the best chance of successfully financing your innovation with IP?
Facts and figures
A study performed by merchant bank Ocean Tomo found that, in 2020, 90% of the value of companies in the S&P500 index was attributable to intangible assets (i.e. IP and related assets), whereas in 1973 only 17% was attributable to intangible assets, with the remaining 83% being attributable to tangible assets such as physical property. Also, according to the Brand Finance Global Intangible Finance Tracker, the worldwide value of intangible assets grew from USD61 trillion in 2019 to USD 74 trillion in 2021.
What does that mean?
These are pretty astounding figures, and what it means is that there has been a steady transition, across the global commercial landscape, toward knowledge-based economies. And, therefore, the value of companies is increasingly determined by intangible assets, including, not just patents, designs and trade marks, but also things like know-how, trade secrets, goodwill and technological skills.
It won’t come as a great surprise then that public policymakers are, not only working to boost business awareness of the importance of using IP rights to protect intangible assets against unauthorized use or copying by competitors, but actively advocating IP rights as a “should have” form of insurance for protecting market share and revenue streams.
That’s all well and good, but IP-rich companies, especially start-ups and SMEs, still struggle to secure financing; so what about a wider perspective that includes the opportunity for proactively financing your innovation with IP?
The good news is that finding ways to unlock intangible asset finance and solve the problem of financing innovation with IP is also recognized as a priority amongst global policymakers.
Whether you are looking for finance in the form of investment or a loan, you will need to know the value of your IP so that it can be offered as adequate surety or collateral.
The challenge in this field is properly analyzing intangible assets and placing a real-world value on them, and this requires specialist knowledge, skillsets and tools to be able to do well, which business owners, investors and traditional lenders often do not have access to. However, as a result of several initiatives from both the private and public sectors, opportunities for IP-backed financing are becoming increasingly accessible, with general business finance companies and even some high street banks starting to offer IP funding.
IP Valuation
When undertaking an IP valuation the IP portfolio itself is important, of course, but investors/lenders are also looking at how that creates a “fence” around the company that will protect its market share going forward; and, of course, the value of that market share over the term of the loan/investment.
A priority for IP financing is a clear alignment between the business and its IP strategies. In other words, the business must a) know and understand what IP rights it has; and b) how these relate (and contribute) to their core products/services and revenue streams.
If you are not sure of all of the IP rights your company has, a good place to start is to have an IP Audit done by a qualified IP attorney. This would give you a “snapshot” of your business, with the IP it has mapped to the parts of the business it protects, so that any ‘gaps’ or risks can be clearly seen and addressed.
Financing your innovation with IP
Once you know exactly what IP you own, a good IP strategy can be formulated that sets out a) how that IP should be protected or safeguarded to maximise or preserve its value; and b) how that IP should (or could) be leveraged to ensure that it works to protect the important parts of your business, or to help your business to grow, for example. The detail here lies in your own commercial plans and goals: with your IP carefully mapped to those as part of the IP audit process, the ways in which it can effectively be leveraged usually become clear and a powerful IP strategy starts to emerge.
And then you can put yourself and your business in the best possible position to secure IP-backed finance.
Can we help?
If you would like to have an IP audit performed, or need any help with your IP strategy, please book a free initial consultation by emailing vicki.strachan@strachanip.co.uk or visit our website at https://strachanip.co.uk/contact/.
