In the face of increasing risk and complexity, organizations need more creative and effective ways to access capital. While accessing capital has always been critical for organizations and the health of economies, ongoing changes and market forces are expanding the very definition of capital to go beyond the traditional focus on hard assets to now include a focus on the value of intangible assets like intellectual property (IP).
Intangible assets comprise nearly 85% of the total asset value in the S&P 500. And for fast-growing innovative businesses, IP is likely the organization’s most valuable asset. Despite this, our research consistently shows that IP is undervalued, under protected and underappreciated as a source of significant value to companies of all sizes, at all stages and in all industries.
As companies grapple with evolving business models to face today’s disruption, they must find ways to best leverage their IP assets to add liquidity, deflect potential IP-based risks, and protect against a post-crisis future. Amongst one of the many trends in the IP space, new alternative financing solutions are emerging that combine valuation tools with collateral protection insurance policies to create an IP-backed (non-dilutive!) debt structure. This type of innovation is shining a brighter light on IP as an asset class to bolster enterprise value and making IP critical to business strategy.
Given today’s economic uncertainties, businesses must understand the new potential levers at their disposal. IP can be an extremely valuable asset that contributes the majority of the enterprise value and retains significant value through recessionary periods. Most organizations do not optimally leverage IP assets for financing solutions, nor do they articulate that value during investment conversations. Partners that have broad experience and understanding in building, valuing, and leveraging IP assets as a way to access capital can provide a crucial competitive advantage.
Because of these trends, companies like Aon, a leading global professional services firm, are now investing in their IP capabilities and building new solutions. For example, Aon recently launched its IP Capital Solution which combines proprietary valuation tools and a collateral protection insurance policy to create an IP-backed debt structure. This structure has already enabled Indigo, an IP-rich agtech company, to raise additional funds while avoiding equity dilution.
Optimizing opportunity in this area requires companies to:
- Understand the benefits of IP assets
- Understand the value of their own IP assets
- Understand how IP assets can be used as collateral to access growth stage capital
As we move into this new year, consider actively and deliberately how you can better leverage your IP assets to access capital. It could make the difference in how you finance and grow your business, while keeping more it!
We’ll be focusing more on this topic in coming months – stay tuned!
About the Authors
Andy Scott is a Partner at Advantary, LLC and is focused on Growth, Capital Markets, and IP Strategy engagements.
Before joining Advantary, Andy launched multiple high growth startups across various industries. Within the IP realm, Andy co-founded a leading patent strategy and brokerage firm, as well as was an early executive at RPX which went public three years after inception and built multiple businesses to help companies manage patent risks. Andy was named as one of the ‘Top 300 World’s Leading IP Strategists’ by IAM Magazine.
Lewis Lee is CEO and global head of Aon Intellectual Property Solutions, a business focused on enhancing IP-based value creation strategies and minimizing the cost of IP Risk. Lewis is a member of the Federal Reserve Bank of San Francisco’s Economic Advisory Council. He is recognized by Intellectual Asset Management (IAM) as a top 300 IP strategist worldwide, is an experienced IP attorney, entrepreneur, author, inventor and educator. Lewis is the co-founder of Lee & Hayes, a leading US patent and business law firm that enjoyed top quality ranking for multiple years on IAM’s annual rankings.