Monetizing intellectual assets for financing has is a growing trend in the business world. There are several ways to do so. You can use intellectual assets as security for debt finance or collateral, licensed, sold. Or it can provide an alternative basis for seeking equity from family, friends, private investors, microfinance institutions, venture capitalists, and regular banks.
As a business owner, it is vital for you to look after the intellectual assets of your business. Not only as a legal asset but also as a financial instrument.
Using intellectual assets to finance your business
Intellectual assets can help you strengthen your case when securing financing from investors. The investor will assess the innovative product offered by your business and the trademark, patent, industrial design, utility model, or copyright and other related rights that protect it.
Such protection is often a good indicator of the potential of your business to survive in the market. Therefore, intellectual asset ownership is essential to convince investors of the market opportunities open to the enterprise to market the product or service in question. Sometimes, a single dominant patent may open doors to many financing opportunities.
Ownership of intellectual asset rights over the creative output or innovations related to the services. Or products that an enterprise intends to market guarantees a certain level of exclusivity. And, thus, higher market shares if the product proves successful among consumers.
The value of your intellectual assets
Various investors may value your intellectual assets in different ways and may attach different degrees of importance to intellectual property rights. However, a clear trend is creating a greater reliance on intellectual property assets as a source of a competitive advantage for businesses. Thus investors are increasingly concentrating on firms with a well-managed property asset portfolio. Even in the developed countries. Many experience new problems while trying to perfect security interests in intellectual property.
As a business owner, you must, therefore, take steps in understanding the commercial value of your business intellectual asset. Ensure professionals properly evaluate it if the need arises. And fully understand the requirement(s), if any, for their proper accounting in the balance sheet and accounts books.
Above all, make sure to include your Intellectual assets in your business plan when presenting it to potential investors.
Securitization of IP assets — a new trend
The partial or complete attribution of intellectual property rights is a phenomenon even in developed countries. The guarantee of commercial loans and bank financing through the granting of security interest in intellectual property is a growing practice, particularly in the music sector, internet-based business and high-tech sectors. Securitization generally refers to the pooling of various financial assets and the issuance of new securities backed by those assets. In principle, these assets may be claims that have a reasonable, predictable flow of cash, or even exclusive future receivables. Thus, securitization is possible for future royalty fees from licensing a patent, trademark, trade secret, recording rights of a musician or from musical compositions.
Today, equity markets based on intellectual property are small as the universe of buyers and sellers are limited. However, if the diffusion of intellectual property on the internet is an indication, then it is only a matter of time before all stakeholders will develop a more significant interest and ability to use Intellectual assets for financing business start-ups and expansions. There’ll be more opportunities for securitization creation as more cash flows.
Until next time,
To Your Growth & Profits
William De Temple, CEO Antirion LLC
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