Putting IP to work: attracting investors and generating fresh revenue streams

James Cortis
Content Producer | Business West
11th September 2020

2020 is not a normal year. All resources be them human, physical, or financial, seem stretched, yet the crisis has undoubtedly created a raft of opportunities for innovators able to respond with agility and speed. 

Across the South West, many businesses are adapting their offerings and maintaining focus on R&D. Regional developers of mobile apps, SaaS, VR and AI have found new uses for their products and seen subsequent spikes in sales. In Swindon, 10% of businesses, predominantly those in the technology sector, are expected to grow their operations and see a surge in demand following the pandemic. 

Innovating through a crisis is a proven strategy. Businesses that maintained this focus throughout the 2008 financial crash emerged stronger, outperforming the market by an average of 30% and accelerating growth over the next three to five years. 

But the problem is cashflow, how do businesses finance these new projects, and how can IP assets help bring in new funds? 

To kickstart Innovate 2021, an autumn event series on overcoming current challenges and building for growth, we explore that very question; outlining how your IP can generate new revenue streams and attract investors. 

We’ll be hosting a four-part webinar series covering these issues and also looking at IP strategies in collaborative ventures and exits. See the full list here:

Our focus will be on business growth, enabling you to emerge from this crisis more resilient and dynamic than ever before. IP valuation will be critical, whatever your current objectives, and will run as a central theme throughout our webinars.

For now, however, we focus on how IP can help raise capital: 

IP fundraising 

Although UK businesses spend over £130bn annually on intangible assets, very little of this is leveraged for finance. Taking security over assets is a long-established practice in finance, dating back to the ancient Greeks. If a company defaults on loan repayments, lenders can dispose of its buildings, machinery and equipment, all of which have an easily definable market value. 

However, knowledge-based companies own very few physical commodities, and IP assets can be difficult to value, especially if they are innovative and therefore untested. This problem still hinders the development of IP backed lending, restricting the flow of capital to those with the greatest potential for innovation and growth.

Our first webinar, IP valuation for fundraising: Turning intangible assets into finance, will outline how you can buck that trend. We’ll highlight the three main funding routes: debt, equity and grant funding; the relevance of IP assets for each of them, and the ways different sources of finance will assess them. 

Understanding the value of your assets, and being able to demonstrate it, is the next critical step. We’ll be addressing how to know, and show, the value of your IP.

Depending on your chosen route, this may involve focusing on the costs invested in creating the IP, comparisons in the open market or its income generating potential. To make a compelling case, it is important to know which measurements to use when and why.

IP licensing 

Licensing is an effective means of making your IP work harder, generating revenue from partners with readily established, good market access. Innovators can remain focused on what they do best while generating new streams of royalty payments, all without having to take on market risks or invest in global expansion.

It’s a strategy that can certainly be lucrative; In 2014, it was revealed that for every Android smartphone or tablet sold, Microsoft was receiving between $5 and $15 in royalty payments for patented technologies, amounting to $2bn per year

However, there are also some serious risks to consider and licensing agreements should therefore be approached carefully and methodically.

Our second webinar, IP valuation for licensing: Making your assets work harder, will help you understand and utilise the value of your IP assets. We’ll be taking a deep dive into the essential components within a typical licensing agreement, de-mystifying terms like upfront fees, minimums, ongoing royalty payments, exclusivity, rights of audit and more.

Successful negotiation depends upon valuation of the licensed assets, so we’ll also be addressing how to put a price on your IP. Negotiations will likely centre around the revenue or profit-generating potential of your IP; but we will also outline how to research royalty rates from similar agreements, using these as benchmarks. 

To hear all this and more, including detailed insights from businesses that have used IP to successfully generate funds, click the links above and sign up. 

Do you want to join the conversation?

Sign up here