This report has been issued from the UK IPO and essentially relates to the situation in the UK. The ten points given below are simply what caught our attention and do not fully do justice to this 221 page report.
1. Knowledge assets are not appreciated in mainstream UK lending. Recent banking initiatives have found that traditional fixed assets no longer exist for many companies, and so it seems that change will be needed to allow knowledge assets to become bankable. 70-80% of company value may now come from intangible assets.
2. Other countries are already making the necessary changes. Malaysia and Singapore are introducing guarantees to facilitate IP-backed lending. Denmark and India are developing IP marketplaces. Brazil is experimenting with IP audits.
3. The infrastructure for IP markets and IP financing needs to be improved. However a key question remains over how much is the IP worth when the business fails. If the technology turns out not to work then a patent can be worth nothing.
4. Venture debt and mezzanine-style finance does exist in the UK, for example from Silicon Valley Bank which participates alongside venture capital. In this patents are regarded as very important.
5. At the moment there are 3 FCA-regulated crowdfunding platforms that can be used to raise money on the internet; Crowdcube, Seedrs and Abundance.
6. Very few companies have tried to assess the worth of their IP, and so clearly would not have had knowledge of the worth of their IP when approaching a lender.
7. Offensive patent aggregators are mentioned as a (controversial) option for monetising patent rights. Defensive patent aggregators are also mentioned, the costs of which are met by investors such as IBM, Cisco and HP.
8. The Intellectual Property Exchange International is a recently opened public exchange that allows IP rights to be traded as commodity. However it is too early to assess whether it will be a success.
9. There are IP auctions and brokerages. This is mostly a US activity, though. In addition the UK IP insurance market is also immature.
10. Ultimately IP is seen as too complex to finance with the usual lending means due to the difficulties in understanding what it is, how it relates to cash and where its values can be realised independently of the business. Banks cannot carry out the appropriate due diligence.
The report is available here.