Valuing physical objects is straightforward due to their tangible differences and quality comparisons, but intangible assets, such as intellectual property (IP) like designs, trademarks, and patents, pose a challenging task both in protection and quantification. This difficulty can be especially problematic for companies aiming to utilize patents for fundraising, given the rising importance of innovative ideas driven by technology. Nevertheless, recent years have witnessed increased financial support for companies seeking funding, with a significant portion going to startups and tech firms with patents. From 2011 to 2020, 58% of venture capital was directed toward patent-holding startups, with these patent companies securing larger deals and higher valuations during fundraising rounds, particularly in angel investments.
Companies that master the deployment of intangibles investment will be well positioned to outperform their peersMcKinsey & Company
On a global scale, there has been a consistent increase in the allocation of resources towards intangible assets, such as intellectual property, research, technology, and software. Regardless of the industry, companies that prioritize higher investments in intangibles witness a remarkable revenue growth rate that is 6.7 times faster.
Even more exciting, a new EPO & EUIPO joint study revealed that patents and trademarks propel startups to new heights of successful funding. This joint study, by The European Patent Office and the European Union Intellectual Property Office, highlights that startups that secure trademarks and patents in their initial seed or early growth phases have a significantly higher likelihood of successfully securing funding, up to 10.2 times more.
As a result of the ubiquitous adoption of technology, asset-based lenders are recognizing the value of intellectual property and utilizing IP portfolios as collateral to secure loans. This provides businesses with a new source of capital, enabling them to harness the value of their IP to access funding.
Hear from Caldwell’s Managing Member, Keegan Caldwell, and Fortress Investment Group‘s Managing Director, Chris Seidl, about the necessary requirements to use intangible assets as loan collateral in order to raise capital.