Inngot, the online platform for intellectual property (IP) identification and valuation, has been awarded a £250,000 grant from Innovate UK, the UK’s innovation agency to study the recoverable value of IP and other intangible assets when used as collateral for IP backed lending.
The new award will fund ground-breaking research that will help Small and Medium Sized Enterprises (SMEs) obtain growth funding by evidencing the recoverable value of IP and other intangible assets. The one-year project will secure data that will build confidence in the market, and power Inngot’s next generation of tools to support lender credit decisions.
Inngot CEO Martin Brassell says: “The economic gains to be made by addressing the IP collateral issue are very substantial. UK businesses spend over £130bn annually on intangible assets, very little of which is leveraged for finance, for example through IP backed lending. Unlocking intangible value will improve the flow of capital to SMEs, the companies with the greatest potential for innovation and growth, and enable lenders to successfully acquire new business with less risk, significantly reducing their cost of capital.”
Taking security over business assets is a well-established practice in finance. If a company gets into difficulty, lenders can recover outstanding debts by disposing of physical commodities like buildings, machinery and equipment. However, knowledge-based companies own very few of these assets, and the intangibles that drive their business models have proved hard to utilise in finance due to uncertainty over their recoverable value. This has had an impact on the growth of IP backed lending as a viable funding option.
“M&A data provides plenty of evidence that intangibles drive business value, as well as being the primary area of company investment,” comments Brassell. “Understandably, though, banks lack confidence in whether IP has recoverable value if a business fails, because they are unused to dealing in it. Our project will gather and analyse data that will demonstrate to lenders, insurers and policymakers how intangible assets genuinely provide a means to recover value, provided they are appropriately screened.”
The difficulties in dealing with intangibles like IP are commonly blamed on the lack of transparent markets on which they can be traded, making price and value harder to substantiate. However, even if these markets existed, most companies would not choose to sell their IP because it represents the core of their business; they cannot function without it. Inngot is therefore taking a broad approach to value identification.
“Judging the value of IP purely by looking at how much it can fetch in a ‘fire sale’ when a business is distressed is unrepresentative of the true contribution these assets make,” says Brassell. “We will therefore be looking at refinancing, restructuring and M&A data as well as IP disposals during this new 12-month project, in order to build a truer picture of the role these assets play. At the moment, no-one has more than a small piece of the puzzle: we intend to share our analysis with all those who contribute to the data pool.”
Inngot is already in discussion with its international contacts to start to populate this new recovery data repository. Brassell concludes: “Delivering this project will mean working closely with a range of stakeholders in banking, insurance, legal and recovery services as well as government. We look forward to working with our existing networks to make this important breakthrough, and are happy to hear from other parties who may have data to contribute.”
Inngot offers a suite of online tools to help innovative businesses identify, manage and value Intellectual Property and intangible assets. In addition to its IP valuation tools, it contributes to the international debate on how best to help SMEs in particular uncover and leverage the value locked up in their IP and intangible assets and offers bespoke IP valuation and technology valuation services.