Intellectual Property Financing is key building-block of sustainable Innovation

Intellectual Property has become a significant part of so called intangible asset categories over the past 30 years shifting the correlation between “tangible : intangible” assets from 80:20 to 20:80 percent of a typical balance sheet.  Banks have not been being understanding asset lending at all, have destroyed many prosperous entrepreneurial undertakings, slowing down their economies by their lack of ability to support innovation based Qualitative Growth. Their imaginations just followed the patterns of greed for more of the same, projecting yesteryears into the future, expecting hokey-stick Business Plans promising trees that grow into sky-scrapers. While on the other hand they sell highly speculative gamble-like investments to private wealth investors, even named “Products” in spite of often totally open end-risks.

Due to common lack of Intellectual Property Rights’ valuation and ongoing confusions between Inventions and Innovation there neither yet exists any vibrant market place in form of IPR-Platforms or Exchanges. While already Cash Flowing IPR could be considered for subordinated convertible debt financing not yet cash flowing IPR would need pre-agreed ROI based Capital Providers. In light of the role Innovation plays in our economies, tax-regimes would be wise to credit private or institutional Capital provisions towards IPR-financing against such investors’ tax returns. Korea took the interesting approach of installing a State IP-Agency issuing guarantees to banks against taking the IPRs into the Agency’s escrow collateral to protect the owners from any arbitrary bank actions. Where the guarantees might become conclusively drawn by a loan issuing bank the IPR remains in escrow, allowing the original owners to continue its endeavors towards commercialization under a buy-back option. For example through a sedation of license fees or Sale & License Back as a basic form. This Technology financing via facilitation of IPR-funding following a Technology Business Rating replacing Credit Rating allowing to take IP as a collateral by Korea’s Technology Credit Bureau [KOTEC] has promoted Korea into 4th rank in global Patent registrations (or #5 in PCT) in consequence . The Technology Business Rating is KOTEC’s proprietary method and is more like VC standard questionnaires resulting in a State Certificate, not intended for bankers’ use. In the Global Innovation Index Ranking [GIIR] measured across 35 categories key to Innovation actually happening beyond IP registrations or other publications, Korea worked its way up from 18th to 11th rank. Most remarkable also China’s ascend from 35th to 15th while the USA descended from rank 5 to 7. While patent filings and publications comprise 16% of the criteria only, the financing conditions precedent for entrepreneurial engagements are at 35% of the judgement categories. That way number one in GIIR, Switzerland, ranking number 9 in IP registration or the United Kingdom ranking number 4 in GIIR but 7th in patent registrations or China 15th in GIIR but number one in patent filings clearly shows that financing Innovation implementation is utmost important. Of course IPRs, often being the only assets a Technology start-up can count on, may be intangible but the basis for securing new value creation. Regimes that facilitate financing of it or growth financing against it will benefit from more additional employment and GDP.

For Carbotopia™ we had a macro-economic study done by the Economica Research Institute resulting in a fiscal return to the IRS of 14% of CAPEX for a Bio-Refinery from Municipal Waste just from employment related taxes, fees and social welfare contributions and savings under the Austrian employment regime. This was irrespective of any operating result derived corporate taxes. The redistribution of fiscal contributions may come out different for other employment regimes but the local closed loop economy employment effects would still generate the same prosperity enhancement. Financing Innovation related IPR should actually be regarded to be a least risky wealth investment, if managed protected from greed.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s