The IP Funding Opportunity

Intellectual property is an economic asset recognized by financiers. IP can generate a return, both in profit margins and to investors or financing institutions.

IP financing is a multi-billion dollar market that’s still in its initial stages. It’s been widely used in the pharmaceutical and biotech sector, and now businesses from many other industries are using their IP assets to take advantage of this funding option. Intellectual Property can be collateral for debt finance, or security for equity financing from private investors, venture capital, specialized banks and commercial lenders.

IP financing is getting more attention as an alternative funding source, especially for small businesses and start-ups, where IP often comprises the bulk of their assets. This is an attractive alternative or addition to traditional funding. A company receives cash in place of an often undervalued IP portfolio. This process is ideally suited for revenue generating companies requiring more, non-dilutive capital for expansion, management buy-out, or acquisition of technology from a third-party.

How a Transaction Works

Transactions can be equity or debt. Funding is provided against a percentage of the estimated value of your IP assets. Funders and investors will typically have a first priority interest in the IP as part of the financing agreement. Here’s an example of how a transaction would work:

A company is entering into a license agreement with another company, and wants all the future royalty payments up front. A financing company (or investors) can step in and convert the future payments into an upfront payment if certain conditions are met. The parties are able to negotiate a deal where a special purpose vehicle is set up to hold the IP and licensing agreements, collect the royalty payments and send payments to the finance company or investors.

Many of the world’s largest companies, including General Motors, Alactel-Lucent, Kodak, Seagate, Dell and others are using their patent portfolios as collateral to secure financing. In the last decade, movie studios, such as DreamWorks, Universal and Disney, and major consumer brands companies, such as Borden, have secured hundreds of millions of dollars in loans against their trademarks and copyrights.

Benefits of IP Funding

There are many benefits to IP funding:

Raise non-dilutive working capital
Low-cost alternative to VC funding
Secured by IP assets or royalties
Debt and Equity Options

What We Do

LCG assists companies in using its intellectual property as collateral for debt finance or security for cash funding. We help you organize, prepare and present your IP assets for funding. We provide the outreach to a network of IP lenders and investors, and help articulate your IP story – what your IP is and why it’s a valuable revenue generating asset that can support debt or equity financing opportunities.

Our services include:

Developing an IP Audit
Creating an IP Strategy and Management Plan
Managing the IP Valuation Process
Marketing to a Network of IP Funders
Negotiating Funding Offers
Facilitating Funder/Investor Due Diligence
Reviewing Funding Agreements
Enhancing the Value of your IP Assets