“The presence of an asset is a function of its ability to generate a return”
It is a well known fact that, in a knowledge based economy 65% of most company’s value, source of revenue and building blocks for growth, sustainability and profitability resides in its intangible assets.
Intellectual capital is recognized as the most important intangible asset of many of the world’s largest and most powerful companies; it is the foundation for the market dominance and continuing profitability of leading corporations. It is often the key objective in mergers and acquisitions and knowledgeable companies are increasingly using licensing routes to transfer these assets to low tax jurisdictions.
Intangible assets include anything and everything generated by your company in terms of internal processes, resources, brand names and IPRs. While it is difficult to ascertain the valuation of every intangible asset, fair methods have evolved to measure and determine the actual value of IPRs.
And therefore it is the value of IPRs and intangible assets as a whole that lets you clinch your finances from VCs, equity funds, debt investors and other financial investors.
As a matter of fact, a research study on over 300 startup companies in US and Europe reveals that the valuation of a startup company increases by an average of 22% on account of IP assets. You can access the research paper: here.
Acquisition of Instagram by Facebook perhaps stands out as the best in case example. The balance sheet of Facebook for previous year, filed at Securities Exchange Commission USA shows that Instagram’s amortisable intangibles, including technology, tradename and others, have an estimated fair value of $86 million, they carry a goodwill valued at a whopping $435 million!!
IPRs with their long life cycles and relatively low depreciation costs are your best bet on creating intangible assets whose value can be realized at multiple points in a company’s growth cycle.
What is the action item here?
With the current fiscal year coming to a close, this is undoubtedly the best time for you to invest and create intangible assets in the form of IPRs. If you are a start-up company or looking to raise funds, private equity in the coming fiscal years, your investment in creating IPR today will help you get that right amount of funding to excel in the long term.
Current accounting year is coming to a close. Click here to get in touch with us right away!!
I do not have time to create IPRs, What do I do?
IPRs are of many types viz. Patents, Trademarks, Copyrights, Designs etc. and exists in your products, processes, internal systems, communications and even management policies. It is well known that patents are the most valued intangible asset by any given valuation. We will help you identify those potential candidates for patents and trademarks that will benefit you in both short term and long run.
What benefit do I get with all this process?
In simple bullet points:
- You own intangible assets in the form of patents and trademarks or other IPRs maybe
- Valuation of your company goes up, when you go for funding in the coming financial year
- You may also seek funding using your IPRs as collateral for debt investment
- In the long run, IPRs will generate YoY licensing revenues for you