The value of an idea lies in its using of it. -Thomas Edison
With the advent of innovations worldwide and the growth of startups, a knowledge-based economy has become an essential source of economic growth worldwide. Knowledge/Intangible assets are now the principal form of economic assets, more valuable than tangible ones. As per the Global Intangible Finance Tracker 2020, physical assets account for only 4% of Amazon’s net worth, while the corresponding numbers were only 6% for Apple, 7% for Microsoft, 16% for Facebook, and 26% for Alphabet. This has led to growth towards using intellectual Property as collateral, even for emerging business opportunities that may help further boost the startup economy.
India is a bustling startup center with the world’s third-largest startup ecosystem. However, the emerging startup economy has not stabilized yet; the NASSCOM survey (2020) found that nearly 40% of startups have temporarily shut down or are on the verge of closing and 70% have less than three months of cash runway.
The rapidly increasing awareness and significance of intellectual Property has spread to micro, small, and medium enterprises (MSMEs) and startups. We cannot deny the role of IPR as a factor in the success of Indian Startups. Possession of registered IPRs gives an edge to startups; rivals can use an unregistered invention. Monetization of IPR in the Indian economy, where the primary source of capital for startups is family and friends( 43 %) and only 36% as loans from banks and financial institutions, IPR financing can be a significant source of capital for emerging startups.
Interestingly, using IPR and other intangible assets as security for debt financing is not new, though it has not gained popularity. Going back to the bulb’s invention, Thomas Alva Edison used it as his patent as security to borrow money to launch the General Electric Company.
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