Launch of new WIPO report series on unlocking IP-Backed Finance at Singapore’s IP Week, 26 August 2021 – Sharing the Singapore Country Report

September 28, 2021

Many enterprises face challenges securing access to capital to grow or stay afloat. With few tangible assets to put up as collateral, financing can be out of reach for many companies, particularly start-ups and technology companies. What banks and entrepreneurs often overlook is the most valuable asset at a business’s disposal – their intellectual property. What if businesses could tap into these resources to secure capital?

The promise of that potential lies at the heart of a new project of the World Intellectual Property Organization (WIPO) on IP-Backed Financing. Within WIPO, the series is part of the work program of the IP for Business Division in the IP and Innovation Ecosystems Sector. Through a series of country reports, the project offers a look into the initiatives governments are to help enterprises use IP as a financial asset. At the same time, the reports will identify hurdles to overcome to make this type of financing more widely available. The series aims to bridge the information gap to facilitate IP-backed financing. Singapore is the first report in the series. The report’s preliminary findings were shared during the country’s IP Week at the end of August in an event co-organized by WIPO and the Intellectual Property Office of Singapore.

During the series launch, WIPO Director General Daren Tang explained the motivation behind building the evidence base. The aim of these reports and WIPO’s new focus in the area is “to move the international conversation forward so that more innovators and creators from around the world can begin to find tools and policies that can help them maximize and leverage the value of their IP,” he said. Mr. Tang describes a “blind spot” that complicates the policymaking process in the area of IP-backed financing. With no standard way to value intellectual property or use it to access capital, enterprises cannot realize the full benefit of their IP. Mr. Tang also stressed that “the complexities involved in valuing intangible assets prevents many firms from leveraging what is often their most strategic asset – their IP – to access the financing they need to scale up and to grow.”

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Daren Tang
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Rena Lee

In the first report of the series, Singapore shares its journey to develop a multi-faceted ecosystem for IP-backed financing.  One major focus for Singapore is IP valuation.  Mrs. Rena Lee, Chief Executive of the IP Office of Singapore (IPOS), described the country’s experience. “Financing institutions remain uncertain about the methodologies of valuing intangible assets and therefore lack confidence in accepting the valuation outputs.”  Singapore sees a real benefit from valuation guidance that considers “the multi-disciplinary nature of the assets and improves the credibility and consistency of valuation across economies.”

Improving valuation is just one part of the holistic approach taken by Singapore. The report’s author, Mr. Andre Toh of Ernst and Young LLP underlined that “there is a clear recognition that a conducive ecosystem must be in place to facilitate access to capital for intangible assets”. As Mr. Toh put it, Singapore has started to “piece together the various ingredients” to create this ecosystem. The country started with a robust legal and regulatory framework at its foundation. Then Singapore developed a network of key players along the IP value chain, and will leverage public private partnerships moving forward.

This network is broad. In addition to IPOS, other agencies like Enterprise Singapore which champions local enterprise development are involved. Singapore’s central bank, the Monetary Authority of Singapore and the Singapore Accountancy Commission also play a role.

While Singapore continues to advance IP-backed financing as an option for enterprises, this route to capital is far from mainstream.  Mr. Toh identified several challenges from the country’s experience. First, the acceptance of IP as collateral. Financing institutions are less familiar with intellectual property, unsure when or how to use it as collateral. Compounding this, another obstacle stems from information asymmetry. Mr. Toh reflected that IP information tends not to be disclosed in financial reporting, making it harder to understand its value. At the same time, the absence of a strong secondary market makes the underlying assets difficult to dispose in times of default. Having effective means to sell off the assets gives investors confidence to use such assets to underpin financial transactions. Mr. Toh also suggested that enhancing awareness and capabilities to manage IP could help enterprises extract additional value.

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Andre Toh
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Martin Brassell
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Marco Aleman

From an international perspective, there are parallels to Singapore’s experience in terms of both the opportunities and obstacles. According to Mr. Martin Brassell, an expert on IP and finance who has written on the subject for OECD and others, there is a growing appetite for IP-backed financing. His research has uncovered two main barriers. The first is high transaction costs, which are magnified by the complex and unique nature of the assets. For example, financiers must engage specialist due diligence and valuation of the assets being relied upon for the loan. The second problem is a lack of lender confidence in the realizable value of IP. “Transparent secondary markets for IP are actually quite hard to achieve,” he said.  As an example, while IP is recognized as a driver of enterprise value and IP licensing transactions happen regularly, transaction details often do not become public.

In part, financier uneasiness regarding recoveries stems from the close association between intangible asset value and firm performance; distressed assets may be significantly less valuable outside the context of the company that created them. Mr. Brassell believes data-driven analysis of assets and their markets can build confidence, but also observes that guarantees and insurance have a key role to play in ensuring that lenders have a safety net.

While there are substantial challenges ahead to making this type of financing a viable option, its potential to help companies is undeniable. The report series is one aspect of holistic approach taken by the newly established IP and Innovation Ecosystems Sector. The Sector is headed by Assistant Director General Mr. Marco Alemán. “Our objective is to support countries and the enterprises that drive their economies.  That aim will only be possible when our innovators can realize the full benefit of their intellectual property.”

Watch the event

1:30

The Role of IP Assets in Strengthening Business Access to Finance.

9:01

Developing a Credible and Trusted IA/IP Valuation Ecosystem

18:40

Singapore’s Experience in IP-Backed Financing: Presentation of the Country Report

28:58

International Perspective of IP-Backed Financing

52:47

Unlocking IP-Backed Financing: Taking Stock and Looking Ahead