A new report from global re/insurance broker Aon, in partnership with Beauhurst, shows that there is a significant funding gap for intellectual property (IP) rich UK organisations, with only 2% having reached scale-up status and also raising equity funding.
Important to remember, scale-up status is defined by the Organisation for Economic Co-operation and Development (OECD) as when a company has an average annualised return of at least 20% in the last three years, and had at least 10 employees at the start of the three-year period too.
Moreover, while the broker has established that while there are only 381 IP-rich companies in the UK (2%) that have managed to reach scale-up status and raise equity funding, the meaningful potential of these businesses is demonstrated by the £15.7 billion raised between them.
Of these equity-backed, IP-rich companies, top sectors include artificial intelligence (AI), genomics, big data and the Internet of Things (IoT).
The study also showcases how the ‘Golden Triangle’ of London, Oxford and Cambridge continues to dominate the innovation landscape, which clearly highlights a regional gap within the market.
If you recall, a survey conducted by Aon in 2019 showcased that IP risks were identified as a top-10 concern for organisations, which also found that insurance covers only 16% of the $1.0 billion average potential loss for certain intangible assets.
Further, the broker addresses six solutions that may wind up tackling the funding gap facing IP-rich scale-ups, which includes:
· IP financing to fully leverage intellectual property to access capital
· First-of-a-kind asset finance to support new labs and manufacturing lines
· Clear strategic priorities from government
· Pension reforms to release new capital specifically for high growth firms
· Specialised funds with sector expertise for IP-rich sectors such as deeptech and life sciences
· New tax incentives such as a version of the Enterprise Investment Scheme (EIS) for Series B companies
At the same time, Aon’s IP Finance solution is already active across the market and making a significant impact for IP-rich scale-ups.
According to the broker, the solution can enable organisations to use the value of their IP as leverage to access the funds they need to keep growing.
Julie Page, CEO of EMEA, Aon, commented: “We believe Aon can play a central role in reducing the funding gap for today’s innovators by providing solutions that enable them to value their IP effectively and, in turn, secure funding. Our objective is to keep looking forward and creating the data and proof points around IP that enable this hugely important asset to move from intangible to tangible for the purpose of capital transactions.”
Will Kier, head of IP Solutions EMEA, Aon, said: “While the ideas, innovation and drive to succeed are evident in all corners across the UK, funding is still a challenge for promising scale-ups. The well-documented scale-up funding gap disproportionately impacts businesses with cutting edge technology which require patient capital to develop, validate and commercialise products. By looking at access to capital and identifying the scale of this gap as well as providing proven solutions, we hope to be part of a more dynamic and thriving environment for the UK’s most innovative scale-ups.”
