Business of IP Asia Forum 2016 IP Financing : Global Success Models And The Future Roadmap for Hong Kong INTELLECTUAL PROPERTY FINANCING : THE MALAYSIAN EXPERIENCE By: Mohd Sharizal bin Mustapah Kamil Senior Vice President Malaysia Debt Ventures
Introduction
3 Introduction to MDV Mandated by the WHO Govt of Malaysia Provide financing to the WHAT technology sectors Technology sectors WHY are deemed risky Through flexible & innovative HOW loan products
4 Mandate 2002 2008 2011 INFORMATION & COMMUNICATION TECHNOLOGY Technologies for gathering, storing, retrieving, processing, analyzing, and transmitting information BIOTECHNOLOGY Use of living organisms or biological techniques to provide chemicals, drugs, food and services GREEN TECHNOLOGY Products and services that reduce or eliminate negative environmental impacts and improve productive and sustainable use of resources 2014 EMERGING TECHNOLOGY High value & high impact technologies including aerospace & aeronautics, fintech, Big Data etc Startup Growth Matured
5 With Intellectual Property INTELLECTUAL PROPERTY FINANCING SCHEME (IPFS) USD 50 million IPFS 2% interest rebate from the Govt 50% credit guarantee from the Govt FIRST OF ITS KIND!
6 IPFS MECHANISM Assignment of IP 2 MDV and Loan Customer sign Loan Agreement. MDV conducts verification of the IP to be deposited validity and substance. Financing 1 2 MDV and Loan Customer sign Memorandum of IP Deposit An escrow agent is appointed to hold the deposit. 4 Loan Interest & Maintenance Costs 3 Escrow : Deposit of IP material Guarantee 3 The loan is disbursed once all security documents have been perfected. The Loan is perfected by securing the 50% guarantee from the credit guarantee corporation 4 Loan Customer pays interest on the loan and maintenance costs to ensure the IP deposit is updated
7 IPFS PERFORMANCE 16 COMPANIES USD 13 MILLION NUMBER TOTAL APPROVAL USD 40 MILLION TOTAL IP VALUED AS COLLATERAL 3 : 1 RATIO OF FINANCING TO IP VALUATION
ARE YOU READY FOR IP FINANCING?
9 MARKET READINESS AN OPTIMUM ECOSYSTEM specialised funders / financiers - match for long term : equity and debt - Funding & Finance promoting IP Champions - develop specialists in IP Office- Talent building - arbitration / adjudication - strong IP protection laws Industry-friendly policies - tax rebates, pioneer status - alignment with economic policies Government assistance Trade local IP marketplace - induce demand & supply - Market building - encouraging more SME/SMIs - cradle-to-grave education Horizontal industry cross-bordering Vertical industry cross-bordering - international recognition - include IP in value/supply chain - IP as an accounting asset class - IP valuation as value benchmark
10 IP VALUATION : CHALLENGES RELIABILITY OF VALUATION
11 MODELS OF IP FINANCING Income generating capacity? Property of Prosperous Invest 2011 Cost of EQUITY is expensive over longer term BUT legal obligation of DEBT is more demanding, especially for startups & small companies Property of US Capital Partners 2014/06/03
MODELS OF IP FINANCING TYPES OF FINANCING INSTRUMENTS (value of IP is imputed) (value of IP often expressed externally) Ordinary shares Collateralbased Preference shares Microloans Loan stocks (convertible options) Securitisation
Knowledge sharing
14 Lessons from Malaysia s IP Financing NO GO FOR BANKS - Uncertainties about ecosystem MATCH THE INSTRUMENTS - different funding for different purposes IDENTIFY THE REAL IP - what is form & substance of the innovation/uniqueness ALWAYS DO YOUR IP S DUE DILIGENCE - understand the past, present & future A COSTLY AFFAIR - account for all-in costs MAINTENANCE IS AS IMPORTANT AS ACQUISITION - think of value preservation / enhancement PROFIT OR PROVISION? - high hurdle rate MULTI-INDUSTRY & MULTI-SPECIALITY - go niche to avoid getting blindsided
WHY?
Thank you MALAYSIA DEBT VENTURES BERHAD Level 5, Menara Bank Pembangunan, 1016 Jalan Sultan Ismail Kuala Lumpur General Line: +60 3 2617 2888 Fax: +60 3 2697 8998 Email: info@mdv.com.my Website: www.mdv.com.my Facebook: malaysiadebtventures