A recent report by Aon, in collaboration with Beauhurst, a UK private company data provider, reveals challenges in the funding ecosystem for intellectual property (IP)-rich companies in the UK.
The study, titled “Funding Innovation: Intellectual Property’s Role in Unlocking the Potential of UK Scale-ups,” highlights a significant funding gap for these companies, with only 2% of IP-rich companies both reaching scale-up status and raising equity funding.
According to the report, there are 18,477 IP-rich companies in the UK, but only 8% have achieved scale-up status as defined by the Organisation for Economic Co-operation and Development (OECD). Furthermore, just 18.5% of these companies have secured equity funding. Scale-up status is identified by an average annualised return of at least 20% over the last three years, with the company having at least 10 employees at the start of this period.
The report underscores the considerable potential of IP-rich companies, with the 381 companies (2% of the total) that have reached scale-up status and raised equity funding collectively amassing £15.7 billion. Aon suggests that harnessing the value of IP could unlock greater potential in a larger number of UK-based IP-rich companies.
Sector-wise, equity-backed IP-rich companies are predominantly found in fields such as artificial intelligence (AI), genomics, big data, and the Internet of Things. The report also highlights a regional disparity, with the “Golden Triangle” of London, Oxford, and Cambridge dominating the UK's innovation landscape.
This report is based on extensive interviews with 30 leaders from the UK and European scale-up ecosystem and an analysis of proprietary data from Beauhurst. It explores the barriers faced by IP-rich scale-ups in securing funding and proposes potential solutions.
Aon identifies six solutions to address the funding gap for IP-rich scale-ups. These include IP financing, first-of-a-kind asset finance, clear strategic government priorities, pension reforms, specialised funds with sector expertise, and new tax incentives like a version of the Enterprise Investment Scheme (EIS) for Series B companies.
Aon's IP Finance solution has already made a significant impact in the market, helping companies leverage their IP to access needed capital. The firm has facilitated $2.5 billion of debt, enhanced with collateral protection insurance, for an innovative IP-rich company in the UK and others in the US and Europe.
“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,” Aon EMEA CEO Julie Page said.
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