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Placing value on the intangible

Aon uses data science to help establish intellectual property as a recognized asset class

Placing value on the intangible
Aon’s IP valuation platform harnesses the power of machine learning to analyze vast data sets

Consider this scenario: A hot new startup needs cash to invest in growth. Being a young company, its founders have few tangible assets they could use to secure a loan. The company has plenty of intangible assets—including intellectual property (IP) like patents, data software, trademarks, and brands—but that value (especially this early in the game) is nearly impossible to determine. So, out of options, the owners sell equity in their company: They get the capital they need, but now have smaller stakes in their venture. And because intellectual property is so hard to assess, they may have significantly undervalued the company’s real worth.

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To global professional services firm Aon, this incomplete understanding of a company’s intangible assets is a missed opportunity in early-stage startup funding. And (as Aon quickly realized), a source of untapped potential, with companies continuing to derive possible ever-increasing value from their intangible assets. “Early-stage companies innovate. It’s what typically makes them investable in the first place,” says Lewis Lee, CEO of Intellectual Property Solutions at Aon. “But at the same time, they often don’t get credit for that.”

To address that challenge, Aon developed a proprietary platform that applies machine learning to a massive data set to place a value on a company’s IP portfolio (and even help predict potential future revenues). With a thorough IP valuation—and an insurance-market capital-financing mechanism known as IP-backed lending—Aon can now support companies seeking to use their IP as collateral for a loan. For its transformative approach to the valuation of IP assets (and creating a new area of growth-stage funding), Aon has earned a place on Fast Companys list of the world’s Most Innovative Companies.

USING DATA FOR A COMPETITIVE EDGE

In 2021, Entrinsic Bioscience used Aon’s IP valuation platform to help raise capital. The biotechnology company was holding valuable IP: Its proprietary innovation selectively modulates proteins inside the human body to regulate health. Determining a value with its IP valuation platform, Aon helped the company secure an insurance policy, allowing it to use its potentially profitable technology as collateral against a $49 million loan. Without Aon’s IP valuation platform, Entrinsic Bioscience likely would have had to sell off a large chunk of equity to access those funds.

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Aon’s platform can do more than open a new stream of capital. It can give businesses insights into how they can align and build their IP assets to help enhance enterprise value. And it can also deliver actionable information to help investors, insurance carriers, lenders, and other stakeholders make better, and more informed decisions—including the ability to identify which companies’ IP assets may have the greatest growth potential.

CREATING A NEW ASSET CLASS

At a time when, according to Ocean Tomo, intangible assets are estimated to comprise 90% of the total value of the entire S&P 500 Index, the significance of having more accurate snapshots of a company’s financial health is expanding across the business landscape. “We expect our platform to impact all the different spaces—lending, financing, insurance, investing, advising,” Lee says. “We’re opening an entirely new asset class that’s already valued in the trillions.”

Lee would like to see Aon help move capital efficiently around the globe—to fund promising, useful innovations, wherever they might come from. “We’ve always focused on people innovating in their garages,” he adds. “In the future, people could conceivably innovate in their garages, and then see the value of those innovations recognized almost in real time.”

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