One of the best sources of data on new start-ups is the Kauffman Foundation's Firm Survey, which is tracking 5000 companies that began operations in 2004. Each year, new questions are added to the survey. I'm happy to say that the survey is fully cognizant of the importance of intangibles. The 2009 survey specifically asked questions on the firms' investments in intangibles. Data on the 2009 survey will be available in April but a preliminary discussion of survey was presented at the annual AEA meeting (see earlier posting):
I am especially pleased to see this in the survey as it incorporates the suggested question I submitted to Kauffman late last year in response to their call for new questions. In that submission I noted that a better understanding of how new businesses are financing their operations and expansion - specifically whether they are taking advantage of their intangible assets and intellectual property. It is becoming somewhat more common that the borrower's IP is explicitly included in an asset-backed loan and that the value of these intangible assets are included in the loan analysis. In a very few cases, the IP is specifically used as the major form of collateral for the loan. However, collateral often takes the form of a blanket lien on all assets. Intangibles and IP would implicitly be including in such a lien. In this case, their value would not necessarily be recognized at the time of the loan or used to determine the conditions of the loan (i.e. the amount of collateral required and the loan-to-value ratio).
It will be interesting to see the results of the survey -- especially if companies are explicitly aware that their intangibles might be part of their loan collateral. That data will not be available for over a year, however. In the meantime, I'm looking forward to more in-depth analysis of the 2009 data in investments in intangibles.
The preliminary data shows that almost half of the new companies surveyed in the US invested in some form of intangible assets (almost 65% of "high-tech" companies). For US companies, the leading intangible asset was brand development, followed by investments in software or databases, worker training and then design of new and improved products and services. Organizational development investment was very low.Now comes word that the 2010 survey will include more questions on intangible investments and innovation. One set of questions will focus on what debt financing the firms use. As part of that question, it will specifically ask whether companies used their intellectual property (patents, copyrights, trademarks) as collateral for loans.
I am especially pleased to see this in the survey as it incorporates the suggested question I submitted to Kauffman late last year in response to their call for new questions. In that submission I noted that a better understanding of how new businesses are financing their operations and expansion - specifically whether they are taking advantage of their intangible assets and intellectual property. It is becoming somewhat more common that the borrower's IP is explicitly included in an asset-backed loan and that the value of these intangible assets are included in the loan analysis. In a very few cases, the IP is specifically used as the major form of collateral for the loan. However, collateral often takes the form of a blanket lien on all assets. Intangibles and IP would implicitly be including in such a lien. In this case, their value would not necessarily be recognized at the time of the loan or used to determine the conditions of the loan (i.e. the amount of collateral required and the loan-to-value ratio).
It will be interesting to see the results of the survey -- especially if companies are explicitly aware that their intangibles might be part of their loan collateral. That data will not be available for over a year, however. In the meantime, I'm looking forward to more in-depth analysis of the 2009 data in investments in intangibles.
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