Intellectual Property: Measuring the value of intangible assets

This article first appeared in Digital Edge, The Edge Malaysia Weekly on May 22, 2023 – May 28, 2023

Innovation-driven businesses in Malaysia are booming but they are in need of financial support from investors and government subsidies to scale regionally and internationally. Given that start-ups and new ventures have limited tangible assets to use as collateral — which consequently makes these businesses highly risky undertakings for prospective debt financiers — the answer could be to use intangible assets when seeking capital.

It can be tough to measure and quantify intangible assets but it can be shown through intellectual property (IP) such as patents, trademarks and copyrights.

However, most start-ups and small and medium enterprises (SMEs) tend to focus on generating IP and overlook the importance of putting a value on them, says Tee Lin Yik, founder and CEO of Valuing IP Sdn Bhd.

Valuing IP is a technology start-up and, as the name suggests, specialises in IP valuation. The firm provides consulting services and publishes reports on intangible assets or individual IP for businesses. Last year, it received an investment of RM1.1 million through Malaysia Co-investment Fund (MyCIF), alongside equity crowdfunding (ECF) and funding from Cradle Fund Sdn Bhd, to develop the IP valuation digital platform.

“The tendency to neglect intangible assets is higher than tangible ones. Now, under the MyIPO initiative by the government, the ecosystem is good. Start-ups rely on IP because they are new business models [and] they create new technology, new brands and so on. This allows them to determine the monetary value of these assets,” says Tee.

The Intellectual Property Corporation of Malaysia (MyIPO) is an agency under the purview of the Ministry of Domestic Trade and Cost of Living (formerly known as Ministry of Domestic Trade and Consumer Affairs). It is responsible for the development and administration of the intellectual property rights (IPR) system in Malaysia, which includes patents, trademarks, industrial designs and layout designs of integrated circuits, copyrights and related rights.

In the National Fourth Industrial Revolution (4IR) Policy Framework, businesses — particularly in the electrical and electronics sector — are encouraged to generate more IP.

“Although MyIPO lays the foundation for IP rights in Malaysia, it focuses only on law and enforcement,” says Tee, who came up with software for businesses to safeguard their intangible assets and reach out for consultation when in doubt after he noticed the gap.

In 2007, the Malaysian government launched the National Intellectual Property Policy, which aims to create a conducive environment for the development and commercialisation of IP in the country. The policy includes provisions for promoting IP valuation and management, as well as creating awareness of IP rights among businesses and the general public.

“For instance, large companies have a lot of research and ongoing projects but they don’t know which to focus on and [sometimes] there is a budget restriction. This is where IP valuation comes in and helps companies identify shorter projects that have potential and commercialisation value,” says Tee.

“Other than that, the benefit of having proper [IP] valuation is to help companies with their liquidation process. Also if a company wants to seek damage compensation or someone else is using its label and it is up for suing, IP valuation helps it justify the compensation amount,” says Valuing IP co-CEO Kuok Pui Leng.

The software and digital platform was developed simply for businesses to get an instant IP valuation report without having to go through an arduous process of consultation and waiting time.

“To simplify the entire process, IP valuation can be fully automated. All clients have to do is key in the information instructed into the system and the results will be generated in three to seven working days, as opposed to dealing with an IP valuer, where the results take much longer to process,” says Kuok.

To make the process even more efficient, Valuing IP is working to add artificial intelligence (AI) and machine learning (ML) tools to its platform. “But to incorporate AI and ML, the platform’s foundation has to be strong first,” says Kuok.

“We are building the fundamentals, and AI is in the pipeline. In the future, we may be able to come up with reports on a business’ strengths, weaknesses, opportunities and threats (SWOT) analysis, competitors and market predictions using AI in our software.”

As IP is becoming increasingly popular as a valuation tool, there are many IP valuation software providers in the market. This is where Valuing IP’s services sets it apart from its competitors, says Tee, as the firm offers its software and digital platform services at a relatively low price compared with its competitors.

“We have a standardised price package for clients. Three packages at different price points and validity periods. The lowest is RM6,000, targeted at small businesses, while the titanium package, which costs over RM60,000, is designed for large corporations with many patents,” he adds.

While companies are aware that intangible assets are as valuable as tangible assets, Valuing IP is looking to democratise the valuation of IP, especially for start-ups and SMEs.

“The general perception [is that it is enough if] they own IP, which is either a brand name, technology, software or app. They know that these are IP and they are a form of an asset, but most are not aware of their value. For an IP valuation report, prices can go up to RM50,000. We want to be able to change this,” says Tee.

Save by subscribing to us for
your print and/or
digital copy.

P/S: The Edge is also available on
Apple’s App Store and
Android’s Google Play.