The proper inclusion of IP as part of a company’s valuation process can improve their negotiation position when seeking financing. On average in Europe, 40% of a company’s value is represented by intangible assets (intellectual assets, but also brand, ecosystems and partnerships), and this share is continuously growing (i.e. by 29% in the last 25 years) Moreover, intangible assets are even more consequential in fast growing high-tech companies, such as space tech, due to their strong focus on R&D. 

Nevertheless, unfortunately many organisations often fail to understand the value of their intellectual assets (software, IPR, R&D, knowledge and know-how resulting from R&D, databases, etc.) and the associated risks. Fast-growing high-tech companies additionally face other pressing issues such as developing their product, hiring employees, raising capital and more. As a result, companies may place their priorities elsewhere within their internal operations and fail to benefit from a thorough intellectual asset valuation. 

“Assessing and valuing a company only utilising one valuation approach is like the parable of the blind men describing an elephant. Depending on the viewpoint, a company may be described and perceived very differently. That’s why in our experience it’s always important to assess the context of the company analysis, frame the analysis correctly, and to utilise multiple fit-for-purpose valuation methods to reveal the full and most accurate picture.” Tuomas Nousiainen, Apollonian 

The following best practices can be followed in order to mitigate the risk of neglected intellectual asset valuation:   

1. First, clearly identify each intellectual asset and their boundaries with other similar assets. This includes the definition of the asset, qualitative and quantitative characteristics of the asset, etc. By clearly identifying and defining assets one may improve the estimations of their value and the accuracy of forthcoming calculations.
2. Use different methods to evaluate the value of intellectual assets. The use of multiple methods allows for comparisons between different results and thus will aid in the selection of the best valuation method, or, the best combination of methods. 
   1. Cost-based valuation takes into consideration both how much it has cost to create the asset and how much it would cost to recreate it from scratch at this stage. This approach, although imperfect, is especially relevant to valuing intellectual assets where there is no significant cash flow associated with the assets. 
   2. Market-based valuation considers similar assets in comparable markets, from a sale or  purchase perspective. An example would be to estimate royalties. 
   3. Income-based valuation considers the flow of historical income and expected future earnings attributable to the intellectual property. 
3. Identify risks and opportunities linked to the intellectual assets. Like any other asset, there is potential that an asset may lose value or generate new opportunities for any number of reasons. Such risks and opportunities must be considered in the valuation.  

The good news is that e-shape partner, Evenflow – leader of the Sustainability Booster – offers a solution to these issues. Having partnered with Apollonian – a company specialised in deeptech valuations, Evenflow provides a SAAS-based deep tech valuation tool to start-ups and other SMEs in the space industry. This tool runs sophisticated models complemented by expert assessments. One of the added values of this tool (compared to other valuation bodies) is the focus on intellectual assets representing an important part of space high-tech value. These assets reveal if a company will survive and prosper in a competitive environment over the long haul.