Patent Financing: Everything You Need To Know
BlueIron finances startup companies using your IP as collateral. When we provide financing, we have "skin in the game" and our success is based on the value of your IP - coupled with your success in getting a product to market.
BlueIron’s patent financing is designed for Seed, Angel, and Series A startup companies. Rather than pay for patents with the full up-front cost, financing frees up cash for operations, however, the biggest benefit of financing is BlueIron’s due diligence and research prior to patenting.
What is the legal structure of patent financing?
The legal structure is a "lease-back." The IP assets are held in a Special Purpose Vehicle, which is a specially-created LLC holding company where the patents are assigned. You have an exclusive license with a buyout option, and you can buyout the holding company at any time.
Some people buyout the holding company in a few months or maybe a year. Other companies have a higher cost of capital and choose to continue financing until they are profitable and can borrow from a bank, then execute a buyout.
Almost all big companies, including virtually every one of the Fortune 50, use patent holding companies for their IP assets. This corporate structure is widely used and known - although not very frequently discussed.
Can I enforce my patents while they are being financed?
Just like leasing a car, you have full CONTROL of the patent assets without having to pay the full price up front.
Because you have an exclusive license, you – and only you – decide how to use the patent assets. You can enforce, license, sublicense, cross license, or sell your business assets. BlueIron has no veto power and no say in how you run your business.
BlueIron provides Patent Enforcement Insurance with every patent finance agreement. This means you have pre-paid legal fees ready and waiting to assert the patents against infringers. We do not want you to fail to enforce the assets just because of lack of money.
Is it better to own my patents than to lease them?
Financially, a startup's cost of capital is extremely high - especially at the beginning - so every dollar needs to be spent wisely. Leasing or renting assets is much more capital efficient.
Most startup companies lease office space and even lease furniture through a coworking space. They lease computer services through Amazon Web Services and Microsoft Azure. Virtually all of the tools they use are SaaS or other "leasing" type models.
The reason why leasing or renting is attractive is two fold:
- Leasing an asset means you do not have to pay for it up front.
- Leasing an asset means someone else takes care of building and maintaining the asset.
When you consider a startup company's cost of capital, BlueIron's financing is actually cheaper on a Net Present Value of money basis.
The big benefit of "leasing your patents" is that BlueIron is perfectly aligned with your business. We need to create good, solid assets and will only do so when there is a business reason. You will never get the feeling that you are asking the barber if you need a haircut.
What is the buyout cost of a financed patent?
The buyout option is based on BlueIron’s investment in the asset, NOT a percentage of the patent value, revenue, or any other measure. Our job is to build Investment Grade Patents for you, not become a tax on your success.
Can I still get angel or venture investment if I finance my patents?
Our due diligence reports are highly respected by investors.
BlueIron’s due diligence process not only evaluates patentability, but also enforcability, the economic advantage of the invention, its value to the startup’s market, as well as its value to competitors. Solid business value is REQUIRED before BlueIron can finance the invention, and BlueIron's due diligence reports puts investor's minds at ease about their investment.
BlueIron's financing ensures that we have "skin in the game." We succeed only if the patents are valuable and when your company is successful.
BlueIron NEEDS You to be Successful
BlueIron is investing in your ability to execute at least as much as the quality of your idea.
The patents ONLY have value if you are successful in bringing a profitable product to market. If the product fails in the marketplace, the patents are likely worthless, which is our only collateral. BlueIron’s interests are perfectly aligned with your’s.
Find Out More
Give Russ a call at 970.776.4355.
We are always happy to chat with inventors and startup CEOs. If we cannot help you, we will direct you to someone who can.
You can download a one-page brochure here: