[Valuable Intellectual Property] The 'Thing' Invented by Edison, the King of Invention... Worth 6 Trillion Won Domestically

⑪IP Finance Revitalizing Innovative Companies
Utilized for Secured Loans, Guarantees, and Investments
Funding Through Economic Valuation of IP
Advantageous for Tech-Savvy SMEs and Venture Firms

IP finance played a crucial role about 140 years ago when inventor Edison commercialized the incandescent light bulb and established an electric company. Today, the venture company 'STN,' which creates LED sculptures, secured operating funds through IP finance and illuminated the beach last year by hosting the Haeundae Light Festival.

[Asia Economy Reporter Kim Bo-kyung] The inventor Edison secured loans and attracted investments by using the patent for the incandescent light bulb as collateral. This was a method of raising funds based on the value of a patent over 140 years ago. With this money, he succeeded in commercializing the incandescent light bulb and established an electric company that became the foundation of the global corporation GE (General Electric). Utilizing intellectual property (IP) to obtain loans or investments from financial institutions is collectively called IP finance. Edison is regarded as the first beneficiary of IP finance.

Compared to advanced countries like the United States, South Korea has a relatively short history of IP finance. Often, financing is based on tangible assets like real estate collateral or credit rather than the value of intangible assets. Therefore, it is not easy for small and venture companies to secure funds. Especially these days, high loan interest rates make fundraising even more difficult. IP finance can be an effective means for innovative companies with excellent technology but difficulty in securing funds. It also offers preferential interest rates, making it a win-win solution.

IP finance is broadly divided into collateral loans, guarantees, and investments. IP collateral loans are a system where a company’s patents are appraised for value and used as collateral to obtain loans from banks. The venture company 'STN', which manufactures LED sculptures, needed operating funds to respond to a temporary business downturn caused by COVID-19. In 2020, they secured a low-interest loan of 300 million KRW by using five patents related to LED and optical fibers as collateral, successfully diversifying their business.

To receive an IP collateral loan, an 'IP valuation' that assesses the economic value of the IP is essential. A total of 23 public and private institutions designated by the Korean Intellectual Property Office conduct IP valuations. Since technology and market experts must collaborate, the costs involved are considerable. STN received support from the Korean Intellectual Property Office for half of the 5 million KRW IP valuation fee. Lee Ji-woon, CEO of STN, said, "Our annual sales, which were about 3 billion KRW at the time of the loan, rose to 12.5 billion KRW last year," adding, "We achieved results such as winning a 1 billion KRW contract for the Busan Haeundae Light Festival."

IP guarantees refer to obtaining a guarantee certificate from guarantee institutions such as the Korea Technology Finance Corporation or the Korea Credit Guarantee Fund, and then using the certificate to secure loans from banks. A small company producing COVID-19 rapid diagnostic kits, 'Jet Biotech', is an example. This company, which had difficulty obtaining general guarantees due to operating losses, received an IP guarantee certificate for two diagnostic system patents in 2021 and was able to secure a 300 million KRW loan from a bank to purchase raw materials for kit production.

Companies with excellent intellectual property also have opportunities to receive IP investments. The software company 'AnyPen' attracted 5 billion KRW in investments last year through venture capital (VC) firms such as The Wells Investment, based on the valuation of two augmented reality (AR) related patents. This secured funding for the development of a metaverse platform scheduled for release in the first half of this year.

The scale of domestic IP finance has steadily increased, with new supply amounts of 1.3504 trillion KRW in 2019, 2.064 trillion KRW in 2020, and 2.5041 trillion KRW in 2021. Considering the funds still outstanding and circulating in the market, the scale of IP finance exceeds 6 trillion KRW. Companies interested in IP collateral loans or guarantees can visit one of the 10 banks handling IP collateral loans or guarantee institutions such as Kibo or Shinbo to request consultations. For IP investments, it is advisable to consult with investment institutions. Information on investment institutions conducting IP investments can be obtained through Korea Venture Investment Corp.

This content was produced with the assistance of AI translation services.