Valuing Technology Based Intellectual Property<br />An Innovation Catalyst™ Seminar<br />Prepared and Presented by <br />M...
Contact Details<br />Marcus Tarrant<br />Managing Director<br />Mission HQ Pty. Ltd. ATF the Innovate Trust<br />Marcus.ta...
Copyright ©2010 Mission HQ. <br />The content, format, structure and communication technique utilised in this document are...
Seminar Agenda<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />4<br />
 Some Quotes<br />“IP Valuation isn’t rocket science, its much more difficult.”<br />Unknown<br />“Valuation is in many wa...
About Mission HQ Pty. Ltd.<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />6<br />Some recent past clients of Mission...
Mission HQ staff track record in IP Valuation<br />For litigation purposes (Software Technology)<br />Established foundati...
How can we help?<br />Running IP surfacing workshops<br />Running workshops to structure the creation of alternate busines...
Top 6 Valuation Mistakes<br />1 – Thinking that value is a well-defined and well-understood term. <br />2 – the value of a...
What is value? – Whiteboard Discussion<br />What are some of the characteristics of Value?<br />Value is Dynamic<br />© Mi...
Is Value equal to the price someone is willing to pay<br />Discussion<br />© Mission HQ Pty. Ltd. All Rights Reserved<br /...
Is Value is equal to the cost of creating an item<br />Discussion<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />12<...
Summary - Characteristics of value<br />Value is not<br />Consistent<br />Stable<br />Easily predictable<br />Value is<br ...
Introducing a new perspective<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />14<br />
What justifies the price difference?<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />15<br />$220<br />$19.95<br />
A cost approach<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />16<br />Tangible Cost<br /><ul><li>Leather
Plastics
Production costs
Marketing costs
Labour
Logistics and Distribution</li></ul>Tangible Cost<br /><ul><li>Canvas
Plastics
Production costs
Marketing costs
Labour
Logistics and Distribution</li></li></ul><li>An intangible asset approach<br />© Mission HQ Pty. Ltd. All Rights Reserved<...
Intangible asset valuation<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />18<br />$ Valuation<br />Production techni...
Intangible assets provide a new way of looking at your organisation<br />Intangible Assets another dimension<br />
Lets start by thinking broadly<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />20<br />
what are intangible assets?<br />Intangible Assets<br />intellectual assets (IA)<br />intellectual <br />property (IP)<br ...
Skandia Concept of Intangible Assets<br />Market Value<br />Financial Capital<br />value of all physical and monetary asse...
 attitude (motivation, behaviour, conduct)
 intellectual agility (innovation, imitation, adaptation)</li></ul>Structural Capital<br />‘non-thinking’<br />Organisatio...
 processes
 culture</li></ul>Customer (Relationship) Capital<br />customers, suppliers, shareholders, <br />alliance partners, other ...
Adam and Oleksak Concept of Intellectual Capital<br />Market Value<br />Intellectual Capital<br />Financial Capital<br />H...
Human Capital<br />This indicates tacit knowledge, skills, abilities and experience embedded in individuals within an orga...
Structural Capital<br />knowledge and rules embedded within organizational routines, including <br />mechanisms and struct...
Relational Capital<br />This involves every existing business network linking an organisation to partners (distributors, s...
Business Model<br />This consists of competitive ability, extent of market control, knack for business development  and ra...
Aspects of Valuation<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />28<br />
What constitutes Intellectual Property?<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />29<br />
-30-<br />Intellectual Property Foundations – what is IP?<br />Intellectual property rights are the legal rights which res...
Forms of IP<br />Copyright <br /> applies to original works or art, literature, music, films broadcasts and computer progr...
-32-<br />Intellectual Property Foundations<br />Patents<br />A patent is a right granted for any device, substance, metho...
Conducting an IP Valuation<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />33<br />
The IP Valuation Pyramid<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />34<br />Solution Layer<br />Methodology Laye...
Foundation Layer - Purpose<br />Why are we valuing the asset?<br />Helps to set the goals and objectives for the valuation...
Foundation Layer – Description (1)<br />What is the asset?<br />Form of intellectual asset(s)<br />Inter-relationship betw...
Foundation Layer – Description (2)<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />37<br />P Characteristics & Valuat...
Foundation Layer – Premise (1)<br />How will the asset be used?<br />This is often the most complex component of establish...
Foundation Layer – Premise (2)<br />Not to just value the technology on the current business model.<br />We look at any po...
The 9 Element business model Matrix<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />40<br />
The business model matrix<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />41<br />Value Proposition – What are you of...
1. The Value Proposition<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />42<br />
Defining the value proposition<br />-43-<br />Value can occur in any of the following elements<br />
Mapping out your value proposition<br />-44-<br />
-45-<br />Evaluation Process<br />Simplify a customer’s evaluation process<br />Example: ISELECT<br />
-46-<br />Value Co-Creation<br />Through various technological advances the integration and participation of the customer ...
-47-<br />Purchasing Process<br />Customers highly value an efficient, simple and convenient purchase process.Example: Cre...
-48-<br />Set-Up/Installation<br />In some cases set-up or installation is necessary. The simplification of this process i...
-49-<br />Use/Operation<br />In many cases most of the value in a value proposition comes from the use or operation of an ...
-50-<br />Maintenance & aftersales support<br />Value is often created during the maintenance and after-sales phase. This ...
-51-<br />Ending and value transfer<br />In many cases once a customer does not need a product or service anymore he has t...
2. Capabilities/Resources<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />52<br />
2. Capabilities/Resources<br />What physical assets does our business model require?<br />Factory<br />Machinery<br />Etc....
3. Partnerships<br />Describes the network of suppliers and partners that will make the business model work<br />Joint Ven...
4. Activities<br />The activities outline the most important things that the organisation will do.<br />Production<br />Pr...
5. Costs<br />Outlines the primary areas of cost under the business model<br />Fixed Costs<br />Variable Costs<br />Econom...
6. Relationships <br />What relationships other than partnerships may be required.<br />Particularly relevant in web 2.0 c...
7. Channel<br />What channels to market with the model employ?<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />58<br />
8. Revenue<br />What element of our value proposition will our customers actually pay for?<br />Asset Sales<br />Usage fee...
9. Customers <br />The different groups of people or organisation that the organisation hopes to reach and serve.<br />Seg...
Foundation Layer – Value Standard (1)<br />Fair Market Value<br />Fair Value<br />Market Value<br />Investment Value<br />...
Foundation Layer – Value Standard (2)<br />Preferred standard is fair market value<br />Who will be the assumed buyer of t...
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Valuing Intellectual Property

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This presentation was prepared for the 2010 Australian Innovation festival by Mission HQ. It provides a framework that we utilise in consulting engagements for the valuation of technology based intellectual property.

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Valuing Intellectual Property

  1. 1. Valuing Technology Based Intellectual Property<br />An Innovation Catalyst™ Seminar<br />Prepared and Presented by <br />Marcus Tarrant<br />Managing Director<br />Mission HQ Pty. Ltd. ATF the Innovate Trust<br />
  2. 2. Contact Details<br />Marcus Tarrant<br />Managing Director<br />Mission HQ Pty. Ltd. ATF the Innovate Trust<br />Marcus.tarrant@missionhq.com.au<br />+61 3 9005 9710<br />www.missionhq.com.au<br />Guest Presenter<br />Matthew Bowler<br />IP Valuation Pty. Ltd.<br />Matthew.bowler@ipvaluaton.com.au<br />www.ipvaluation.com.au<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />2<br />
  3. 3. Copyright ©2010 Mission HQ. <br />The content, format, structure and communication technique utilised in this document are the intellectual property of Mission HQ Pty. Ltd.<br />This document is strictly classified as “Commercial in Confidence” and intended only for recipients expressly authorised by Mission HQ. Any modification or distribution under altered expression, by any means, in its entirety or in parts, to any person without written approval from Mission HQ is expressly prohibited. <br />Natural Persons or bodies corporate may not copy, retransmit, distribute, publish or otherwise transfer any copyrighted material to third parties or contractors without the express permission of Mission HQ.<br />This document is intended to reflect MISSION HQ’s high-level overview of the IP Valuation Process. It does not constitute formal professional advice or a recommendation to potential licensors, tax advisors, inventors or other third parties as to a course of action in respect of the processes addressed, and should not be relied on as such. All care is taken in the preparation of this document but MISSION HQ bears no responsibility as to the contents of this document and disclaims any liability with respect to its use or misuse.<br />Intellectual Property & Disclaimer<br />
  4. 4. Seminar Agenda<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />4<br />
  5. 5. Some Quotes<br />“IP Valuation isn’t rocket science, its much more difficult.”<br />Unknown<br />“Valuation is in many ways simply the quantification of business strategy, strategic planning frameworks and execution capability”<br />Marcus Tarrant<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />5<br />
  6. 6. About Mission HQ Pty. Ltd.<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />6<br />Some recent past clients of Mission HQ and the team:<br />
  7. 7. Mission HQ staff track record in IP Valuation<br />For litigation purposes (Software Technology)<br />Established foundation valuation for Arbitration<br />For M&A activity (Mining Technology)<br />Movement of IP from entity in administration<br />For IP warchest (Telecommunications)<br />International IP transaction facilitated<br />For Investment Purposes (Clean Energy)<br />$50m investment by Aust ASX co in UK Aim listed entity<br />For Tax Purposes (Clean Energy)<br />Manage transfer pricing impacts of shifting IP to overseas entity<br />For project selection (Optical Communications)<br />$1.5m in additional funding provided to accelerate development<br />For Grants applications (Materials)<br />Successful grant application<br />For IP Assertion Programmes (Biotech)<br />Enabled investment into Assertion programmes<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />7<br />
  8. 8. How can we help?<br />Running IP surfacing workshops<br />Running workshops to structure the creation of alternate business models for valuation purposes<br />Building valuation financial models<br />Advising on or supporting your valuation process<br />Conducting complete IP valuations<br />Facilitating IP transactions<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />8<br />
  9. 9. Top 6 Valuation Mistakes<br />1 – Thinking that value is a well-defined and well-understood term. <br />2 – the value of an intangible is equal to the price someone is willing to pay. <br />3 – value is equal to the cost of creating an item. <br />4 – there should be only one accepted method for valuing intangibles. <br />5 – patents cannot be valued credibly because each one is unique. <br />6 – The value of a company’s intangibles is the difference between its market value and the value of its tangible assets. <br />© Mission HQ Pty. Ltd. All Rights Reserved<br />9<br />
  10. 10. What is value? – Whiteboard Discussion<br />What are some of the characteristics of Value?<br />Value is Dynamic<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />10<br />
  11. 11. Is Value equal to the price someone is willing to pay<br />Discussion<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />11<br />
  12. 12. Is Value is equal to the cost of creating an item<br />Discussion<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />12<br />
  13. 13. Summary - Characteristics of value<br />Value is not<br />Consistent<br />Stable<br />Easily predictable<br />Value is<br />Dependent on other factors<br />Context is critical<br />Dynamic<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />13<br />
  14. 14. Introducing a new perspective<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />14<br />
  15. 15. What justifies the price difference?<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />15<br />$220<br />$19.95<br />
  16. 16. A cost approach<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />16<br />Tangible Cost<br /><ul><li>Leather
  17. 17. Plastics
  18. 18. Production costs
  19. 19. Marketing costs
  20. 20. Labour
  21. 21. Logistics and Distribution</li></ul>Tangible Cost<br /><ul><li>Canvas
  22. 22. Plastics
  23. 23. Production costs
  24. 24. Marketing costs
  25. 25. Labour
  26. 26. Logistics and Distribution</li></li></ul><li>An intangible asset approach<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />17<br />Nike Trademark<br />Nike Air Patents No 12345345<br />No 347654321<br />Distribution model<br />Trade Secret on sole bonding<br />Production technique for bonded plastics<br />Patent: 9897134<br />Design registration on sole <br />
  27. 27. Intangible asset valuation<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />18<br />$ Valuation<br />Production technique for bonded plastics<br />Patent: 9897134<br />
  28. 28. Intangible assets provide a new way of looking at your organisation<br />Intangible Assets another dimension<br />
  29. 29. Lets start by thinking broadly<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />20<br />
  30. 30. what are intangible assets?<br />Intangible Assets<br />intellectual assets (IA)<br />intellectual <br />property (IP)<br />intellectual capital (IC)<br />patented technologies<br />trade marks<br />designs<br />copyright <br />databases<br />trade secrets<br />key skills<br />know-how<br />processes<br />market data<br />information <br />un-recorded inventions<br />data<br />business relationships<br />licenses<br />branding<br />reputation<br />human resources<br />What are intangible assets?<br />
  31. 31. Skandia Concept of Intangible Assets<br />Market Value<br />Financial Capital<br />value of all physical and monetary assets<br />Intellectual Capital<br />Human Capital<br />‘thinking’<br /><ul><li> competence (knowledge and skills)
  32. 32. attitude (motivation, behaviour, conduct)
  33. 33. intellectual agility (innovation, imitation, adaptation)</li></ul>Structural Capital<br />‘non-thinking’<br />Organisational Capital<br /><ul><li> infrastructure
  34. 34. processes
  35. 35. culture</li></ul>Customer (Relationship) Capital<br />customers, suppliers, shareholders, <br />alliance partners, other stakeholders<br />Innovation Capital<br />renewal and development value<br />Process Capital<br />Intellectual Property<br />Intangible Assets<br />
  36. 36. Adam and Oleksak Concept of Intellectual Capital<br />Market Value<br />Intellectual Capital<br />Financial Capital<br />Human <br />Capital<br />Structural Capital<br />Relationship Capital<br />Business Model<br />Management<br />Intellectual Property<br />Network<br />Employees<br />Processes<br />Brand<br />Customers<br />
  37. 37. Human Capital<br />This indicates tacit knowledge, skills, abilities and experience embedded in individuals within an organization. <br />intellectual agility for adaptation, innovation and cross-fertilisation. <br />
  38. 38. Structural Capital<br />knowledge and rules embedded within organizational routines, including <br />mechanisms and structures of the organization, <br />assets linked to methodologies, <br />technologies and processes, <br />licenses, <br />patents, <br />trademarks, <br />research and development strength, <br />architectural competencies which enable a firm to integrate component competencies in new and flexible ways<br />
  39. 39. Relational Capital<br />This involves every existing business network linking an organisation to partners (distributors, suppliers and alliance associates) <br />at higher and lower regions of its value stream; <br />corporate image and perceptible reputation; <br />building blocks of customer base, <br />customer loyalty,<br />market connectivity.<br />
  40. 40. Business Model<br />This consists of competitive ability, extent of market control, knack for business development and rationality of strategy.<br />Covered in further detail later in this presentation. <br />
  41. 41. Aspects of Valuation<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />28<br />
  42. 42. What constitutes Intellectual Property?<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />29<br />
  43. 43. -30-<br />Intellectual Property Foundations – what is IP?<br />Intellectual property rights are the legal rights which result from creations of the mind (such as inventions, literary and artistic works, and symbols, names, images, and designs used in commerce).<br />IP rights can be broadly categorised into two groups: IP rights which are registerableand those which are not. <br />
  44. 44. Forms of IP<br />Copyright <br /> applies to original works or art, literature, music, films broadcasts and computer programs<br />Patents <br />apply to any device, substance method or process which is new, inventive and useful<br />Plant Breeders Rights <br />applies to registered plant varieties<br />Confidential information <br />applies to any information that is demonstrably kept confidential<br />Registered Designs <br />applies to features of shape, configuration, pattern or ornamentation which gives a product a unique appearance<br />Circuit Layout Rights <br />apply to layout designs for integrated circuits and computer chips<br />Trademarks<br />apply to a word, phrases, letter, number sound smell shape, logo or picture that distinguishes good and services from another<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />31<br />
  45. 45. -32-<br />Intellectual Property Foundations<br />Patents<br />A patent is a right granted for any device, substance, method or process, which is new, inventive and useful.<br />Patents do not protect artistic creations, mathematical models, plans, schemes or other purely mental processes.<br />A patent gives the owner the exclusive right to prevent others from exploiting the invention the subject of the patent.<br />The term of an Australian standard patent is 20 years.<br />
  46. 46. Conducting an IP Valuation<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />33<br />
  47. 47. The IP Valuation Pyramid<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />34<br />Solution Layer<br />Methodology Layer<br />Profile Layer<br />Foundation Layer<br />
  48. 48. Foundation Layer - Purpose<br />Why are we valuing the asset?<br />Helps to set the goals and objectives for the valuation<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />35<br />
  49. 49. Foundation Layer – Description (1)<br />What is the asset?<br />Form of intellectual asset(s)<br />Inter-relationship between intellectual assets<br />Remaining asset life<br />Strength of protection assessment<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />36<br />P Characteristics & Valuation<br />
  50. 50. Foundation Layer – Description (2)<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />37<br />P Characteristics & Valuation<br />
  51. 51. Foundation Layer – Premise (1)<br />How will the asset be used?<br />This is often the most complex component of establishing the valuation foundations<br />Highest and Best Use Criteria<br />Alternative Premises of Value<br />Value in continued use, as part of a going-concern business enterprise<br />Value in place, but not in current use in the production of income<br />Value in exchange, as part of an orderly disposition<br />Value in exchange, as part of a forced liquidation (fire sale)<br />Requires development of a business model to better understand how the technology will be exploited and what revenues may be attributable.<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />38<br />
  52. 52. Foundation Layer – Premise (2)<br />Not to just value the technology on the current business model.<br />We look at any potential business models that the client is free to pursue given IP encumbrances<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />39<br />
  53. 53. The 9 Element business model Matrix<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />40<br />
  54. 54. The business model matrix<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />41<br />Value Proposition – What are you offering? <br />Capabilities/Resources – What skills and capacity do you require?<br />Partnership – Who do you need to work with?<br />Activities – What will you do?<br />Costs – What are your significant costs likely to be?<br />Relationship – What formal and informal relationships are required<br />Channel – What are our channels to market?<br />Revenues – What will our customers pay for?<br />Customers – Who are our customers?<br />
  55. 55. 1. The Value Proposition<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />42<br />
  56. 56. Defining the value proposition<br />-43-<br />Value can occur in any of the following elements<br />
  57. 57. Mapping out your value proposition<br />-44-<br />
  58. 58. -45-<br />Evaluation Process<br />Simplify a customer’s evaluation process<br />Example: ISELECT<br />
  59. 59. -46-<br />Value Co-Creation<br />Through various technological advances the integration and participation of the customer in the value creation process is increasingly possible. <br />Together with the knowledge and networks of customers additional value can be created and facilitated.<br />Examples: Ebay & Amazon<br />
  60. 60. -47-<br />Purchasing Process<br />Customers highly value an efficient, simple and convenient purchase process.Example: Creative Mobile Technologies back-seat swipe and entertainment for Taxi Cabs<br />
  61. 61. -48-<br />Set-Up/Installation<br />In some cases set-up or installation is necessary. The simplification of this process is of enormous value to the customer.<br />Example: Dick Smith: Mobile Techxphert Services<br />
  62. 62. -49-<br />Use/Operation<br />In many cases most of the value in a value proposition comes from the use or operation of an actual product or service. However, to differentiate themselves companies try to create value beyond a simple product or service.<br />Salesforceis carefully creating additional value by offering continuous updating "behind the scenes" and providing easy access to complementary products by third party vendors.<br />
  63. 63. -50-<br />Maintenance & aftersales support<br />Value is often created during the maintenance and after-sales phase. This can be either by offering high quality service or by offering a value proposition that minimizes the need for maintenance & after-sales.<br />Example: The attractiveness of salesforce.com’s value proposition essentially comes from the fact that the hosted software model (application service provider - ASP) minimizes the need of software maintenance by the customer.<br />
  64. 64. -51-<br />Ending and value transfer<br />In many cases once a customer does not need a product or service anymore he has to terminate the service or dispose of the product.Example: BMW Recycling Programme<br />
  65. 65. 2. Capabilities/Resources<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />52<br />
  66. 66. 2. Capabilities/Resources<br />What physical assets does our business model require?<br />Factory<br />Machinery<br />Etc.<br />Intellectual Assets<br />Trademarks (licensed or owned)<br />Patents<br />Processes<br />Systems<br />Human Resources<br />Skills<br />Team structures<br />Financial<br />Access to finance<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />53<br />
  67. 67. 3. Partnerships<br />Describes the network of suppliers and partners that will make the business model work<br />Joint Ventures<br />Strategic Alliances<br />License agreements<br />Service agreements<br />Outsourcing arrangements<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />54<br />
  68. 68. 4. Activities<br />The activities outline the most important things that the organisation will do.<br />Production<br />Problem Solving<br />Platform management<br />License management<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />55<br />
  69. 69. 5. Costs<br />Outlines the primary areas of cost under the business model<br />Fixed Costs<br />Variable Costs<br />Economies of scale<br />Key cost rachet points<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />56<br />
  70. 70. 6. Relationships <br />What relationships other than partnerships may be required.<br />Particularly relevant in web 2.0 companies, where a customer has data vested with the company.<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />57<br />
  71. 71. 7. Channel<br />What channels to market with the model employ?<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />58<br />
  72. 72. 8. Revenue<br />What element of our value proposition will our customers actually pay for?<br />Asset Sales<br />Usage fees<br />Subscription<br />Advertising revenue<br />Renting or leasing<br />Licensing<br />Financing<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />59<br />
  73. 73. 9. Customers <br />The different groups of people or organisation that the organisation hopes to reach and serve.<br />Segmenting requires:<br />Distinct groups and value segments<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />60<br />
  74. 74. Foundation Layer – Value Standard (1)<br />Fair Market Value<br />Fair Value<br />Market Value<br />Investment Value<br />Collateral Value<br />Arm's-Length Standard<br />Other Standards of Value<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />61<br />
  75. 75. Foundation Layer – Value Standard (2)<br />Preferred standard is fair market value<br />Who will be the assumed buyer of the asset?<br />Represents how value is tied back to the valuation purpose.<br />Fair market value is the most common standard adopted in both legal and accounting frameworks<br />Accounting standard on Fair Market Value FASB 157<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />62<br />
  76. 76. Profile Layer – Legal Profile<br />Legal opportunities dictating the scope and limitations of the asset.<br />Commercialisation agreements<br />License agreements<br />Asset control<br />Encumbrances<br />Legal scope of protection<br />Breadth of claims<br />Geographical coverage<br />Market coverage<br />Scope for monopolistic recourse<br />IP landscape/Freedom To Operate<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />63<br />
  77. 77. Profile Layer – Business Profile<br />Business issues dictating the scope and limitations of the asset.<br />Refers to the specific characteristics of the commercialising entity<br />Surrounding intellectual assets and intellectual capital that will work to support or detract from the core asset value<br />Capacity to bundle with other intellectual assets<br />Capacity to get the technology to market through existing relationships and processes<br />Product support and complementary technologies<br />Porter’s 5 forces model provides a useful framework for assessing the impact of the business profile on valuation<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />64<br />
  78. 78. Profile Layer – Financial Profile (1)<br />Financial issues dictating the scope and limitations of the asset.<br />Projected revenues, costs and capital requirements associated with commercialising the asset<br />Estimated time to commercialise the asset<br />Estimated cost of non-infringing alternatives<br />Cost of capital associated with the asset (Discount Rate)<br />Financial capacity to commercialise<br />Requires the construction of a financial model<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />65<br />
  79. 79. Profile Layer – Financial Profile (2)<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />66<br />
  80. 80. Profile Layer – Financial Profile (3)<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />67<br />
  81. 81. Methodology Layer<br />There are 4 primary valuation methods:<br />Transactional<br />Cost<br />Income<br />Binomial/Option<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />68<br />
  82. 82. Methodology Layer - Transactional<br />Represents a recent price paid for similar intangible assets under similar circumstances<br />Review recent, relevant transaction information<br />Listed entities are the best<br />Proprietary transactional databases<br />License transaction journals and information<br />Transaction data can never be ignored as part of a valuation exercise, it must be review and its relevance to your valuation either accepted or denied.<br />Typically involves two steps, screening and adjustment<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />69<br />
  83. 83. Methodology Layer - Cost<br />Assumes that the current replacement cost to develop is a good proxy for the value of the asset<br />Look at the cost to design around a patent or patent family<br />A particularly useful approach when legal protection is weak, ie. How much would it cost a potential licensee to re-create or work around<br />This method should not be confused with Historical cost or accounting cost<br />This method is generally not used for assets that have been granted a monopoly<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />70<br />
  84. 84. Methodology Layer - Income<br />Values the asset on a best estimate of its ability to generate future cash flows<br />Has 3 primary components<br />Economic Life (i.e.. Patent life)<br />Projected Cashflows<br />Discount rate<br />DCF (Discounted Cashflow) is a foundation of the income method<br />Other analytical factors should influence your discount rate.<br />A terminal value, beyond the economic life of the asset may be applicable (e.g.. Panadol)<br />Must cater for both direct and indirect cost and income<br />Requires detailed financial modelling by month and year<br />Generally the most applicable when valuing technology<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />71<br />
  85. 85. Methodology Layer - Binomial/Options<br />Takes into account future, contingent events<br />Methods were originally developed for pricing of stock options<br />real options, <br />Assumes that value increases as the level of uncertainty decreases<br />Most useful for highly capital intensive activity with a high degree of uncertainty<br />binomial options <br />Otherwise known as decision tree analysis<br />The impact of alternate pathways is explored and modelled.<br />Montecarlo simulations.<br />Models a low probability of pay off across a large number of potential iterations<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />72<br />
  86. 86. Choosing the appropriate methodology<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />73<br />
  87. 87. The solution<br />Deliverables include:<br />Valuation document<br />Scenario analysis<br />Financial model<br />Statement of Value<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />74<br />
  88. 88. How can we help?<br />Running IP surfacing workshops<br />Running workshops to structure the creation of alternate business models for valuation purposes<br />Building valuation financial models<br />Advising on or supporting your valuation process<br />Conducting complete IP valuations<br />Facilitating IP transactions<br />Thank you for your attendance<br />© Mission HQ Pty. Ltd. All Rights Reserved<br />75<br />

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