Broadly speaking, financing options for companies rich in intellectual property (IP) but poor in capital include:
- Going Public
- Bank Debt
- Private Debt/Equity
- Venture Capital
- Angel Investors
Venture capitalists and angel investors tend take on more risk by investing in companies at earlier stages. According to the Business Development Bank of Canada (BDC), there is currently a lack of venture capital money in Canada, especially for hardware and life sciences companies even if they are IP-rich. Further, there are only a very small number of “super” angel investors in Canada that focus on IP.
For companies in their mid to later stages, the BDC may be another option for financing capital growth. The BDC’s $160 Million financing envelope to support IP development has recently been publicized as the first of its kind in Canada.
The BDC has announced that it is looking to invest in IP-rich companies because they tend to have lower default rates and lower loss rates compared to traditional brick-and-mortar companies. The type of companies BDC is looking for must generally meet the following three criteria:
- Public or private company
- Minimum of $1 million revenue over the last 12 months
- Registered IP portfolio with granted patents
Notably, BDC will look at the entirely IP portfolio, which may include trade secrets (and not just patents) in evaluating how much market share a particular company can protect.
Method Law can help your company prepare the patent applications that may attract financing from the BDC.
Link to BDC’s webpage: https://www.bdc.ca/en/bdc-capital
This article is provided for informational purposes only and is not legal advice. For further information or assistance in obtaining a patent, please contact us by phone (416) 847-0054 or by email at mail@methodlaw.ca.
Disclaimer: Please note that we are not affiliated with the Business Development Bank of Canada (BDC).