The quality of a technology company’s intellectual property (IP) is an important consideration in funding, investment and acquisition decisions. However, existing valuation methods fail to deliver true insight into the value of a company’s IP. This is largely due to the fact most IP is created and valued around protecting specific technologies rather than capturing the overall value proposition of the business. Existing methods for IP valuation simply miss the point: they fail to focus on the extent to which a company’s IP enables them to leverage the opportunity within their overall business space, or value proposition (VP).
While it is hard to believe that companies would invest in creating patents that do not protect them, it happens all the time. The fact is most patents are relatively worthless. Why? Because they do very little to protect a company from the competition because they are very easy to circumvent. Where the game changes are when companies invest in IP as a strategic asset. That’s when their own position takes hold and their multiplier should improve significantly! But, there is currently no known method to assess the quality of IP relative to the VP in a common rubric.
I am proposing a new scale to measure IP — Business to the power of IP, also known as Bᴵᴾ. Given a well-defined value proposition, the Bᴵᴾ scores an IP portfolio’s ability to protect the VP by answering the question: “What percent of the solution space that is given a value proposition is actually protected by this portfolio?” The score is between 0 to 100, where 0 is no protection and 100 is ideal protection.
The Bᴵᴾ is a rating scale that can be used to evaluate and influence the multiplier of a company at any stage. It will also inform the risk level associated with an investment in a technology-based company. Bᴵᴾ makes it is easier to compare and contrast multiple companies in the same space. It also informs early-stage investment decisions by answering the question: “Can this VP be protected and to what level?” This can offer powerful insights into the overall strategic direction of the company.
While this scale is still new and in development, I am very excited to see the impacts it will have on businesses and strategies. Since this scale is still in alpha, there will be more to share as we move through testing over the next few months. If you are curious about learning more about Bᴵᴾ, don’t be shy! I would love to connect and share more about it with you!