Recently, Malaysian startup Valuing IP Sdn Bhd, which handles intellectual property valuation, announced the official launch of a new IP valuation software platform. They hope that their IP valuation software will be used by companies of all sizes and industries to identify and accurately value their IP assets to further pursue their growth ambitions.
This raises an interesting point around the need for IP valuation or for that matter, how many businesses understand the value of what they own and have created. To find out more, we got a chance to speak to Lim Hui Lee, Chief Operating Officer of Valuing IP, about the current state of the market in Malaysia and Southeast Asia.
There are already existing valuation methods in place, but this is one of the few digital solutions available to a broader range of companies.
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This matters because traditional IP valuation methods can be extremely expensive and time-consuming, making them unsuitable for companies with limited funds and resources. There is also the issue of determining the most appropriate method for generating accurate valuation based on the company’s IP assets, which is highly dependent on the industry and nature of the business. As a result, without access to reliable and accurate IP valuation, these businesses’ chances of obtaining financing are slim to none.
Here is what she had to say.
Congratulations on the new launch. Could you explain how the platform works?
Valuing IP is transforming the conventional way of valuing intellectual property (IP). Our platform is a Software-as-a-Service (SaaS) and is ASEAN’s First IP Valuation Software and Digital Platform that democratise and digitalise IP valuation services to make them affordable and accessible to IP and business owners.
The conventional way of IP valuation is a ‘Do-it-for-You’ – in which the clients are required to provide documents according to a long checklist, several rounds of interviews for collecting information and clarification, reviewing the information by IP Valuer, and applying the right methodology to arrive at the fair value of the said IP. This is time-consuming and costly. Moreover, there are only 23 certified IP Valuers in Malaysia to be trusted with the IP Valuation exercise, hence such a service is not easily accessible.
Valuing IP’s digital platform challenges the industry status quo that omits the checklist, and minimizes long waiting times and back-and-forth correspondences.
Users can subscribe to our packages on a one-off, half-yearly or annual subscription to access our digital platform anytime, anywhere. With just one account creation, one valuation request and one click away, users can get an International Standards-compliant IP Valuation Report within 7 days at only RM 6,000 (approx. USD 1,350) – compared to the conventional way that requires at least 20 days at a minimum RM 35,000 (approx. USD 7,900) per valuation report.
Our digital platform applies the standard approaches to arrive at a fair value of the IP. The approaches include the cost approach, income approach, and market approach. The platform is interactive and automated and will select the right approach for deriving the IP value based on the IP status. It should be noted as well that the valuation report generated by our digital platform complies with the IFRS (International Financial Reporting Standards), IVSC (International Valuation Standards Council), IASB (International Accounting Standards Board), and IP Valuation Model by MyIPO (Malaysian Intellectual Property Corporation).
Can you share how IP valuation works, as many companies do not accurately protect or measure their IP?
IP valuation is a subjective and complex subject that has many nuances involved in valuing intellectual property. Hence, IP specialists have IP knowledge, and IP Valuers knowing financing and valuation, are preferred to apply the right methodology while taking into account the IPR (intellectual property rights) status, useful life and opportunity cost in arriving at a credible value of the IP.
The misperception of Price vs Value: The price of an IP represents the amount of money for transacting the IP by way of changing ownership between a willing buyer (new owner) and a willing seller (IP owner); the Value of an IP represents the potential future economic benefits to the IP owner or authorized user.
There are international standards and guidelines for IP valuation, including International Valuation Standards (IVS) as set by IVSC, the IFRS,
IAS, ISO 10668 the International Standard on Brand Valuation, and Malaysian Financial Reporting Standards (MFRS), as well as the IP Valuation Model (IPVM) published by MyIPO.
The principal methods for valuing IP include a cost approach, a market approach and an income approach. The income method is the commonly used method in which it values the IP based on the amount of economic income that it is expected to generate, adjusted to its present-day value. However, the income approach may not be suitable if the IP is yet to be commercialised.
An intangible asset is accountable to a company’s value which most of enterprises may not realise with. When it comes to determining the value of a business, greater value has been attributed to intangible assets. Nowadays, intangible assets are increasingly recognized as key business assets, where IP is considered a necessity and no longer a luxury. However, the conventional IP valuation service is costly (fees can start from RM 30,000 per valuation) and many individuals, start-ups, and SMEs could not afford it.
As such, when it comes to negotiating the price for commercialising the IP, it will be decided based on a mutually agreed price without proper valuation or benchmark. Most of the time, the IP is transferred or licensed below the fair market value.
In your estimation, what percentage of businesses in Malaysia (or Southeast Asia) misvalue their IP or do not protect their patents, trademarks etc?
They misvalue IP. We do not have the statistics or numbers at the moment as IP valuation is still relatively new and not widely practised in Malaysia or even regionally in SEA. Recognising this, Valuing IP was founded to foster the importance of IP valuation locally and regionally. Our founding team has a combined experience of 40 years in the IP domain, including IP valuation and IP management.
Many businesses do not protect their IP. There has been a growth in IP filing numbers in recent years as businesses are moving towards technology, branding and digital reliance to stay relevant in the global competition. The economic disruptions caused by the COVID-19 pandemic have prompted firms to introduce new ideas, innovations, new goods and services, and brandings to stay competitive.
Based on the IP Statistical Country Profile 2021 of WIPO, Malaysia ranked #37 according to global rank and #2 for Southeast Asia for patent applications filed by applicants residing in Malaysia.
|Type of IP filed by applicants residing in Malaysia||Global rank||Southeast Asia||Residents filing per 100 billion USD GDP|
|Patent application||37||2 (11.3%)||100|
|Trademark application||58||6 (8.3%)||2,278|
|Industrial Design application||66||5 (2.7%)||53|
In the year 2021 in Malaysia, there were approximately 45,000 new companies incorporated as a Sdn Bhd, and 384,000 new businesses incorporated as sole proprietors or partnerships. However, only 20,000 new trademark applications were recorded by local companies and/or businesses.
Whilst most businesses are starting to recognise IP as a necessity for business growth, lots of efforts still need to be put in to elevate the awareness of IP and IP valuation locally and regionally.
How large do you estimate the market is in Southeast Asia?
The market is potentially huge! Any individuals, businesses, or organizations who have or own Intellectual Property will at one point or another need IP Valuation.
WIPO (World Intellectual Property Organisation) estimated 250,000 IP registrations in Southeast Asia in the year 2021. These are only for IPs that are applied and recorded at the IP Offices. There are still unapplied IPs such as copyright, trade secrets and more.
Our digital platform is a significant advancement in how IP assets can be valued and transacted. With it, we hope that businesses and companies can now fully understand and realise the full potential of their IP portfolios and decide how to pursue commercial or strategic opportunities based on that potential.
What’s next for Valuing IP?
Valuing IP is moving forward and upward, to help businesses redefine their assets and make their intangibles, tangible.
We are enhancing and expanding the software and digital platform’s offerings, including IP marketplace portal for IP trading, and expanding our presence in the ASEAN region. We are targeting to raise RM 8 million (approx USD 1.8 million) at our second-round funding in Q4 2023, and the team is kept busy doing software demonstrations for those who are interested.
We are driven to make IP financing a success in Malaysia, and we are pursuing conversations with IP stakeholders, financial institutions, and the Malaysian government. We are also already in talks with policymakers and/or companies from Indonesia, Singapore, the Philippines, and India.
Together with the IP community, our ultimate goal is to facilitate the growth and refinement of the IP ecosystem in ASEAN.