Articulating Intangible Assets to Prospective Investors

Michael D. Moberly   November 10, 2009   ‘A blog where attention span really matters’!

Anytime I am in a engaged in a conversation with a member of some companies’ management – leadership team, I find it revealing if they express indifference toward intangible assets in general, or worse, trivialize or dismiss intangible assets their company has produced, particularly intellectual, structural, and relationship capital. Too me, as an intangible asset strategist and risk specialist, such expressions are akin to a ‘climate change denier’ and revealing in the sense that it’s probable this business leader…

    • does not understand what intangible assets are,
    • is operationally unfamiliar with intangibles’ contributory value to a company,
    • does not recognize how certain intangibles’, again, intellectual, structural, and relationship capital are already firmly embedded in their companies’ key – mission essential processes, procedures, and practices, or
    • relegates intangibles’ stewardship, oversight, and management into one the proverbial boxes, i.e.,
      • it’s too difficult to do,
      • I don’t have time for it,
      • what difference does it make, or
      • I will do it only when I see my competitors doing it.

Not surprisingly, the opposite should occur, particularly for early stage – newly launched companies that are seeking investment capital to expand and grow. In these circumstances (seeking investment capital), I find it useful to apply a very straight forward strategy, i.e.,

  • anticipate (know) what information prospective investors will be seeking – demanding, and
  • how that information can best be articulated (communicated).

My experience clearly suggests a significant percentage of prospective investors in early stage – newly launched companies have already achieved operational familiarity with intangible assets and their strategic contributory role and value to a companies’ trajectory for growth, profitability, and commercial success. That said, prospective investors frame their ‘invest – don’t invest’ decisions in a fairly conservatively.

Collectively, I am suggesting that whenever one is positioned to seek investment capital engages a venture capitalist or angel investor absent a thorough operational familiarity with their companies intangible assets, they may well be operating at a irreversible deficit.

I can say with some surety that, at minimum, savvy prospective investors, as part of their ‘invest – don’t invest’ decision making process, will want to know and see evidence of…

  • what the company identifies as their key (mission essential) intangible assets, and
  • how the company assesses, utilizes, manages, and safeguards those intangible assets.

While the answers to these important questions will vary, relative to a company’s sector and product and/or service offerings, the attention any business leader gives to their language – narrative to prospective investors should never be taken lightly or underestimated.  In other words, responses should be conveyed in clear and understandable business contexts, but, most importantly, each must be immediately recognized as being viable.

For example, managing a company’s intangible assets should be articulated on, at least, two levels:

–  The first is a company’s ability to identify, unravel, position, leverage, and extract value from its intangible assets.

–  The second is a company’s ability to sustain control, use, ownership, and monitor the value, materiality, and risk to its intangible assets.

In any communication with investors about how a company manages its intangible assets, the collective importance the company attaches to both ‘levels’ is essential as is how both levels are managed (executed) simultaneously. There is certainly no shortage of information available to management teams about all facets of intangible assets.

As always, reader comments are welcome and respected.

 

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