Not necessarily, it's about collateral. Banks want real assets, not IP, which they value at 0. This isn't really the case though, it's just they don't know how to valuate it. Sure, it may be close to 0 in certain cases, but if someone with a collection of garage sale knick knacks can get a loan to open a flea market with their inventory as part of the collateral, why can't I with just IP?

Because it is uncertain if the IP will bring in any money -- because it has not done so in the past so far, has it?. If you can show you're already getting some revenue out of the IP then I think you will have a good chance with the banks. They like existing businesses with existing cash-flow.

Garage sales typically bring in some value or at least the value of the goods is relatively easy to evaluate. Not so with IP.

The way would be to show you have a company willing to purchase the IP at a certain amount, and borrow against that - but if you have that just get that company to invest.

The dirty secret the banks know and the startups don’t want to admit is that much IP is worthless.

ever heard of “not invented here”? even if you have valuable IP big tech companies think they can do better even if they cannot, or are simply greedy and will spend a multiple of what your IP costs just so they don’t need to acquire you. that is what i’ve noticed. there is little logic or reason.

Keep in mind that "big companies" consist of many "small people".

If you offer them the IP for sale any decision-maker in the company that could approve paying for it will need to ask themselves: "How much would this help my career in this company personally? Or does it put me in risk of possible failure? Does it put me in competition with our other departments? How much would we need to invest our own time and efforts to integrate this IP into our product-line?".

great insight, thanks. so what is a smart way to go about this?

Become enough of a threat that they acquire-hire you or buy you to shut you down.

it is uncertain that the garage sale crap will bring in any money. or your inventory. besides, they discount it 90% anyway.

people do buy and sell small businesses. why is a pizza place worth any money? because of the customer database? but that is IP too, so why does that have value? why do i need to pay 50K for that but the code i spent writing for 15 years has “no value”? even if a FAANG is doing something similar right now but their code sucks?

i have had actual products in the market incorporating IP and the banks still think it is worth zero.

curious how movie financing works and why banks would be ok with lending money against future movie IP.

Film financing is ... complex, to say the least, but the classic debt financing model is backed by presale agreements, where you shop a package (script, director, actors, etc.) to distributors, who agree to buy territorial rights (which may include derivative rights to the IP, such as toys or novelizations); those contracts are then used as discountable collateral for the actual financing. (There are approximately 1,795 other ways film is financed, many requiring a comprehensive understanding of multiple national tax codes, but that's the way it used to be done.)

ok, so a distributor thinks a movie will make $100MM, they buy the rights for $50MM, and the bank discounts this to $10MM, so they get a loan for $10MM?

Approximately, yep! For a variety of reasons this approach doesn't hold the pride of place it used to in the indie space; instead you see filmmakers taking on alternate funding, including equity, and then selling distribution at market (the idea here being that a good film with strong reviews will command higher prices after screening, particularly if streamers are interested).

For smaller filmmakers, debt instruments are generally relegated to gap financing: high-risk and expensive loans that cover relatively small percentages (10-20%) of the total budget, and are backed less by secured contracts and more by the track record of the team package (including sales agent) -- basically, think mezzanine financing.

weird film people can raise debt on their reputation without personal guarantees but tech people cannot

It's a lot harder to find someone to buy IP than baseball cards

Here's an idea: government backed loans for tech companies, and if they fail, the government gets the IP and releases it under some kind of FOSS license. Seems like a win-win.

Not sure how much of a win that is for the taxpayers. You loaned someone hundreds of thousands for something that no one found value in, but at least it's open source?

A better use of public money is funding industries with high capital requirements for straight equity. I'd rather we build fabs for Intel and AMD in the Great Lakes region with federal money in exchange for stock where the returns can go to pensions.

i doubt that components for consumer electronics can be made cheap enough manufacturing them in the US. you just never are going to be able to make a TV for $150 in the US. it’s a pipe dream made up by politicians.

and why the great lakes? pollute the beautiful nature in minnesota and surroundings?

also, VCs just follow trends and don’t understand many industries. no VC or angel funding does not mean anything.

Cheap power and plentiful freshwater supply that can be utilized renewably (fabs don't capture water like say, agriculture).

There are multiple fabs in the US today making components for consumer electronics as well as multiple fabs under construction. Government incentives are a major factor in choosing sites for these projects, we know we need more of them domestically, and know we can make a buck off them for the taxpayer.

AMD in sunnyvale is a superfund site and there have been occurences there of people with birth defects.

What’s the IP worth of most failed startups? The code is a bunch of calls to other GPL libraries. The code has 0 value until people pay to use it.

that assumes there is no value in integrating code. actually, from my experience, that is where the value is. how you put into practice components to solve a new problem or offer a new way to do something people are willing to pay for.

what if the govt lends you 100k but you spent 500k of your savings and time? now they own a 600k asset that nobody needs to pay you for using.

but the rates are not low. AND… in the case of SBA or govt programs from other countries the debt comes with restrictions which will hamper your ability to be succesful.

> but the rates are not low

What are you comparing to?

If you've shopped around for interest rates you'll know a bank loan is the lowest of the generally accessible loans. More specifically mortgages are the easiest low rates because they're very predictable (compared to other assets).