Intellectual Property Backed Financing: New HealthTech Trend in 2025

Using intellectual property (IP) as collateral for loans is a growing trend, and it's particularly relevant for the healthtech and life sciences sectors in 2025. Here's a breakdown of this trend:

The Value of IP in HealthTech

Healthtech companies, especially startups, often have a wealth of intangible assets, such as patents, copyrights, and trade secrets, that are far more valuable than their physical assets.

These IP portfolios are the core of their business, containing groundbreaking technologies like AI algorithms for diagnostics, novel medical devices, digital therapeutics, and personalised medicine platforms.

Why IP-Backed Loans are Gaining Traction

Non-Dilutive Financing: For a startup, securing a loan by pledging IP as collateral allows them to raise capital without giving up equity. This is a crucial advantage for founders who want to maintain ownership and control of their company.

Access to Capital: Healthtech is a capital-intensive industry, and developing high-precision medical technologies requires substantial investment. A strong IP portfolio can be a powerful tool for attracting investors and securing the necessary funding for development, clinical trials, and market entry.

Risk Mitigation for Lenders: Lenders are increasingly recognizing the value of IP as a form of collateral. To mitigate the risk associated with intangible assets, they often rely on independent valuation of the IP and may require the borrower to have intellectual property insurance. This insurance protects against legal challenges and infringement, ensuring the asset's value is preserved.

Driving Business Value: A well-crafted IP strategy, which includes patents and trademarks, is correlated with higher chances of securing venture capital funding and successful exits (eg. M&A or IPO).

Key Elements of IP-Backed Financing

When a company seeks a loan using its IP as collateral, several steps are involved:

Valuation: The IP's market value, enforceability, and potential are assessed by independent appraisers.

Negotiation: The borrower and lender agree on loan terms, including interest rates, repayment schedules, and collateral requirements.

Securing Rights: The lender registers a legal claim to the IP, which can be seized in the event of a loan default.

Ongoing Compliance: The borrower must adhere to loan conditions, such as maintaining IP registrations and avoiding legal disputes.

Challenges and Considerations

While IP-backed loans offer significant opportunities, there are also challenges to navigate. The legal landscape for IP, particularly with the rapid rise of AI-generated inventions, is still evolving. This creates complexities around ownership and infringement, which can lead to uncertainty for both creators and investors.

Organisations like the World Intellectual Property Organization (WIPO) are actively working on dialogues to mainstream IP-backed financing and create a more robust legal framework.