Patent valuation mandate as part of a fundraising round

Mandate overview: valuing a telemedicine patent to secure a fundraising round

The mandate covered the valuation of a patent, an intangible technology asset at the core of the project of a French medtech specialised in telemedicine and automated medical devices. The estimate had to provide an independent value of the asset ahead of a fundraising round structured around this intellectual property.

The patent, wholly owned (100%) by the Company, is the technological basis of a connected-health device. The economic valuation took place in a fast-growing market, without prejudging the legal validity or freedom to operate of the title, which fall to an intellectual property adviser.

Key challenges: objectivising the value of an early-stage intangible asset

The main challenges of the mandate were to:

• establish an independent, defensible value of the asset, suitable to present to investors;
• reconcile a prudent approach anchored on market references with an approach reflecting the future exploitation potential;
• incorporate the uncertainty inherent to a technology not yet fully commercialised;
• assess the intrinsic quality of the patent (validity, scope of protection, exploitability).

Approach and results: four cross-checked approaches and a qualitative rating

The valuation drew on the recognised methods for analysing intangible assets, in line with the patent valuation approaches:

• the cost approach (book value, reconstitution costs);
• the market approach, based on royalties and comparable transactions of sector patents;
• the income approach (discounted cash flows attributable to the patent);
• the real options approach (Black-Scholes model, confirmed by the Cox-Ross-Rubinstein binomial model), suited to a high-potential technology asset with uncertain exploitation.

A qualitative rating of the patent (validity, scope of protection, innovative and exploitable character) completed the analysis and informed the fair value assumptions. The market and income approaches set the prudent bound, the real options approach the upper bound.

Key figures of the mandate (orders of magnitude)

Valuation results, in rounded orders of magnitude:

• indicative value of the patent: between EUR 2.0 and 2.1 million (around EUR 2 million, i.e. roughly CHF 1.9 million);
• lower bound (~EUR 2.0 million) from the market royalties approach; upper bound (~EUR 2.1 million) from the real options approach;
• overall qualitative rating of the patent: around 8.3/10;
• addressed market (telemedicine and connected health) growing strongly;
• patent 100% owned by the Company, technological basis of the device;
• purpose: fundraising through a capital increase.

Frequently asked questions: patent valuation, real options and fundraising

Why value a patent before a fundraising round?

The valuation gives investors an independent value of the core technology asset, structures the negotiation of the entry price into the share capital and lends credibility to the valuation trajectory. It objectivises an intangible asset that is often decisive in an early-stage medtech.

Which methods are used to value a patent?

Four families: the cost approach (reconstitution), the market approach (royalties and comparables), the income approach (DCF of attributable flows) and the real options approach. Combining them bounds a value range. Learn more: patent valuation methods.

What does the real options approach add?

It captures the flexibility value of an asset whose future exploitation is uncertain, where a plain DCF would understate the potential. Relevant for a technology not yet fully commercialised, it set the upper bound of the range here, confirmed by a binomial model.

How does patent quality affect the value?

A qualitative rating (validity, scope of protection, innovative and exploitable character) adjusts the assumptions and the discount rate. A strongly positioned patent (here around 8.3/10) supports the upper bound of the valuation.

Does the valuation amount to an opinion on the patent’s legal validity?

No. It is an economic estimate of indicative value. It is neither a guarantee, nor a fairness opinion, nor an opinion on the validity, scope of protection or freedom to operate of the title, which fall to an intellectual property adviser.

How long does it take to value a patent?

The usual duration is 6 to 8 weeks, depending on the quality of the technical and financial documentation and the complexity of the addressed market. This mandate was completed in 7 weeks.

Similar mandates: intangible asset valuation

• Patent valuation in an institutional fundraising round (Switzerland)
• Patent valuation in a cross-border industrial partnership (Switzerland)
• Brand valuation in a strategic fundraising round (Switzerland)

Summary

In summary, this patent valuation mandate, carried out in seven weeks for a French telemedicine medtech, cross-checked four approaches (cost, market by royalties, income by DCF and real options) complemented by a qualitative rating of the title (around 8.3/10). Market references set the prudent bound and the real options approach the upper bound, leading to an indicative patent value of between EUR 2.0 and 2.1 million (around EUR 2 million). Hectelion thus gave the Company an independent, defensible value of its core technology asset, directly usable in its fundraising round through a capital increase.