The missing capital

The small innovative enterprise is at a disadvantage with both classic sources of capital. To a bank it has no security, because its principal asset is an industrial property right that the banking system neither values nor accepts as collateral. To investment funds it is too small: the cost of assessing a transaction is relatively fixed, and below a certain threshold the effort is not worth making.

What forms is a gap that appears neither at the start of the journey, where support programmes exist, nor at its end, where private capital exists, but precisely in the middle — at the stage where the solution works but there are still no sales.

The patent does not appear on the balance sheet

A valid patent with relevant territorial coverage is an exclusive right of economic exploitation. In accounting and banking terms, however, it remains an intangible asset that is hard to value and practically impossible to enforce in a way that recovers value.

An enterprise whose principal asset is a patent portfolio appears, in risk analysis, as an enterprise with no assets. The description is technically correct and economically wrong.

A national methodology for valuing industrial property for collateral purposes, coupled with a public counter-guarantee instrument for loans in which a patent serves as partial collateral, would change that reading.

The co-financing the applicant does not have

Most support schemes require co-financing from own resources and, frequently, reimbursement after the fact. Both are reasonable for an enterprise with cash flow. For one that is not yet selling, they turn available funding into inaccessible funding.

Pre-financing for beneficiaries below a certain turnover threshold, and setting the co-financing rate according to the size of the enterprise rather than the type of expenditure alone, would make the difference between a programme that looks good on paper and one that reaches its intended recipient.

The cost of asking for money

For a firm with three or four employees, preparing an application consumes the scarcest resource it has: the time of the people who make the product. The administrative effort does not fall in proportion to the value of the project, so small programmes are, relatively speaking, the most expensive to access.

Lump-sum procedures for low-value projects, justified on the basis of results rather than individual expenditure documents, would correct this imbalance.

The stage nobody finances

Between the working prototype and the sellable product lies a stage the funding system treats as non-existent: market testing, the zero series, certification, adaptation to the requirements of industrial customers. It is not research, so it falls outside research programmes. It is not production, so it falls outside investment programmes.

An instrument dedicated to the commercial validation of patented solutions, with eligible costs covering certification, the zero series and adaptation to the requirements of the first industrial customer, would cover precisely the zone where most projects are lost.

The problem is not the volume of funding available for innovation, but its architecture. The existing instruments are built either for research organisations or for enterprises with a commercial track record.

The small innovative enterprise is neither. Between those two categories, what is lost is exactly the kind of firm an innovation policy ought to be producing.