IP commercialisation directly informs economic growth and Africa is missing out.

By Audrey Verhaeghe for Anza Capital

There is a correlation between a country’s Intellectual Property (IP) performance and its economic development. Venture Capitalists (VC) play a role in making the regions they operate in more innovative and thereby more economically competitive. Focusing on the commercialization of IP and the building of IP tech stacks in companies that VC invests in shows dramatic results on societal, fund and firm levels. As VC we cannot just invest, we need to become involved in building our society through investment. IP is one such a domain we need to become involved in and lead, advise and invest in.

Anza Capital invests in early-stage commercialization of IP in cleantech, foodtech and digital deep tech such as AI and Blockchain. USAID Mobilizing Investment supported our work and we developed a full IP thesis for the regions we invest in. 

Source: U.S. Chamber International IP Index

Africa is dramatically behind the rest of the world in regards to its protection, usage, and commercialisation of intellectual property (IP). Only a few African countries – South Africa, Kenya, Egypt, Nigeria, Algeria and Morocco – have meaningful IP markets that needs further development. VC can make a meaningful contribution in these markets with recognised IP regimes. IP can act as a significant value-creator for both start-ups and society, by enabling defensible, competitive businesses, rewarding risk-taking by researchers and innovators, and preventing the theft of IP from third parties. 

Anza Capital has been actively investing in IP-enabled businesses, or helping businesses build relevant IP, in order to shift this state of affairs in our areas of operation.

The influence of IP plays out on different levels such as society level, a portfolio level and on a firm level. Here are a few, not exhausted aspects to think about: 

In Society IP:

• Activates an undervalued asset class: unlocking the value of IP through commercialisation supports home-grown solutions over imports. This is an undervalued asset class across Africa.
• Solves major problems: Deep-tech solutions tend to solve wicked problems.
• Generates 3rd stream revenue: Successful commercialisation results in greater revenue flows to RD&I institutions (as they hold equity) enabling further R&D and builds the knowledge base of an economy.

On a Fund level IP does:

• Financial de-risking: Reduces downside risks as IP assets can be disposed of during potential liquidation, enabling re-investment.
• Enable technology risk sharing: By leveraging (generally) publicly funded research, much of the technology risk is borne by third parties such as government.

Firm level:

• Defensive moat: IP acts as a powerful competitive, legal, barrier to competitors.
• Scalability: IP can be scaled effectively through licensing / royalties etc, enabling faster growth opportunities.
• Builds asset value: IP commercialisation improves the balance sheet position of a start-up, enabling higher valuations and exit opportunities.

The VC market needs to actively lobby their African constituencies to provide better incentives locally to keep African firms’ IP on the continent. When its good advice only of course! Not just because we are loyal. At the moment many tech startups set up their IP holding companies in the UK, Europe or the US because they can access better incentives there. This is a HUGE loss for the continent but an essential survival tactic for the start-up. Well performing start-ups will stay if the early stages of building IP in Startups are backed and incentivised by Government and development organisations. Examples of these incentives are research grants on firm level (Start-ups), tax incentives for early- stage investors, first loss facilities and great IP regimes. The ultimate price of these short-term savings ( by not instituting these incentives) are incredible for countries.

At Anza Capital we lobby government through the Startupact movement South Africa.

Soon we will also become actively involved in the Kenyan Start-up Act and other national policies.