IP-based investment funds are investments that aim only on acquiring intellectual property (IP) assets of a firm and later monetize these assets to raise capital for further growth of the venture. These funds neither aim on acquiring target company’s equity nor interest-based returns like debt financing instead prefer IP acquisition. There are two basic types of IP; Informal IPs and formal IPs, the former is related to startup’s overall technical know-how, relationships, and processes while the latter is the often form of trademarks, patents, copyrights etc. Usually, these investments focus on acquiring the formal IPs, more specifically patents . IP investments could be risky because the proper valuation of IPs is difficult, these investments are more expensive than normal financing alternatives and one financial miss-arrangement could liquidate firm’s entire assets
