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Web3 & DeFi: Revolutionising Intellectual Property Financing for Creative SMEs

Imagine a world where a struggling filmmaker in Mumbai or a budding fashion designer in Nairobi can easily unlock the hidden value of their ideas, turning their intellectual property (IP) into a springboard for global success. This vision, once relegated to science fiction, is rapidly becoming a reality thanks to the convergence of Web3 and decentralised finance (DeFi).

For creative SMEs – the lifeblood of innovation and cultural expression – traditional financing has long been a frustrating maze. Banks often view intangible assets like copyrights, trademarks, and patents with skepticism, leaving these businesses starved for the capital they need to thrive and scale.

Enter Web3, a decentralised internet built on blockchain technology, and DeFi, its financial counterpart. We wrote about web3 before and you can learn more bout reading our previous blog post here. By enabling peer-to-peer transactions and leveraging the power of tokens, Web3 and DeFi are unlocking a treasure trove of opportunities for IP-based financing, especially for SMEs in the creative industries.

Here's a glimpse into the exciting possibilities:

1. Fractional Ownership: Imagine a musician tokenizing their song rights, allowing fans to become partial owners and share in the future revenue streams. Platforms like Royalty Exchange and Opus already facilitate this, democratizing access to IP investment and empowering creators.

2. Secondary Market Creation: Web3 paves the way for vibrant secondary markets for IP, allowing creators to trade their assets freely and access additional liquidity. Platforms like OpenSea and Cargo equip artists with the tools to sell fractional ownership of their artwork or grant licensing rights directly to buyers.

3. Community-Driven Funding: DAOs (Decentralized Autonomous Organizations) offer a revolutionary model for community-driven funding. Think of a fashion designer raising capital from a passionate DAO of fashion enthusiasts, who not only invest but also participate in decision-making. Platforms like Aragon and Colony enable the creation of such DAOs, fostering deeper engagement and shared value creation.

4. Royalties Reimagined: Web3 empowers creators to capture royalties automatically and transparently through smart contracts. Platforms like Audius and Rarible integrate this functionality, ensuring creators receive their fair share of revenue generated from their work.

The Impact on Creative SMEs

For creative SMEs, these Web3 and DeFi innovations carry the potential to be transformative:

  • Increased Access to Capital: No more begging banks for loans! SMEs can unlock the value of their IP, attracting diverse investors and securing funding through innovative channels.

  • Faster Funding cycles: the end of lengthy paperwork and bureaucratic hurdles. DeFi enables instant, transparent transactions, speeding up the funding process and accelerating growth.

  • Global Reach: Web3 knows no borders, connecting creators with investors worldwide, opening doors to previously inaccessible funding sources.

  • Community Engagement: this web medium fosters deeper connections between businesses and their fans and supporters, turning them into active participants in the creative journey.

  • Empowering Creators: By putting control back in the hands of creators, Web3 fosters a more equitable and sustainable ecosystem for creative expression.

Examples in Action

Crypto composer. Imogen Heap, a Grammy-winning musician, sold fragments of her album via NFTs, raising $1.2 million and fostering deep engagement with her fans.

Film DAO. "Decentralized Pictures" is a DAO raising funds for independent films, empowering a community of film enthusiasts to support innovative storytelling.

Tokenized fashion. "The Fabricant" tokenizes digital fashion items, allowing wearers to own and trade unique virtual garments.

Special Mention 

Molecule DAO: a decentralized biopharma marketplace that facilitates connections and transactions within the Decentralised Science (DeSci) space.Molecule acts as a platform where researchers and scientists can present their projects and secure funding from interested individuals or organisations. This dao in collaboration with other platforms like Nevermined, has pioneered the use of IP-NFTs (Intellectual Property Non-Fungible Tokens). These tokens represent ownership rights or specific aspects of intellectual property associated with a research project.

HyDRAULIC: Our inhouse flagship DeFi project, currently under construction and that started as a serie of pilot projects. HyDRAULIC is a decentralised marketplace for IP backed financing that connects IP owners (businesses and creatives) with lenders by leveraging the value of their IP assets as collateral and thus enable inclusive financing at scale.

The Road Ahead

While Web3 and DeFi hold immense potential, challenges remain. Regulatory frameworks need to evolve, education and awareness need to expand, and security risks need to be addressed. Nevertheless, the momentum is undeniable. By embracing these disruptive technologies, creative SMEs can unlock boundless possibilities, paving the way for a more democratised, creator-centric future.

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