How do you value proprietary technology and algorithms as intangible assets?

Full Explanation

A proprietary machine learning algorithm that improves accuracy by 15% versus competitors is worth money if that improvement translates to customer willingness to pay or lower churn. Valuation approaches: 1) Cost approach: what would it cost to develop the same technology (£500K development cost = baseline value). 2) Market approach: compare to similar tech companies and their IP valuations. 3) Income approach: estimate the revenue premium driven by superior tech, discount to present value. For example: your algorithm reduces customer churn by 5%, worth £2M annually in retained revenue. Discounted at 15% over 5 years, tech is worth roughly £6.7M. Patent strength matters: are your patents broad and defensible, or narrow and easily around? Trade secrets (algorithms, processes) protected by non-disclosure are valuable but harder to sell. Adoption and competitive testing matter: if customers choose your product specifically for the tech, value is real. If tech is nice-to-have and easily replicable, value is lower. Opagio helps companies articulate technology differentiation and calculate the financial impact on valuation.

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