Hardware Asset Class for Recurring Revenue Financing
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Solution Overview
Problem
Hardware-based solution providers face significant capital burdens due to the high costs of manufacturing, configuring, and deploying hardware components, leading to expensive hardware sales and limited access to capital, which stymies their growth and hampers their valuation compared to software companies.
Innovation Solution
The introduction of a hardware asset class that allows investors to purchase hardware from solution providers and deploy it to end-users, with the investor receiving royalties from the solution provider's recurring revenue, thereby reducing the upfront costs for end-users and providing a scalable investment opportunity.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Quantity of substance
If hardware companies require end-users to purchase hardware up front, then the hardware company receives capital for manufacturing and deployment, but the end-user faces high upfront costs and the hardware company faces capital burden
Solution Approach 1:
The patent introduces an intermediary financial mechanism where investors purchase hardware assets directly from hardware companies and deploy them to end-users. This intermediary model separates the capital provision function from the traditional end-user payment, allowing hardware companies to receive capital without requiring end-users to bear upfront costs. The investor acts as a mediator who provides both capital and deployment services.
Solution Approach 2:
The patent segments the hardware acquisition and deployment process into separate transactions: (1) investors purchase hardware assets from hardware companies, and (2) investors deploy the hardware to end-users. This segmentation allows the hardware company to focus on manufacturing and capital recovery through royalties, while the investor handles deployment and end-user relationships, eliminating the need for end-users to pay upfront.
2Ease of manufacture
If hardware companies sell expensive hardware, then they recover manufacturing costs, but hardware sales become slow and capital investment is limited
Solution Approach 1:
The patent implements a feedback mechanism where hardware companies receive ongoing royalty payments from investors based on the revenue generated by deployed hardware. This continuous feedback stream replaces traditional upfront sales transactions, allowing hardware companies to recover manufacturing costs over time through systematic royalty payments rather than requiring rapid upfront sales velocity.
Solution Approach 2:
The patent applies preliminary action by having investors purchase and deploy hardware before the traditional sales cycle completes. Investors acquire hardware assets and immediately deploy them to end-users, enabling hardware companies to secure capital and manufacturing viability ahead of traditional sales timelines, thereby accelerating the realization of manufacturing value.
3Adaptability or versatility
If hardware companies deploy hardware to end-users, then solutions are implemented, but capital requirements for manufacturing and configuration increase
Solution Approach 1:
The patent uses investors as intermediaries who assume the capital burden for hardware deployment. Investors purchase hardware assets and provide the necessary capital for manufacturing, configuration, and deployment to end-users. This intermediary model enables hardware companies to maintain solution implementation capability while transferring the capital requirement burden from the hardware company to the investor.
Data Source
AI summary
A system, method, and computer-readable medium for implementing a hardware resource class. An electronic processor may be configured to determine a rate of a hardware resource. The hardware resource may be configured to allow a hardware-based solution provider to provide a service to an end user. The rate may be configured to be remunerated by a source different than the end user. The electronic processor may be further configured to determine an inflow amount for the hardware-based solution provider to remunerate to the source based at least partially on the rate of the hardware resource. The end user may utilize the service from the hardware-based solution provider. The service from the hardware-based solution provider may be at least partially based on data provided by the hardware resource.