We are well out of the .com bubble, but tech companies still form and fail. For the lenders brave enough to lend to the tech companies developing software, the collateral is often the source code which is the nuts and bolts of an application or “app”. While the source code is actually a written text written in some development code, it exists in the abstract and it thus an intangible in that sense. However, unlike most collateral intangibles, this type often requires the original developer to make the source code worth anything more than a line item on a security agreement.
Consider for a moment the case of Aereo, Inc., which filed bankruptcy is late 2014. It was a company which developed a web based app which allowed users to watch TV on mobile devices or over an internet connection at home. Basically, Aereo, Inc. received the cable/TV signal from the normal sources, e.g
., cable and antenna, and then converted the signal to be routed through the internet to the subscribers.
In the course of developing this technology, Aereo raised about $250 million in equity from inventors. So, presumably someone believed in the product. (Admittedly, there was no secured debt). Additionally, Aereo listed its assets as worth $20 million when it filed bankruptcy in November 2014.