Financial technology: Snowflake unlocks markets for intangible assets

Peter Lee
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Innovation is held back by the gap between the old financial system, investing and lending primarily against hard assets, and the new knowledge economy that depends on intangible assets. A new type of bank could benefit SMEs seeking to develop innovative products. It could also give investors the chance to redeploy speculative capital more productively. But who is the driving force behind Snowflake?

Snowflake could turn out to be the ultimate FinTech company. The brainchild of Andre Lee, a former debt markets investment banker turned technology investor, the company is on track later this year to unveil a new type of bank, into which it hopes large companies will deposit intellectual property and from which SMEs will borrow to bolster their own new product development.

It will also unveil a new type of limited recourse lending for product development, filling a crucial financing gap, which commercial banks do not currently meet with loans. "The typical choice even for well-established SMEs seeking to finance new product development is between giving up equity to venture capitalists – which is anathema to most SMEs especially family-owned ones – and tying up all their limited spare cash flow," says Lee.

"There are also government grants but these are often given as reimbursements. Companies have to raise the money in the first place and governments then match or refund it. But banks won’t lend against ideas. They see too much uncertainty as to whether a new product will ever progress through development and sell. Banks only want to lend against the security of a company’s hard assets."

Snowflake’s ultimate ambition is no less than to nudge a global financial system that grew up in the industrial age, with commercial banks, investment banks and investors financing tangible assets – land, property, manufacturing, consumption of products and their cash flows – towards the financing of intangible assets – ideas, technology and innovation.

Snowflake focuses on innovation

Snowflake focuses on innovation
Source: Snowflake 

These are often illiquid and very hard to value. Innovative technologies may only find successful commercial application in fields far away from those their inventors originally intended, and sometimes only when combined with other owners’ innovations. And these surprising combinations are hard to bring about when the assets are static and separate. The marketplace for exchange and for the attribution of value and pricing has yet to appear. But it’s important for all of us that it does.

Lee takes matters back to basics. "There are only two ways to grow an economy: increase the amount of labour, basically the number of workers, or increase productivity, or both. A lot of developed economies have ageing populations and so productivity is vital. The key driver of productivity is innovation and the key driver of innovation is technology. If you don’t have access to it, you are at a very significant disadvantage.

"Intangible assets are becoming the main drivers of economic and wealth development. But those assets are not easily exchangeable. And as for financing them, banks are still in the industrial age while the real economy is moving into the knowledge age. When a bank looks to fund the building of a data centre, it’s still likely to be lending against the collateral value of the land and ignoring the much higher value of the data itself because it’s hard to measure it precisely."

Andre Lee, the
founder of Snowflake

Lee argues that most thinking around intellectual property still stems from a defensive mindset – protecting assets from other rival users with patents and trademarks – and has yet to progress towards finding ways to exchange and monetize these intangibles. This is reflected in accounting, which casts intellectual property as a wasting asset that companies must depreciate or capitalize. That is unlike, say, land, which can be revalued upwards and accounted as profit, even if a company does nothing with it.

Lee says: "It is only with the comparatively recent advances in computer power, digitization, cloud technology and the rest that we now have the potential to sift, parse, segment and value these intangible assets. But you cannot truly know their value until you first extract them and put them on platforms where an informed marketplace can make judgments about whether to buy, sell or rent them."

Lee set up Snowflake in 2011 after a varied and at times turbulent career starting as a trader and head of fixed income in the emerging Asian high-yield corporate bond market in the mid-1990s, that stalled when his group was blamed for the collapse of Peregrine Securities during the Asian crisis. Peregrine had accumulated exposures to unrated borrowers, which could not be refinanced when the Asian bond markets collapsed at the end of 1997. Lee had hoped to pioneer a new market to help unrecognized Asian firms finance themselves and after reveling in early successes, first at Lehman and then at Peregrine, now found his business swept away in the Asian meltdown. In the aftermath, regulators banned a number of senior Peregrine figures, including Lee, from managing a company in Hong Kong for four years.

Euromoney interviewed Lee in forensic detail on all this in 1998.


Lee, who is half Canadian, half Korean, reinvented himself. He initially created a business to assist SMEs in capital raising and financial restructuring, but found they had big needs far beyond capital. He became enmeshed in helping SMEs in many different industries with product development, business model creation, branding, business development, supply chain and manufacturing.