Most inexperienced entrepreneurs are unaware of the many options and alternative strategies available to push a new idea or invention to market. The most common approach they seek to implement is a classic funding round. When this avenue fails, and with overwhelming frequency it does, the idea often is dropped.
Driven inventors attend invention trade fairs, venture capital conferences, small business incubators, and network at every possible opportunity in search of funding and working capital for their invention. It is commendable and a tribute to the pursuit of the American dream that such efforts are expended in this daunting effort. However, virtually all will come to a disappointing end with no funding and disappointment.
In 2005 over 500,000 new business incorporations were organized in the United States. This does not include the hundreds of thousands of sole proprietorships, partnerships, joint ventures and strategic alliances formed. From this sea on creative, new opportunities only about 1000 were funded by traditional venture capital sources. The odds are so long against a successful funding round: the wonder is that so many entrepreneurs, with so much creativity to offer, are chasing so few sources of funds.
There are other opportunities and strategies available for successfully getting a great idea to market. The bar for acquiring venture capital funding is so high, so difficult and so competitive, that it is unfortunate how many inventors quit the pursuit of their goal after receiving no traditional funding commitment. One of several alternatives to venture funding is a license campaign.
Licensing is the assignment of intellectual property or product rights to a licensee for consideration. The consideration may consist of a rights fee, royalty, options, personal service fees, minimum annual sales turnover and more. The licensee agrees to make good faith efforts to commercialize the product or intellectual property and the agreement is memorialized in a License Agreement.
There are many more companies interested in licensing a product or technology than there are conventional funding sources for startups. Having said this, there is really no difference in the requirements for success in either venue. You will just get more swings at the ball when seeking a license for your project.
Entrepreneurs read about Blackrock Capital, Harvard Capital Management or Kohlberb Kravis Roberts funding a new opportunity for $200 million dollars or more. This is exciting, motivating and for most, unrealistic. A fully fundable opportunity is a rare amalgam of huge upside, mitigated risk, unique, potentially disruptive product and REALLY strong, experienced management. Very few entrepreneurs can present such a comprehensive package.
In the world of licensing the product, upside, risk mitigation and disruption features are crucial. Management is irrelevant as the licensee presumably has the management in hand to drive the project to success. The same elements that excite venture capitalists also excite the licensee. They are keen on a strong Unique Selling Proposition detailing the niche the product will claim.
A powerful, well-structured sales model will quantify and support the sales universe available to the product or technology.
There are many successful approach strategies available when seeking to license an exciting new product. The following are some broad elements we have utilized in our consulting firm with success. Remember there is no linear, set in steel index to follow. Innovate, adapt and keep pushing and try everything necessary to get that appointment with the decision-maker.
Create a Working, Production Quality Prototype
Whether you have a new product, a service or a technology, you MUST be able to demonstrate the unique features and benefits of your offering. Some inventors have a facility to create, design and construct the necessary demonstration unit. The great majority of people do not. This is a simple hurdle to overcome.
In every city in America there are job shops, product design and development firms, engineers and software writers capable of providing professional guidance resulting in production of the prototype required.
A key by-product of this process will be the creation of 3-D, Computer Assisted Design art. This art is essential in the assembly of the product for production, in obtaining crucial and totally accurate cost of goods and filing patents.
Patent Filing