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I can not find financing. Dead is my idea? No, Consider Licensing Campaign!
Most inexperienced entrepreneurs are not aware of the many options and alternative strategies available to promote a new idea or invention to market. The most common method of trying to implement financing round is a classic. When this approach does not work, and with overwhelming frequency it does, the idea often is dropped.
powered assist inventors invention trade fairs, conferences, venture capital, small business incubators, and the network at every possible opportunity to seek funding and working capital for his invention. It is commendable and a tribute to the pursuit of the American dream that such efforts are spent on this effort of enormous proportions. However, virtually all come to a disappointing end unfunded and disappointment.
In 2005 over 500,000 new business incorporations have been organized in the United States. This does not include the hundreds of thousands of individual companies, partnerships, joint ventures and strategic alliances formed. In this sea of creative new opportunities for only about 1000 were funded by traditional sources of venture capital. The odds are so long against a successful round of financing: the wonder is that so many entrepreneurs, with as much creativity to offer, chasing so few sources of funds.
There are other opportunities and strategies for successfully achieving a great idea to market. The bar for acquiring venture capital funds is so high, so difficult and so competitive, it is unfortunate how many inventors seeking leave its goal after receiving no traditional funding commitment. One of several alternatives to finance risk is a licensing campaign.
Licensing is the transfer of intellectual property rights of a licensed product for consideration. The examination may consist of a royalty payment, rights, options, personal services fees, the minimum turnover of annual sales and more. The licensee undertakes to make good faith efforts to market the product or intellectual property and the agreement is memorialized in a License Agreement.
There are many more companies interested in granting licensing of a product or technology that is conventional funding sources in startups. Having said that, there really is no difference in the requirements for success in one of these places. You just got the ball changes to obtain a license for your project.
Employers read about Black Rock Capital, Harvard Capital Management in Kohlberb Kravis Roberts or a new funding opportunity for $ 200 million dollars or more. This is exciting, motivating, and for most, unrealistic. A fully funded opportunity is a rare amalgam of enormous head, mitigated risk, only, are potentially harmful and really strong, experienced management. Very few entrepreneurs can present as a complete package.
In the world of product licensing, conversely, mitigating risks and characteristics disturbance are crucial. Administration is irrelevant that the licensee management probably has on hand to lead the project to success. The same elements exciting venture capitalists are also excite the licensee. They are very interested in a strong Unique Selling Proposition niche product detailing the claim.
A powerful, well-structured sales model to quantify the universe and sales support available in the product or technology.
There are many successful approach strategies available when a license is new and exciting product. The following are some general elements that have been used in our consulting firm success. Remember there is no linear progression in the rate of steel to follow. Innovate, adapt and keep fighting and trying everything you need to make appointment decisions.
Create a working prototype production Quality
If you have a new product, service or technology, you should be able to demonstrate the features unique benefits of your offer. Some inventors have a facility to create, design and construct the demonstration unit is necessary. The vast majority of people do not do. This is an easy obstacle to overcome.
In every city in America there are workshops, product design and development of enterprises, engineers and software writers capable of providing professional guidance resulting from the prototype production is required.
A key product this process is the creation of 3-D Computer Aided Design of art. This art is essential in the assembly of the product to production costs in obtaining absolutely crucial and accurate property and patent applications.
Registration of patents – Intellectual Property Protection
Very few dealers are interested in investing significant money in marketing a new product without the guarantee of certain patents, copyright and / or trademark protection. View a patent attorney. Patent law is very specific and for this reason, it is a legal specialty. A patent attorney shall carry out a search and using the results, advise the possibility of successfully receiving a utility patent (highly preferred), design patent (patent art, easy overcome) or not smart enough to get any coverage.
If an item has patent risky prospects that we like an alternative strategy. I have been counsel of several of my clients in a strategy we call "patent pending forever." Our goal is to keep a product in the patent pending status for as long as possible by addendum time of application and art and the presentation of these to continue to review the presentation again.
During patent pending deposit is essentially in limbo. The advantage to the inventor is that no publication of details of the technique, the features and benefits unique products. The secret is an asset. Once a patent number is received two undesirable things happen: details of the patented product is public knowledge and the clock begins to count against the 20-year life of the patent.
For most entrepreneurs seeking a license, do not push for the presentation international patents. International Filing is very expensive and allow the licensee to assume this expense.
Power Production, Manufacturing
Depending on the product, service or technology that provides for the license, which should guide the production of origin. The reason is simple: it will separate from the dreamer. Mirrors its commitment to opportunity. It ensures that the product can be built (see a number of projects that are not realistic from an assembly and economically).
Now, let's discuss a sensitive issue in the current economic climate. I love my country. America is the land of opportunity. However, I am a capitalist and the rules of capitalism are much larger than any individual-including you, the entrepreneur. If possible I prefer to assemble components, source, and manufacture here in the States USA. However, it is increasingly difficult to be competitive here in America.
I have clients who are adamant that they do not want your assembly project in sea. Do not be a Luddite. You really have two options: you can go with the flow, or it can be drowned by the flooding. In the last decade, we have not found a single project that might occur in the United States as cheaply as we could produce the high seas, including the cost of freight, customs and duty. Not at all!
We are looking for four or five plants, or high seas resources, for the presentation of the 3-D CAD of art and a launch package. The launch package contains printed samples of all the components that form part of the finished product. After this refers usually receive contributions in four to six weeks.
This citation should include all costs of the line components listed in the BOM for the product, as well as outer packaging, costs of the screen (if any) carton, inserts (assembly instructions, etc), plus freight to the U.S. port of arrival, customs, cargo destination and its storage via and fulfillment point. This is a net cost of a good dead.
The use of Cost of Goods (COG)
Knowing the cost of goods is crucial! This number demonstrates the feasibility of the product pricing model, confirms the hypothesis of margins and the ability to build an exciting sales model. If COG is too high, and no compression capability of the costs, the future prospects of the product license are not exciting. This number sets the parameters for the potential of your project and tells the potential licensee is a thoughtful, serious and qualified licensor.
Research
The licensee in an exciting opportunity offered will want to know (not think) everything possible about the market are about to enter. This shall include customer demographics, market size, more growth, competition, and potential licensees. Cite research sources and assemble as part of Opportunity License document you offer. This is the knowledge that distinguish it from the factory race tire kickers in the hope of reaching an agreement.
Professional Approvals
Nothing resonates with professional log buyers. I'm not necessarily talking about the approval of celebrity. They are great for certain products. A pediatrician support a Juvenile product, or an association of professionals who test positive on a budget of a service, or an approved educational toy are simple examples of taking a product and brandishing with the glow of an expert. This is very valuable and a technique regularly used for our projects. Include these quotes in all collateral materials.
Test Market / Focus Group
If you only have a prototype that can be difficult to gather a focus group or test market. What we recommend is to show the product to foreign sequentially in the field where the product is normally used. Recently, a single prototype of a baby stroller accessories spend an afternoon in Central Park in Manhattan, which shows the unity of mothers pushing strollers. We walked away with positive contributions for the allocation of 26 of 29 mothers who used the prototype. These are included as an exhibit in our folio product.
Document License Opportunity
With the above in hand, you have the data and resources to mount an approach paper. We've all heard stories about inventor crept up to a banker in a bar, uninvited, and successfully launch their idea for a whiskey and soda. Good luck!
You get one chance to make a great first impression. No direct access to any aspect of the initial approach. With its patent, prototype, its possible adoption, research and costs under control, you are ready to assemble the written document detailing the characteristics and benefits of your project and quantify the opportunity.
As you are looking for funding, and are not interested in the free market, a classic business plan is not required. However, you have a written summary of your project, written along the lines of the business plan. We call this the opportunity to License.
This document must be clear, exciting and short eight to 10 pages, plus exhibits. The sample should include patent information, the list of contributors to the project, the art of CAD, BOM, cost of goods, research data.
Sales Opportunity
To overcome the above now puts the opportunity in terms of seriousness and professionalism, licensee approach goals. His research has identified the obvious candidates. Networks, walking proper scouring trade shows and industry publications, trade will increase familiarity with the addition of possible homes for the placement of the item.
The list of objectives has to be treated with care and diligence. Large, listed companies have different, but rather strict rules for accepting unsolicited submissions. I think it's crazy this barrier, as many great opportunities are never seen for fear of litigation. Medium size and small companies, producers really fast, are more open to reviewing unsolicited submissions.
Prepare correspondence carefully. Make sure you know the exact name and title of decision making in each licensee potential target. Personalize each letter and assemble shipping in a folio. The letter should be on top on the right pocket opportunity Licensing document directly behind. In the left pocket instead a public relations positive entries of users, etc.
Follow-up mailing with a phone call within 7 to 10 business days. Now the ebb and flow to a Offer begins.
Talks
No two deals are alike. This is not a cookie cutter, fill in the blanks in the process. Ensure that face face meeting with Mr. Decision Maker is crucial, and opportunity can not be burned. We maximize every potential revenue stream for our clients. These include:
Share Rights
You should receive consideration in the form of a rights fee in return for delivering all aspects of your project for the licensee. This must be paid upon signing of the license documents and not refundable. The licensee must perform due diligence before signing. There is no good here. The size of the rate of Rights will be in direct proportion to the size of the opportunity offered.
Royalties
This is the bulk of their income any licensor receives from a successful product placement in a licensing agreement. The variables in structuring the percentages are endless. Some rights are created for sales growth and the minimum investment sales promotion. Others are linked to the achievement of sales targets levels. Many contain purchase options points automatically kick in some travel.
The term (length) of the license is crucial. The licensee wants a shorter period. The licensor want as long as possible to maximize revenue.
The details of each license is unique and specific to dealing in particular.
Production
Another reason why they are aggressive about controlling the sources of production, and knowing that our costs are because often becomes another source of revenue for the inventor. For example, assume a net cost of the good dead of $ 1.92 per unit. Assuming you can maintain control of production in negotiations, and this happens quite often, we will cite the licensor COG $ 2.00 per unit. The difference of $ 0.08 (4%) goes right to the licensor to bare Letter of Credit which is organized to pay for offshore production of inventory. $ 0.08 may not seem like much of the revenue per unit. However, applying this number to potentially hundreds of thousands of units per year for seven, 10 or 15 years. Do the math!
Several points in this regard.
Do not be a pig. Pig getting slaughtered. A good deal is an agreement in which each side feels fair treatment! This is an area where we see too many deals go south. All party should benefit generously, according to their level of participation.
Second, do not try to license a product without performing the steps detailed above (Or some variant of the process). I mentioned this before. This is just an outline. There are endless variables that apply to different sectors, styles and categories of vacancies. Click their task and not try to take shortcuts. You will be wasting their time and resources.
Finally, no, never use the services of a windmill invention. These companies usually advertise in the night infomercials and they prey on the inexperienced, naive and desperate. These companies are little more than a boiler room with order to separate the weak from their money. Check with your Better Business Bureau and Attorney General for the history of one of these houses. Even then proceed with caution.
Licensing is one viable option for real inventors have opportunities, fresh definable features and benefits. The Unique Selling Proposition contained in these inventions can have a real value to licensees, while venture capital may not be able to overcome one or more deficiencies inherent in the project. Funding sources are often the search for a different address parameter. Dealers simply seek the opportunity to bring home a product, service or invention that complements its range of assets. This license makes the best choice for employers in an area or limping other: they simply have a great product to offer.
About the Author
Geoff Ficke has been a serial entrepreneur for almost 50 years. As a small boy, earning his spending money doing odd jobs in the neighborhood, he learned the value of selling himself, offering service and value for money.
After putting himself through the University of Kentucky (B.A. Broadcast Journalism, 1969) and serving in the United States Marine Corp, Mr. Ficke commenced a career in the cosmetic industry. After rising to National Sales Manager for Vidal Sassoon Hair Care at age 28, he then launched a number of ventures, including Rubigo Cosmetics, Parfums Pierre Wulff Paris, Le Bain Couture and Fashion Fragrance.
Geoff Ficke and his consulting firm, Duquesa Marketing, Inc. (www.duquesamarketing.com) has assisted businesses large and small, domestic and international, entrepreneurs, inventors and students in new product development, capital formation, licensing, marketing, sales and business plans and successful implementation of his customized strategies. He is a Senior Fellow at the Page Center for Entrepreneurial Studies, Business School, Miami University, Oxford, Ohio.
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