Many of the largest global companies sit on billions of dollars of valuable market ready intellectual property. Their challenge is not having the internal resources and patience to bring these technologies into the commercial marketplace. And this offers great opportunities for startups and small businesses to license a market ready technology with big market potential.
Last year, Dow announced it shut down the sales and production facilities for its patented solar shingle technology for residential homes. It merged it with another division and decided to license out the technology.
Expanding in a fast growing market, such as solar energy, with a new product or technology is challenging, cost intensive and risky. Especially if it’s a big market with sizable competitors. That’s an ideal situation where licensing is an effective strategy.
That’s exactly what a small solar panel installation company did. It announced it was expanding its business in the residential solar market, competing against one of the biggest company’s in the solar panel space (Tesla). But it didn’t try to go it alone. Instead the company licensed Dow’s solar shingle technology.
The agreement included all commercial rights to the technology including manufacturing, marketing, sales, installation and service. In return, the company agreed to pay Dow $3 million plus 2.5% royalty on the net sales price of installation sales.
The company gets exclusive rights to a market ready technology, and rights to an established brand name. It gives them instant recognition in the marketplace, a strong competitive position with a patented technology, and a large partner with the marketing and manufacturing know-how. Now the company can focus all of its financial resources on producing and selling the technology.
If your business is lacking intellectual property, licensing a market ready technology is a quick way to acquire it. There is an abundance of market ready IP available from large corporations, universities and research labs. Visit the websites of many largest corporations and you’ll find a list of IP available for licensing. They’ve got large patent portfolios, and they license out the ones they are not pursuing. Many universities have lots of IP available for licensing as well. In particular, they look for startups to develop and get the IP into the marketplace. Some Universities offer other resources, such as office and research facilities, and sometimes access to potential funding sources.
Licensing in a market ready IP minimizes the risks of developing it yourself, and shortens the time to market. Rather than spending money and time to develop a new IP internally, you find one that’s market ready, and license rights to make and sell it. The IP owners have tested and protected it. They’ll often provide their know-how and expertise on the best way to produce it or make it better. Industries such as computers, electronics, consulting, consumer products and more are shifting to the licensing model. Big players including IBM, Microsoft, Philips and P&G not only license out their IP, but also use licensing to develop new products and services.
Market ready IP gives you an immediate market presence. A big licensing partner wants you to succeed, and you can tap their resources, such as manufacturing and distribution. Often times, licensing is used to tap into a partners promotional power. The strategy is called “Riding the Coattails” and it’s used to multiply your promotional dollars without spending more money. By partnering with a big IP owner, such as a major consumer brand like Coca Cola, you can leverage their promotional power to enhance visibility of your product or service in the market.
Acquiring rights to a market ready IP increases the value of your startup or small business, especially in the eyes of investors. A 2010 report by the OECD found quality IP prompts investors to invest faster and in larger amounts. Quality IP, such as a technology from a Fortune 500 company, is a signal to potential investors that your company has a sustainable competitive advantage, and is more likely to succeed. Your products or services stand out from the competition, and increases your profitability by enabling you to charge higher prices.
Whether you are a startup or operating business, growth is critical to your survival. And one of the best and fastest ways to build your business is through licensing. Many businesses today rely on licensing to acquire the technologies they need to keep growing, especially in highly competitive industries such as smart phones, computers and health care. Rather than spending your time and money on internal development, licensing a market ready IP lets you focus your resources on growing your revenues and building your business.