A cyber security company with a patented technology for software switched to a licensing model when their market shifted and became more competitive as larger companies entered the market. Recognizing the rapidly changing market, instead of continuing to compete directly with bigger cyber protection companies, they sold off their hardware and technology assets and phased out their sales and marketing teams. They pivoted to become an innovation development and consulting company, and licensed its IP to other companies to integrate into their software and security platforms. Now the company generates more than $250 million from licensing its patented technology.
This is an example of a company that recognized the shifting market and moved to a licensing model as a more effective and efficient way to scale their revenues and stay profitable.
For a startup or small business, scalability is critical to adding more revenues. But many small businesses, and especially startups, don’t have the resources to reach every potential market. That’s where your intellectual property is a differentiator. IP is not only inexhaustible, it’s also scalable. It can be licensed in multiple markets and used by many businesses simultaneously. The larger the number of companies that use your IP, the more the value of your IP and business grows.
That’s where licensing is an ideal strategy. It leverages your IP by letting other companies use or apply it in different products, markets or industries, and pay you royalties.
Everyday your business creates and uses intellectual property. Just take a look at where your profits are generated and you’ll find it’s from your IP. Whether it’s creating new products or services, improving current ones, developing a customer relationship system, or figuring out ways to delivering them faster and cheaper, it’s all some form of IP.
Licensing to a competitor is another way of scaling your IP. It lets you earn revenues from your competitors sales. In certain industries dominated by lots of cross-over essential technologies, such as smart phones, competitors pool and license out their patents. Rather than litigating against each other, these pools generate revenues from royalties paid on sales of all smart phones using their IPs.
If your business isn’t scalable, you can use licensing to acquire a scalable IP. Westinghouse used licensing to acquire IP and not inventing it himself. He used that strategy to get the patent rights for AC electricity from Nikola Tesla, which scaled up to the industry standard electric current technology we use today.
Scaling your IP means you must be on the lookout for new ways of using it. Doing an analysis of your intellectual property assets through an IP audit is the best way to figure out new ways of scaling your IP. It helps you find new opportunities by answering some key questions:
- What type and kind of IP assets does your business own?
- Are you protecting all your IP assets?
- How can you better use and manage your IP assets in your growth and expansion strategies?
- Does your technology have non-competing applications that can be licensed to others?
- Does your brand offer value in a brand extension licensing or a co-branding relationship?
- What distribution channels or partnering opportunities can be developed through a licensing agreement?
The IP audit helps you discover underused or unused intellectual property. It will also help you figure out other applications, products or industries for your IP.
Trying to scale up a startup or business with limited capital in today’s rapidly moving market means finding creative ways to grow faster. Especially if you’re in a crowded field, such as the high-tech industry, where you’re up against lots of bigger and better financed players.
Rather than going head to head with these companies, licensing your IP is one of the fastest and more profitable ways to scale up your business. Whether it’s generating more revenues, reaching new markets and customers, or forming partnerships to develop new IP, licensing lets you instantly tap the existing production, distribution and marketing systems that other companies spent decades building. In return, you get a percentage of the revenues from every product or service sold using your IP.