Why Licensing is a Lucrative Strategy for Your Startup

Launching a startup in today’s marketplace can be a risky cost-intensive venture. Especially if your product or technology is new and unknown. It’s even more risky if your startup doesn’t have any IP.

If your startup is lacking IP, licensing 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 large technology companies and you’ll find a list of IP available for licensing. These corporations have such huge IP portfolios they can’t commercialize it all. Universities and research labs create thousands of new patents every year but they don’t commercialize any of it. Universities look for startups to commercialize it, and many offer low-cost and no-cost licenses, development resources and access to potential funding sources.

These are exactly the types of licensing opportunities that can take your startup from zero to millions, sometimes in a matter of months. I’ve seen this first hand when I was at the studios licensing the kids entertainment properties. Many small companies and startups were early licensees on these “unknown” properties. When these properties exploded into multi-billion dollar merchandise juggernauts, many of them were literally catapulted into overnight successes. And it can also happen with other types of IP as well, such as a disruptive new technology, or the right brand and product combination.

Licensing in rights to a proven product or technology also shortens the time to market. Rather than spending your time and money on R&D, you focus your resources on getting the IP into the commercial marketplace. When P&G wanted to expand into the sunglasses category, they licensed their Cover Girl brand to a small sunglasses company. With this well-known brand, sales took off and the sunglasses quickly rose to the number one seller at retail in its first year.

Another variation of IP rights acquisition is buying an IP.  In once case, an Austrian based video game startup acquired the brand and well-known titles of a bankrupt US video game company. The IP acquisition also brought a large customer base of devoted fans. It focused its resources on relaunching the games to the fan base, and quickly grew to become a significant competitor in the video game market.

Licensing out rights to your new technology or product minimizes the risks of developing it yourself.  A bigger partner has the know-how and resources in place to make and sell it into the market in less time. A small company invented a fabric softener and licensed it to P&G, who did some internal R&D on it. They created Bounce, which became one of the best-selling fabric softeners in the world.

It takes time to find the right IP and licensing opportunity. It’s a dynamic process that requires you be actively in the market, whether it’s licensing out your IP or finding one to license in. Some of my clients retain me to be their “eyes and ears” and help them find IP to license in. Entertainment properties are one example. I’ve worked with several clients who wanted to license popular movie franchises. These can be a tough IP to license, because they’re often locked up in long-term license deals between the studios and large manufacturers. But sometimes, we were there at the right time, and licensed rights to a new product category and territory that was just opening up.

Growing your startup doesn’t mean spending lots of time and money trying to launch and sell new or unknown products or services. In today’s IP rich market, licensing is a lucrative strategy that can literally catapult your startup into the marketplace with a proven revenue generating IP.  But success in licensing requires taking action and making it part of your daily business activities. Remember, the best licensing opportunities go to those startups that make licensing a part of their short and long-term business strategy.

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