How to Use Licensing as a Nonprofit Funding Strategy

On November 10, 1969, the preschool educational show Sesame Street aired its first episode on public television. Grants funded it through its nonprofit organization, Children's Television Workshop. By the mid-1970s, Sesame Street had become “an American institution.” However, its continued survival depended on government agencies and private foundations funding to produce the show. But these financial sources became a problem in 1978 when the US Department of Education refused to deliver a $2 million check. That's when CTW decided to license its characters for books, toys, apparel, and other products and use the recurring royalty revenues to fund its ongoing production and operations.

Like most nonprofits, you face a big “business” challenge – funding. Most nonprofits are not supporting themselves by selling products, services, or technologies. Instead, they rely on fundraising to get donations and grants. You spend much time trying to find donors instead of fulfilling your social mission.

But there is a strategy to help your nonprofit rely less on private foundation grants and government funding and ensure your survival through income-generating activities. That strategy is licensing.

No matter your nonprofit type, you create and use intellectual property to achieve your mission or goals. Today's nonprofits are more than just volunteer organizations. From improving the academic performance of at-risk middle preschoolers to increasing African farmers' crop yields to significantly reducing the number of deaths of young children worldwide — nonprofits of all sizes are creating new technologies, systems, and apps to solve all types of complex social challenges.

Licensing is a flexible strategy for your nonprofit IP. It's an effective way to create a recurring revenue funding source and an excellent strategy for expanding your nonprofit's mission.

Through licensing, your nonprofit can create partnerships in several ways.

The first is directly licensing your nonprofit brand or technology for royalty revenues. That is one of the most common strategies. Many public and private colleges and universities generate millions of dollars licensing their school logos and brands on all sorts of merchandise, such as hats, t-shirts, sheets, umbrellas, etc.

Another example is the Denver Food Rescue. Its mission is to provide healthy food to Denver neighborhoods. They developed an app that connects gardeners with excess produce to communities in need of extra food throughout the city. Their app makes it easier for their volunteers to schedule pickups and deliveries. Realizing the value of the technology, they decided to license the app to other venues. Their strategy includes white-labeling the app and licensing it to other nonprofits transporting supplies to neighborhoods and groups in natural disaster areas. Their licensing strategy created a self-funding and sustainable revenue source to support the nonprofit and the continued development of its app technology.

Through a JV licensing agreement, you can partner with other nonprofits in different markets to expand your nonprofit mission's reach. When the nonprofit BELLXCEL wanted to expand its summer and after-school programs for at-risk kids, it formed a licensing partnership with the YMCA. The licensing agreement included branding the Power Scholars Academy program; BELL provides the training and education programs, and the YMCA offers startup grants, enrollment, staff, and operations. About 80% of the US population lives within a 5-mile radius of a Y branch, giving it access to local communities and low-income neighborhoods.

Another variation of the JV licensing strategy is partnering with a for-profit company. A giant ice cream company in the Dominican Republic did a JV licensing deal with an environmental nonprofit. They combined their know-how IP to create a social enterprise that helps local Dominican Republic farmers grow macadamia trees and reforest farmland by selling a new macadamia nut flavored ice cream.

Licensing is a great way to kick start your funding efforts if you're a startup nonprofit. One strategy is forming a for-profit company and licensing it as a nonprofit IP. The for-profit Parent Earth Inc. and the nonprofit Parent Earth Foundation have the same mission — to educate the public about healthy eating habits. The nonprofit produces educational videos about food, while the for-profit generates advertising and sponsorship revenue to support the nonprofit while it applies for grant funding.

Technology creates opportunities for disruptive innovation to solve big social problems, from education to health care. Collaborative relationships between businesses and nonprofits are growing fast as social entrepreneurs and businesses seek to impact positive change and achieve goals that benefit society and the planet. A 2015 Social Enterprise Survey in the UK found social startups are quickly growing at three times the number of for-profit startups and introducing new products or services at almost twice the rate as for-profit-only startups. The vast majority of profits from these companies are invested back into furthering social or environmental goals. Now is an excellent time for your nonprofit to get into the licensing game.

Licensing provides significant marketing benefits to your business partner(s) from your nonprofit mission and goodwill, including great PR, attracting new customers, and increased sales. In return, your nonprofit uses these licensing partnerships to create a recurring revenue funding source, attract more donors, and generate more PR to expand your market recognition and mission.

Ready to learn more about how to use licensing for your nonprofit IP? Sign up and view the free online workshop, Licensing Strategies for Nonprofits. Find out how to turn your single funding transactions into a recurring revenue funding source. Click here to register.