Licensing is one of the fastest ways to build your start-up. When you license a market ready intellectual property, you’ve got an asset that builds immediate value to your start-up. The one thing you don’t want to do is approach them with a start-up mentality. That means being ready to show them how your start-up will successfully commercialize their IP.
You can literally take your start-up from zero to millions if you get the right IP. For example, when I was licensing the big entertainment brands, several companies did just that – they went from zero revenues to millions in sales within two years.
But being a start-up doesn’t mean you have to pay big bucks to get a license. One strategy you can use is an option to license. You lock up the rights to license an IP, which creates value for your start-up. While it’s not really an asset on your balance sheet, it’s still a value builder. An option agreement gives you a limited time right to execute a full license agreement. Anytime during the option time period, you have the right to “exercise” the option to get the license.
Options are a great licensing strategy for both small business and start-ups. It offers incredible flexibility in making your business attractive to investors or financing institutions, especially if your start-up doesn’t qualify for traditional business loans or lines of credit.
If you’re looking for sources to find an IP to license, one of the best is universities and research labs. I offer an audio workshop, University IP: The Billion Dollar Start-up Secret, that teaches you how to tap this resource. Universities have billions of dollars of intellectual property available in every industry and product category, from nanotechnology to consumer products. In many cases, you can license this IP for little or no money down. It’s a hidden source that many start-ups don’t know about.
I’ll discuss more about University IP – where to find it, and the tremendous licensing opportunities for start-ups – in future articles.
You don’t have to be “in business” to do business with a big licensing partner. As a start-up, you just have to know how to deal with a big licensing partner. Before approaching them, make sure you’re ready to tell them why you’ll succeed with their IP. And most important, don’t overpay for the license. Be creative and if you’re still raising money, an option is one way to get rights to their IP without tying up all your financial resources.