In our last Newsletter, we highlighted how licensing external tech can help you grow without losing focus on your core business objective. Now, let's flip the script, what if your IP could do the heavy lifting?
Imagine you've built an amazing software product, but scaling your business generally feels out of reach. Sound familiar? Don't fret. In this post, we'll break down smart and creative ways to fuel your growth with your IP assets.
Monetizing your IP
Here are a few options to consider:
- White Label Licensing: You can permit other businesses to use your software under their own branding, while you stay in control. This is a smart way to scale, access new markets, and generate revenue through royalties or one-off payments by leveraging the reach of other brands..
- Reseller and Distribution Arrangements: Involves licensing your software to resellers who market and distribute it in their regions. Microsoft's global reach, for instance, is supported by strategic reseller partnerships. With their existing customer base, Resellers help you break into new markets faster. Some even offer local technical support for the benefit of your users.
- Franchising: Imagine your startup produces hardware devices but you don't have the time or resources to open and maintain service centres across the world. With franchising, you let trusted local partners run service centres under your brand name. You earn upfront fees and ongoing royalties while maintaining strict quality control. SLOT's business is a prime example of the franchise model.
- Joint ventures: Picture partnering with a big brand to tap into new market, either for development of a new product or provision of complementary services. A joint venture lets you combine strengths, create better solutions, and share revenue, fast-tracking growth. However, be mindful. Decision-making often a shared responsibility, so you'll need to align on how your product is to be deployed under the joint venture.
- Data Monetization: Your company's data is a valuable asset. As effectively captured by Tim O'Reilly, founder and CEO of O'Reilly Media, "We're entering a new world in which data may be more important than software". You may choose to sell your company's data or use it to create new products and revenue streams. Make sure to get legal advice on data privacy. Skipping this could cost you big time!
- IP-backed Financing: Do you have copyright, patents or trademarks? IP-backed financing lets you use your IP as collateral for loans, just like Sci-Net did with a £700k facility secured from NatWest. It's a smart way to scale without losing equity. It's however essential to engage a lawyer to lock in the best deal and protect your interests.
Developing and implementing an IP Monetization Strategy
Here's how to get started:
- Run an IP Audit: Start with an IP audit to identify all your intellectual property assets (registered and unregistered). An IP audit will also help spot any risks, restrictions, or protection gaps.
- Close the Gaps: To close IP gaps, register unprotected IP in key markets. Secure IP transfer agreements with staff and NDAs with partners. Enforce your rights against infringements, renegotiate weak contracts, and improve security for trade secrets.
- Set Clear Goals: Define what you want to achieve through IP monetization (e.g. revenue, reach, scale) to determine best applicable monetization strategy.
- Build the Right Structure: For instance, if you're exploring the franchise route, you'll need essential elements like Franchise Agreements, comprehensive brand and operational guidelines, and robust monitoring systems, among others.
- Protect & Monitor: Keep an eye out for infringement and take action where necessary.
IP Monetization Mistakes to Avoid
When it comes to monetizing your IP, there are common mistakes you should avoid to maximize success:
- No Strategy: Lacking a clear plan can lead to restrictive deals and misalignments with long-term goals, proving costly.
- Rushing Into Deals: Don't let pressure or excitement force you into unfavorable agreements. Always review the fine print and seek legal counsel.
- Skipping IP Valuation: If you don't know what your IP is worth, you risk undervaluing it. A proper valuation strengthens your negotiation power.
- No Quality Control: Avoid deals that prevent you from overseeing IP usage. Choose pathways that protect your brand, product quality, and reputation.
Conclusion
As a tech startup, your IP is more than just an asset. It's your growth engine. With the right monetization strategy, scaling becomes less costly. However, do not trivialise the role of informed legal guidance. It could be the difference between a great deal and a costly mistake.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.