To Start-Up or To License?

One important decision to make when creating a new product is whether to sell the product directly to consumers (or businesses) or to license the technology.  There are, of course, various mixes of the two approaches.  For example, a company can be established solely to develop and license products.  Or a company may need to be established and the technology proven in the market before it can be licensed.

At the outset, it may not be obvious which route will be more successful.  However, there are some indicators that can hint at whether licensing or selling the product directly is the better route to market:

  1. Existing intellectual property rights
  2. Established distribution channels and barriers to market entry
  3. Technology production and manufacturing capabilities
  4. Funding opportunities and financials
  5. Lifestyles preferences of the founding team / inventors

Below is a matrix that may help clarify whether a technology would be better commercialized via licensing or selling directly to consumers.

 

License Idea Sell Directly
Market research indicates a market

Yes

Yes

There are high barriers to entry

Yes

No

You can protect intellectual property

Yes

Yes

You want to be an entrepreneur

Not really

Yes

You have knowledge and access to resources for production

No

Yes

You will be able to obtain financing for your business by demonstrating favorable ratios and financial statements

No

Yes

You plan on “going it alone” without a team

Yes

No

You have a high tolerance for risk

No

Yes

Advertisements

About Anne
I'm a marketing professional with a deep passion for delivering a memorable Customer experience from the very first time a Customer encounters a brand. I have a strong focus on technology commercialization and marketing innovative products. While I was a student at the University of Toronto, I founded Young Inventors International, a not-for-profit organization that has worked with more than 2,000 university student innovators.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: