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Why inventors have trouble landing licensing deals

Postby jimdebetta » Wed Dec 01, 2010 11:54 am

jimdebetta
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I keep getting calls and emails constantly about licensing. People ask me the same thing over and over – can’t I just license my idea/product to a company? Unfortunately, it’s just not that easy .….

I am not sure what the current statistics are for success rate for licensing, but based on what I used to know and the deals I have been involved in few very products every get licensed. Why? Lots of reasons…and here are just a few that I have experienced:

- the product is simply not that exciting or capable of attracting much excitement with potential licensees
- the product has not even been developed and so there is nothing for the potential licensee to evaluate
- The inventor has unrealistic expectations about the kind of money they could earn from a licensing deal – most people seem to think they will make a ton of money and most do not make much at all
- the inventor has little or no knowledge of how licensing deals are done and how to approach the right people at the companies they are interested in striking a deal with

There are other reasons for sure but it seems the internet can be a blessing and a curse so to speak. There is a lot of information out there but sometimes too much info can be confusing and overwhelming to an inventor. What really makes a difference is if someone has experience doing licensing deals and nothing beats a real world experience in my book. People must understand that in order to have a chance at a good licensing deal, they must first have a product that can change the retail markets as we know them or at least have a product that appeals to a broad audience that can solve everyday problems or enhance your life in a positive way (like an IPOD for example.) Although licensing deals are done in many product categories, it seems that consumer electronics/gadgets, apparel, and house wares/home improvement products seem to be popular for deals from what I have seen.

Just know that very few products ever reach that level of licensing success…likely a percent or two at BEST….likely less than that based on some older stats. For those lucky few that do get a deal, there are lots of things to work out like length of deal, royalty rates, guarantees, etc, etc – and many of these “done deals” wind up going south real quick! My advice – take the risk out of the deal for the licensee by “proving your concept” by developing it yourself and sell it to a few retailers. Once you do that, you have proven that your product is commercially viable and then you can increase your chances of securing a deal…..

Jim

Re: Why inventors have trouble landing licensing deals

Postby Need2Know » Thu Dec 09, 2010 10:52 am

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This post brings out what stops many inventors.

I've had product successes. Those successes have been like winning a lottery...and yet, there's been many more let-downs. Both extremes were partly based on company decisions and then too, my own bad decisions. If I had made better choices in choosing business partnerships, who knows how different things could be? Being an inventor means wearing many hats, but only a select few have had enough savvy to be good at creating the idea, solving a certain problem, understanding business, then realizing a profit from it. Most of us assume we'll be good at all of the above when in fact, we're not. Ego can kill a good product idea faster than a CFO can say "thanks, but no thanks!"

In the past, where I did all the conceptual stuff, the product development & design, and the problem solving, my business partner(s) were supposedly representing the product to the trade. It was their job to know the market, and respond to it. What became evident however, was having partners who relied solely on their company contacts and not necessarily what was really happening in the wider business. Opening new doors (cold calls) are much harder than calling on someone who will always return your calls. That's a very narrow field to play in. Getting in the fast lane is also way-harder than staying on the path of least resistance. I realized way too late [that] my future was being held-down by partners that stayed on the path...only. I was going to only do as well as my business partner was willing to work at presenting....!

Not all trades operate in the same manner, but one common denominator is that all businesses depend on buyers. The buyer stands between the company you may be licensing to and success. If you're avoiding the middlemen and licensing, your skin better be very thick, you have a trust fund, and you've got tons of time to spare.
In developing and presenting new products, I follow one philosophy:

1% of something is better than 100% of nothing!


Bad partnerships are a dime-a-dozen, where good ones are rare. That was the past. My present partner and myself are...well...I wished it had jived this good a long time ago!

In the beginning, my product models were more thought-out than the business model I depended on. My previous partners didn't have a business plan. This fact stymied my success. This "representation" issue was my own undoing, no one else's. No one forced me to trust the wrong guy. Choosing a reliable partnership is far harder than finding product solutions. One so-called "rep firm" I worked with, actually placed a product with a company in chapter 11...and never mentioned it to me. But we had a licensing contract. In fact, we had four contracts, each netting NOTHING. What the hell were they thinking? Answer: They weren't and I had legal grounds to sue them for false contract. I kissed-off two years of work due to false representation and working with fools. My fault. When a good product is placed with a bad company, it begins to demoralize the inventor. Two years of work is a terrible loss and a heavy strain on a marriage. Been there, got the t-shirt, the hat, etc. Instead of quitting, learn from the mistake, move on.

Instead of blaming the so-called partnership, which was easy and valid, step back, examine this. Who chose this partnership? Ahh...that would be...me. So I was 50% of my own problem. I chose unwisely. This I can change...and I did. Instead of the AON (All Or Nothing) view, I chose better. It worked.

Spent my entire adult life pursuing and applying creative skills and made a career out of it.
I've worked for Fortune 500's, big corps, small corps (private & public,) been in management, free-lanced, and ran my own industrial design business for over 15 years. I've worked inside and outside some major US companies. I wish I had someone like me [helping me] when I needed it.

One thing I've come to learn is not said here insult anyone. Most creative souls have no clue about how "business" functions. Understanding marketing, promotion, branding, etc. That's the bad news. The good news however, is where business people cannot do what you do...(!) ...you can learn and do what they do! This gives you an edge, an advantage. And if you choose to be out there in the business world, you need know what you're talking about...or you're toast! It's not a skill set common to everyone, so know your own limits...and drop the ego.

The best advice any inventor could be given, is learn as much as you can about the buisness you're entering. Know the ropes before climb. After may be too late! Look at who your competition is, look at who the players are. Know that it may take time to produce your product, perhaps a year+, so what will the trend be by then?Disseminate what business [is] to your product and where it fits? Your invention, though potentially very profitable, may not be at the profit level that a major company is seeking. They want an immediate and massive profit. This is one reality stemming from the model of BIG businesses. If your idea, patented or not, doesn't forecast-out to earning say $50M first year, don't bring it to 3M. They'll dismiss you. A $10M product can sustain a small to medium sized corp, but is pocket change for the big guys. And the problem that remains, even with all the NDA's, they've seen it. And as people move from one job to another, who knows who'll say what...about what they've seen at the prior job? Sad-but-true, so choose wisely and do use NDA's.

Begin the process first by knowing your market. Then develop a plan that will tailor your product to fit in it for a low-low cost. Do include "The KISS principle": Keep It Simple Stupid!

Inventors have a tendency to over-develop an idea. If I just add one more thing...it will have sizzle! Don't do it. Simplify your idea. By reducing everything to basics, you'll reduce potential costs. Cost has killed more good ideas than RAID has bugs! In the long run, once your product has been costed-out by the company and they want it, allow them to embellish it. Cost is easy to add, hard to remove. You want to get in the door with your idea...and you +/- 30 seconds to grab their attention, so use the time wisely. If you can afford a costing engineer, by all means use them.

The best advice for inventors. Use Google! Spend time doing a patent search. Why work on something that's been done? Learn whether a potentially contender-patent has run out? This would classify it as being "public domain" and no longer viable. Know that products that were previous patented or non-patented can have baring on your idea. If either reached the market they are then considered "prior art" and can eliminate any hope of your reaching a patent.

A sad reality. When and if an inventor, whose invested say $20K in his/her patent, then discovers that as they receive their patent...an Asian company has just flooded the US with a non-patented product that functions like yours it's deemed "prior art". This cancels you out. You cannot claim rights nor sue. Not only have you just lost $20K, your patent is meaningless. However, the patent attorney still gets paid. Inventing is gambling, minus the casino.

Get past your idea. Learn the market. Research similar products and research patents. Google-Google-then Google again! Search and research the business you want to be in. And LBNL, talk to other inventors. There's plenty of opportunities out there, but getting them to fruition takes a thick skin, patience, and knowing what not to do. If only there were a GPN for inventors...hey...hmmm?

N2K

Re: Why inventors have trouble landing licensing deals

Postby jackbnimble56 » Thu Dec 09, 2010 5:56 pm

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Jim

I've inserted some responses into your original post...

- the product is simply not that exciting or capable of attracting much excitement with potential licensees

I think my product, the Magic Toob, may not be particularly "exciting" but whether it's capable of attracting much excitement I would simply suggest that could largely be based on how it's marketed. Not my area of expertise I'll admit...

- the product has not even been developed and so there is nothing for the potential licensee to evaluate

The Magic Toob is fully developed right down to a shelf-ready PVC clam shell complete with instructions and UPC bar code. Several pilot manufacturing runs have been performed so costs of production are well known.

- The inventor has unrealistic expectations about the kind of money they could earn from a licensing deal – most people seem to think they will make a ton of money and most do not make much at all

I know that a licensing deal yields a much smaller return for the inventor than what one might get from manufacturing the product ones self assuming that's even feasible from a cost and logistics perspective. The Magic Toob made the final 10 out of more than a a hundred at the Big Idea Group but failed to make the final 3. Their standard deal is 5%. I've heard Roger Brown speak of deal netting as high as 12%, but I trust that's exceedingly rare.

- the inventor has little or no knowledge of how licensing deals are done and how to approach the right people at the companies they are interested in striking a deal with

I readily confess that I came into this as a complete neophyte but with the help of like-minded people here and other forums I can say I know a hell of a lot more about licensing than I did when I started my little venture two years ago. Of course I came in knowing next to nothing so...

There are other reasons for sure but it seems the internet can be a blessing and a curse so to speak. There is a lot of information out there but sometimes too much info can be confusing and overwhelming to an inventor. What really makes a difference is if someone has experience doing licensing deals and nothing beats a real world experience in my book.

I actively seek out such people and pick their brains whenever I can!

People must understand that in order to have a chance at a good licensing deal, they must first have a product that can change the retail markets as we know them or at least have a product that appeals to a broad audience that can solve everyday problems or enhance your life in a positive way (like an IPOD for example.)

The Magic Toob is designed to solve a problem that either currently or soon will likely exist in one form or another in virtually every household in America. My company, Nimble Jack Enterprises actually operates under the motto "Innovative Solutions to Everyday Problems". Think of the Magic Toob as being as utilitarian as the Paper Clip and almost as ubiquitous. Certainly not as sexy as an iPod, but paper clips do have their place.

Although licensing deals are done in many product categories, it seems that consumer electronics/gadgets, apparel, and house wares/home improvement products seem to be popular for deals from what I have seen.

I think it definitely qualifies under the Home Improvement category.

Just know that very few products ever reach that level of licensing success…likely a percent or two at BEST….likely less than that based on some older stats.

I know the odds are stacked against me but I also know that most of my competition isn't up to the task.

For those lucky few that do get a deal, there are lots of things to work out like length of deal, royalty rates, guarantees, etc, etc – and many of these “done deals” wind up going south real quick! My advice – take the risk out of the deal for the licensee by “proving your concept” by developing it yourself and sell it to a few retailers. Once you do that, you have proven that your product is commercially viable and then you can increase your chances of securing a deal…..

The testimonials page of the Magic Toob site contains universally favorable reviews of the product at least a half dozen of which are from retailers who have purchased the product for sale. I'm thinking I may add a page with sales figures and perhaps some graphs. Any additional suggestions, comments or critiques you have would be most welcome!

Jack
Nimble Jack Enterprises - Innovative Solutions to Everyday Problems
To purchase the Magic Toob product visit: http://www.magictoob.com/

Re: Why inventors have trouble landing licensing deals

Postby ATtheLake » Tue Dec 28, 2010 12:52 pm

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Cost has killed more good ideas than RAID has bugs!
haha there is some real wisdom in this post! glad to read it.. not being said lightly, but it sounds as if you have some great experiences!

Re: Why inventors have trouble landing licensing deals

Postby ATtheLake » Wed Jan 05, 2011 5:36 pm

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I palced an order for you and Roger's course on December 19th how long is expected shipping?

Re: Why inventors have trouble landing licensing deals

Postby jackbnimble56 » Wed Jan 05, 2011 6:57 pm

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Lake

Ummmm... "You" and Roger? I don't have a course. Are you referring to someone else?

Jack
Nimble Jack Enterprises - Innovative Solutions to Everyday Problems
To purchase the Magic Toob product visit: http://www.magictoob.com/

Re: Why inventors have trouble landing licensing deals

Postby Roger Brown » Wed Jan 05, 2011 7:34 pm

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I believe lake is referring to the looking2license CD set. We normally tell you to expect it to be two weeks on delivery. Lake email me at rbrown@rogerbrown.net so I can check on it. If anyone wants me to respond to a question it is easier to go to my website and email directly, then hope I see your post on a thread I am not reading. I do not read every thread in here. It was just dumb luck I saw this one.

Thanks
Come visit my sites at http://www.RogerBrown.net
or http://www.looking2license.com
I have gotten 9 products licensed spending less than $100 on each, you can too.

Re: Why inventors have trouble landing licensing deals

Postby ATtheLake » Sat Jan 08, 2011 3:17 pm

ATtheLake
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Posts: 100
Joined: Wed Sep 29, 2010 6:45 pm
Location: Northern Indiana
Hey Roger,

I shot you over an email with my contact info as requested

I wanted to say I really wasn't even expecting a response..

I casually posted just to get an insight if you guys were busy because of the holidays and what not.. in no way em i upset... still looking forward to receiving the material.. I have enough reading to do for the next month so I am certainly not hard pressed to have more material sitting on my desk! 8)

Sorry for taking a few days also to get back with you...