Partners for Advancing Agriculture ®

The Strategy of Licensing

Fall 2015

Companies often struggle when contemplating licensing deals.  This is especially true of small companies with new technology.  The decision to license, when to license, and the overall licensing approach are crucial factors when considering how to generate new income from newly developed or even existing products.  – Context Partner, James Mann

Although not typically done, any licensing approach should be accompanied by a broader strategy that outlines the trade-offs between the company’s need for near term income/cross license, and the risks of approaching a deal too early. Our suggestion for optimizing a licensing strategy is to approach each deal systematically through a series of internal steps:

  1. Determine the fit of the licensing strategy within the overall strategic direction of the company. Ensuring a clear fit with the company’s overall strategy will safeguard a product or concept that could create a tactical advantage in the future from being sacrificed for short-term income.
  2. Evaluate the multiple license options that exist for products today. Much like the Pharmaceutical industry, licensing is no longer a one-size-fits-all proposal. Multiple options now exist that can combine tactics from the past with new tactics learned and honed from other industries.
  3. Size your opportunities. Determining the size of the licensing opportunity is just as important as determining the size of the market for a business plan. However, this tends to be the most overlooked portion of the licensing planning process. By understanding the market dynamic and the size of the opportunity, the appropriate resources can be applied not only to market the product, but also to creatively explore multiple licensing options and maximize value capture.
  4. Empathetically understand your potential licensees. Multiple internal term sheets should be developed as you begin the licensing process. These should include term sheets developed not only from the licensor’s lens, but also from the lens of the licensee. This will ensure that the company can predict and plan to mitigate any major objections before they occur.

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All of these process steps should be wrapped by a scenario planning session where role-playing can be used to validate and adjust the company’s licensing strategy. Following these steps can ensure the company’s top opportunities are monetized through the licensing process.

For more information, contact James Mann at: James.mann@contextnet.com.