Licensing – Not Sexy?

Licensing – Not Sexy?

  • What is it about licensing that makes it not sexy? No big office, no staff meetings, no employee turnover, no HR, no CEO, no COO, no CFO, no marketing, no press releases, no inventory sitting on the shelf, no, no, no…
  • Usually royalties are paid on a percentage of the wholesale price but when you have a product that will revolutionize and industry you set the terms. Lets take an example of licensing of one of my products for firearms including rifles, shotguns and handguns. There are approximately 270 million firearms within the US and 14 million more sold each year to the civilian population. Within the US the firearms industry generates $6 billion annually in sales which is why VC firms are now buying up mfgs and wholesalers. My item is a “must have” for military and law enforcement firearms (which are not included in the above numbers). It is a “no brainer” I want this included on my gun for civilians.
    • Option A: Create a new company to sell to the aftermarket as an accessory.
    • Option B: License to an existing accessory maker for say $15 for each one sold.
    • Option C: License to the firearm manufactures for a flat rate of $50 per firearm which incorporates the IP. For the consumer the $50 higher price is nothing compared to the value they are getting with the new product incorporated in/on their new gun.
      • Of the 14mil new firearms annually, S&W, Ruger, Bushmaster, and Glock license the product for inclusion on some of their firearms the first year for a total of 1mil units. Heck lets be conservative, 500k units.
      • We have now generated first year $25mil without even adding in LE/military or option B revenues.
      • No company and associated headaches meaning this is NET income. Boys and girls I call $25mil the first year SEXY!
      • The revenue stream continues for the life of the patent(s) and adoption rates increase for production and don’t forget the aftermarket that takes until year 2 to get tooled up and sells 2mil to the AK/AR/M16 “black gun” market for another $30mil in royalties. I call that SUPER SEXY!

Why is it VC always look for serial entrepreneurs?

Why is it VC always look for serial entrepreneurs?

  • VCs always want to know who the “team” members are that will run the company. Typically their websites always say we are investing in the team and your ability to start and grow a company. This is the wrong approach as CEOs are a dime a dozen and can always be hired to run a company with great IP.
  • It is the people with the fantastic product or concept that are the real revenue generators. Why wouldn’t VCs partner with the thinkers who develop the concepts on which companies are built rather than the doers who implement the thinker’s vision?

I would be a serial entrepreneur except…

I would be a serial entrepreneur except:

  • I generate too many great business concepts and create new devices at such a quick rate that I wouldn’t do justice to the business. Position as the Founder / Chair I could do. Limited to strictly one idea / concept for 3 years? Eeeee I would be dead before I could work my way through my innovations!
  • Taxes – The IRS’s IRC Title 26 Section 1235 allows royalties or the payment for assignment of a patent to be taxed at the same rate as capital gains. For those who only claim income from such their effective Federal tax rate is ZERO.
  • Hum work 80 hours a week as the CEO to generate $8mil in income or receive $5mil in royalties for the equivalent $ in the bank after taxes? Even better is when you have 3 such royalty streams. $8mil working or $15mil from licensing/assignments and have time for more innovation? What if the revenue streams kept coming?