The funding gap between concept and execution remains a staggering challenge for many early-stage technology and life science companies. Sure, if you're patient and have strategic scientific research in process, you can probably get some federal grant funding to do your proof of concept and get started.
But the angels aren't flocking to laboratory science these days -- at least not until it has matured into a demonstrated product with a credible market. To get outside funding these days, most entrepreneurs will need at least a few beta reference clients and a path to profitability in the near term.
So what are you to do? Well, one option that has seen some success over the years is to license your intellectual property (IP) as a way to get going -- and growing.
Look to your patent portfolio
If licensing makes strategic sense for your technology, you'd be well-advised to start your process by engaging patent counsel with deep experience in helping companies in similar technology fields build a solid foundation. Although you may be tempted to do it yourself (the Patent Office Web site makes it look simple), I would advise against that approach.
An experienced patent attorney can ensure that your claims are as broad or as precisely focused as appropriate and in sync with your business model. Although your patents provide essentially your right to prevent others from infringing on your inventions, they will form your tangible assets and your negotiable currency in a licensing play.
Examine the landscape
Concurrently -- this is not a linear process -- you should be researching the marketplace for two kinds of companies: large firms that routinely in-license as a part of their R&D strategy; and companies in product or service markets for which your technology might solve a pressing problem or fill a critical gap.
Start by clearly articulating all the problems that your technology might address. Use your professional team, board and scientific advisers to generate a large list of potential companies; you'll reduce it to a few viable prospects later.
How do you find these companies? If possible, look beyond your industry segment -- your best partner may be in a completely different business, or even an attractive licensor, given some careful planning.
If you aren't reading trade journals or e-newsletters across a wide spectrum of related industries, now would be a good time to start. Feeling overwhelmed? Ask your team to share the load, even if there are just a few of you. Start your quest by looking for licensing success stories, problem reports, opinion pieces or even advertisements that might give you clues to potential partners.
Test the waters
Once you identify a list of companies to explore, start visiting Web sites. How do you think your technology could add value to their products or businesses? If a Web site features the logos of key customers, vendors or partners, what does this reveal? Remember to read press releases and any articles posted on the site.
Previous announcements by the company may help you reduce your list to a few licensors to pursue.
Validate your targets
Once you have narrowed the list, see if you can identify other licensing partners that have worked with your target firms. It may be perfectly appropriate at this point in the process to give the CEO a call or send a brief e-mail message, explaining your quest.
Has the company's relationship with the licensor been proceeding as planned? Would the company make the same deal again? If you don't think direct contact is appropriate, have your attorney, a board member or a trusted colleague make preliminary introductions, and then hopefully you can make that call.
Assuming your patent protection is firmly in place, the next step is to contact your target licensor firms. Depending upon their size and stature, you may want to start with their business development manager, one of their research professionals or someone directly involved with the solution you are hoping to offer.
As in your screening process, you may want to arrange a strategic introduction through a service provider, a research associate or even the licensee firm you queried during your validation phase. Be prepared to present your case quickly and succinctly. Frame your introduction in terms of the value you believe that you offer, in the context of a potential opportunity. Why might your solution be important to them?
The more in-depth your homework around this initial proposition, the more likely you will be to receive serious consideration. If you don't think you can do this in real-time, craft an introductory letter. But again, talk briefly about your technology (nothing proprietary at this stage, of course) and focus on your potential to add value to them.
Once again, this is not a time for an amateur to go it alone. Use you attorney to prepare or interpret an offer and response. Scale your expectations -- what are standard terms in your industry or for that particular partner? Will there be a cash or stock deal, or will the compensation be simply the right to jointly perform additional research? What about future royalties and rights to other markets? What are the realistic milestones on both sides? How will the license be managed? What are the limitations?
Remember, licensing can be a strategic step toward closing your early cash flow gap, but it may also be a great opportunity to move your technology closer to delivering on its promise, so be careful not to get greedy.
Hopefully, this process, though complex, will help you fund your continuing R&D, product launch or growth strategy. In tough times, we need to be creative.
Orion is president and CEO of the San Diego Regional Technology Alliance. She can be reached at firstname.lastname@example.org.