Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.
Equity funding is just one source of funding for your startup. There are many others such as licensing.
You may be able to reduce the amount of funding needed to grow your business by licensing your technology to others.
Instead of building and selling a product, you can license to others who will build and sell a product.
In licensing, you must have a patent to protect your technology and oftentimes a series of supporting tools to help those who license your technology for using it.
Licensing brings the following benefits:
It reduces the amount of capital you need to raise
It can generate a substantial return given the costs are low
The risk of product failure is shifted to the licensee
The disadvantages are:
You don’t control how it is used
Your licensee may later compete with you
You don’t receive the full revenue as if you had built and sold the product yourself
Licensees can also bring you new ideas for improvements on the technology.
For applications requiring high capital expenditures for building and selling the product, licensing is a good fit.
Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.
Let’s go startup something today.
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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.