Finding and Approaching Companies

The first step towards a licensing deal is finding the right companies to approach. This is harder than you might think, as the biggest names in your target market may be the least likely to want your idea. The second step is approaching companies in the right way. This is relatively straightforward if you follow our advice, which takes you from initial contact to your first meeting and its aftermath.

This Project, together with Project 10, also helps you avoid a fundamental mistake many inventors make. They don’t fully grasp that what matters most to companies - even technology companies - is profit potential. Not inventive steps, not clever design, not smartypants concepts. Profit, profit, profit.

Are you ready for this?

Before approaching any company you must be confident that you and your idea or product are in a presentable state. You obviously can’t get much better than showing companies a product that you’re already making and selling, but few inventors will be in that position. Discuss your overall state of readiness with your team or a trusted adviser, and check that you’re OK on all of these:

• You have a prototype or equivalent that works.
• You have enough evidence from previous Projects to convince a company that you’ve got something of commercial interest.
• You have a well-rehearsed presentation that enables you to seize any opportunity to present that evidence quickly.

• A ‘chance encounters’ version that you can deliver seemingly off the top of your head in less than a minute without props of any kind.
• A more formal ten-minute version for sit-down meetings. Ten minutes doesn’t sound much but as an opening salvo it’s plenty. If the interest is there, the meeting will go on longer. If it isn’t, ten minutes is enough to satisfy honour on both sides. You got your chance, and someone listened.

Knowing which companies to approach isn’t easy without expert knowledge of your target market - but by now of course, that’s just what you should have. If you don’t have that knowledge, you’re probably not ready to present your idea to anyone. Inventors who haven’t read this book will probably think only of a few big-name companies and will flounder once they’ve had rejections from all of them. In fact, we’d suggest that you don’t initially approach market leaders at all. Here’s why:

• Match the company to your product. Don’t approach companies with no experience of your target market or without the equipment or expertise to handle your product. For example, there may be little point in approaching a metal fabricator with an idea that needs plastic injection moulding.
• Be equally cautious about very small companies, who might struggle to market the product effectively or increase production if sales really take off. (That said, a solution could be for you and the company to jointly license the product to additional companies, perhaps in other countries.)
  

From your market research you should know which companies operate in your target market, and how they rank in terms of product range, market share, size and turnover. Though there may appear to be a great many eligible companies - especially if you’re willing to cast your net internationally, as is increasingly necessary - the likelihood is that after analysing the available information about them, your choice of worthwhile firms to approach will shrink considerably. It may be reduced to no more than a few dozen for a low technology product and perhaps only a handful worldwide for a highly specialised product.

However: the fewer companies there are to approach, the higher the chances of 100 per cent rejection. If that happens and your faith in your product is undiminished, it may be time to start thinking seriously about switching from a licensing to an entrepreneurial strategy.

Professional help
No matter how well you’ve researched your target market, others may know it better - and there’s a good chance that one or more of them will be able to help you. If you’re having trouble finding companies to approach, ask your patent attorney (it’s not really their thing but they might just know a name or two) or seek advice from all the public sector business, innovation or technology support agencies in your area, or in areas known to specialise in technologies appropriate to your product. We know of several inventors who got openings by talking to advisers who took them straight to companies whose owners or managers they knew personally. Many business support agencies can also help you deal with companies and agencies elsewhere in the EU and often far beyond. In general, if you can demonstrate that you’re worth helping and don’t need carrying every inch of the way, you’ll probably find someone willing to go that extra mile for you.

You can of course also get help from private companies and consultants. This inevitably comes at a price, and it can be difficult to know in advance whether you’ll get value for money. Our advice would be to ‘go private’ only as a last resort. If you do need to use commercial resources, find out if you can get any of the cost covered by a grant or subsidy scheme.

One company, or more?
Most inventors dream of one large company offering them a licensing package that leaves them with nothing to do except collect royalties. It can and does happen, but rarely. In most industry sectors companies are becoming more specialised, with large companies tending to become clusters of smaller, autonomous divisions which in turn often license in the products they sell from other companies. This spreads the trading risk and protects the core business if markets suddenly contract, but from an inventor’s point of view it makes a single, all-encompassing licensing deal a much remoter prospect.

A possible solution is for you to play at least a partial entrepreneurial role to help speed up the licensing process. You may find that some companies want to sell your product but not manufacture it, while companies which can manufacture it won’t move a muscle without firm orders from retailers or distributors. If you can’t find one company capable of both making and selling your product, you may have to find two or more: one willing to manufacture, at least one other willing to buy. Your mission is then to win orders at the right price from the one(s) willing to buy, which you then take to the company willing to manufacture. As long as you build in enough profit for yourself, becoming part of the supply chain can be a highly profitable way of both exploiting and controlling your product.

Often, the most frustrating aspect of dealing with companies is getting them to take notice of you in the first place. The following pointers may help when you start contacting companies to tell them about your product.

• If you have something worthwhile to talk about or show - especially trial batches of product - and have adequate IP protection you can’t easily beat a press release aimed at relevant trade and business publications. This won’t cost much if you can produce your own text and photography and find out who to send it all to. It’ll cost more if you use a PR specialist but it may be money well spent, as good ones will know exactly what editors want and will know many of them personally.

• Only phone companies to find out who best to write to or email. Simply say: ‘I want to send details about a new product that might interest your company, but I don’t know any names. Who’s the best person to contact?’ If you’re transferred to that person, resist the urge to tell them every last detail of your product. Stick to finding out briefly if it’s OK to send information, and do they prefer a letter or email? The reason for restraint is that when they come to consider your idea, they need to remember you as a fellow professional, not a time-hogging obsessive.

• If you have a choice, target marketing people rather than technical people. The former are more likely to see profit opportunities; the latter are more likely to see an extra burden they don’t want to deal with because they’re already too busy with stuff thrown at them by the marketing people.

• Don’t call yourself an inventor. It’s not a word that opens doors. Present yourself simply as someone with a business proposition to make to fellow business people. The fact that it involves a new product is incidental. (And call it a product, idea or design, not an invention).

• Unless you’re told that email is preferred, we’d advise using mail for an unsolicited approach. Most businesses use spam filters which may block your email and any attachments, so to ensure receipt the good old letter-in-envelope technique may be more reliable.

Write a brief summary of your idea - no more than three or four paragraphs on one side of A4. Don’t disclose more detail than is needed to convey its key commercial benefits. Your aim at this stage is to whet their appetite, not overload them with information that in its sheer quantity tells them you’re unbusinesslike. Use plain English and plain facts, arranged as bullet-points for clarity and brevity. Use the language of business, not of advertising. (For example, instead of: ‘It’ll make you millions!’ say: ‘It may have the potential to increase your sales significantly’.) End with your name and contact details. If you have a finished product and a photo of it will save a lot of written description, attach one. Otherwise, don’t bother.

If you’ve filed a patent application you can mention that fact, but don’t disclose any detail unless your application is already published. Until then it’s privileged information that you should only discuss (protected by NDA) with a potential stakeholder if they show serious interest.

Send a copy of the summary to each company on your list, with a short covering letter along these lines:

Dear [name],

I attach brief details of a novel mousetrap which is available to license and may be of interest to your company. A working prototype is available which I shall be delighted to demonstrate subject to suitable mutual arrangements regarding confidentiality. To this end I enclose a non disclosure agreement which I hope you may be able to sign.

I can attend a meeting at fairly short notice. Should you require any further information, please contact me. I look forward to hearing from you.

Yours sincerely...

Don’t forget to enclose the NDA!

• If you’ve heard nothing after a couple of weeks it’s worth a phone call or email to find out how your idea has been received. If the response isn’t outright rejection, ask if there’s a possibility of a brief, informal meeting. If it’s a rock-solid no, do your best to seem unruffled. Don’t start arguing, wheedling or whingeing. Listen hard and ask pertinent questions (including ‘Where did I go wrong?’ Disarming frankness rarely goes totally unrewarded). That way you may pick up some piece of wisdom that helps improve your approach to other companies, or even to the same company later on. Always try to come away with something, even if it’s just permission to re-pitch if you improve the idea or think of others. However you handle it, it’s important to leave them with the impression that you’re at least painless to talk to. That might help next time round.

• When ringing companies, you’ll often find that the person you want isn’t available. Leave a message only once. If that gets no response, ask whoever does answer the phone when’s a good time to ring the person you want, and keep ringing until he or she is available. The alternative is to keep leaving messages and wait till hell freezes over for a return call.

• If you get replies at all, don’t be fooled by flattery. If they say your idea is ‘most interesting’ or ‘ingenious’ or ‘highly original’ but there’s no offer of a meeting or any kind of support, it means they’re not remotely interested. They’re just too polite to come straight out with it. Equally final is the letter saying your idea ‘does not at present fit in with our plans’. It never will. A genuinely helpful letter gives it to you straight: ‘It’s wrong for us because of this and this’. Such candour is rare, probably because (a) detailed explanations take time and (b) they don’t want to encourage you to reply.

• A cunning tactic sometimes used against totally irredeemable ideas - for example perpetual motion devices - is to innocently ask the inventor to solve ‘just one small problem’. The problem is of course large and unsolvable. Alarm bells should ring if you get a letter like that. A similar letter might tell you that the company genuinely thinks your idea needs more work or some other input - such as independent testing - before they’ll consider it, but the difference in intent should be clear.

• If you’re invited to a meeting or to send in more information but the company won’t sign an NDA, you have a simple choice. You can trust them or you can look elsewhere.If offers of meetings are rare it’s probably worth the risk. As we’ve said elsewhere, it should be perfectly possible to have at least a first meeting without either party disclosing anything sensitive. If there comes a point where there’s a genuine need for an NDA, a responsible company will recognise it.

If you get invited in, confirm the date and time in writing. To recap briefly on points made in Project 4:

1. Don’t bank on your meeting lasting more than about half an hour.
2. Give advance notice of any special requirements for demonstrating your product or prototype.
3. Get everything fully set up before the meeting or demonstration.

• Strictly for your own use in meetings, prepare an information file which you can dip into for answers to questions. Make sure it’s easy to use and that you know what is and isn’t in it. You don’t want the meeting to lose momentum while you scrabble for the answer to a perfectly reasonable question. However, leave out any information you don’t want to disclose.

• Revisiting an earlier point about patents: unless you have a published patent application, leave all information about your inventive step at home and politely but firmly refuse to talk about it at this stage, even if they’ve signed an NDA. The point is that your prototype won’t embody all possible variations of your idea but your patent application might. To hinder any attempt to steal your idea by varying it, you need to keep others in the dark about how many variations you've already thought of and protected.

• Don’t rely on the prototype alone to persuade people. They’ll be much more interested in the commercial and financial advantages, but equally they’ll be reacting to you: are you the sort of person they could sensibly do business with?

• Treat your encounter as a meeting of equals, not an appearance before a judging panel. The fact that they’ve let you in at all shows a degree of curiosity that you can exploit. Hand out business cards, take brief notes (including, if you don’t already know them, the names and job titles of everyone at the meeting), ask enough shrewd questions to make them aware that you’re no mug.

• Try also to assess the people you meet as individuals. Could you do business with them? This matters because business relationships depend to a large degree on human chemistry. If your instincts tell you that you couldn’t easily trust them or work with them, it may be both a good safety move and a good business move to look elsewhere.

• Immediately after the meeting, scribble a quick memo of what happened and what action, if any, was promised. Also record your perception of the individual attitudes of the company people. In particular, identify the one who is likely to be your best advocate within the company. (Though Sod’s Law dictates that this person will leave the company or be reassigned shortly after the meeting.)

• If the meeting isn’t going your way, don’t despair. Listen and learn. If they know their market well, you’ll pick up some gems of information.

• After the meeting, write to thank them and to confirm any outcomes. It’s both a courtesy and a precaution, as your letter documents your understanding of any actions agreed upon. If your understanding is wrong, they should write back to correct you. If they don’t, and promised actions don’t materialise, your letter makes it harder for them to back-pedal later.

• If they reject your idea ask them to confirm in writing that they have no further interest in pursuing it. This should dampen any later temptation to develop a similar product and protect themselves by claiming that they hadn’t actually rejected your idea.

• Confirm back to them in writing all significant verbal undertakings given to you, particularly when they involve numbers - money, percentages, sales volumes etc - and keep copies of all correspondence. This is as much part of your IP protection as a patent application, so make the effort. Some companies (and, it has to be said, some inventors) will shamelessly move goalposts if they think they can get away with it.

The following checklist is partly an action planner and partly a reminder of what matters. If you’re tempted to think ‘I don’t need to do all this stuff’, it may help to point out that we’ve modeled the checklist on questions professionals are very likely to ask if you want their advice, support or money. We therefore have to be stern and say that if you aim to be a respected and successful inventor, you can’t afford to duck any of it.