routeThus far on Merge, the discussion about entrepreneurship has focused on the process of building a company from the ground up to bring your innovative idea to market. Last week, a lunch conversation with my colleague Dan Wallace brought up an alternative approach that I have not yet written about: signing a product licensing deal with an established company that already has the pieces in place to launch your idea. In fact, if there is a “well-worn path” from graphic design to entrepreneurship, licensing is probably it; there are many examples of designers who’ve had success in the stationery, gift, and publishing markets, as well as font and image licensing.

The basic premise with licensing is that you sell the rights to your product or idea in exchange for royalties on the sales of the product once it goes to market. Royalty percentages can range from 5-15% based on a variety of factors, and often an advance payment can be involved.

While product licensing is a valid option that is well-suited for the designer who is not interested in the complex, demanding, and expensive process of creating a business (financing, production, distribution, marketing, etc.), it should not be mistaken as an easy alternative. The licensing arena is outrageously competitive and the process of selling your idea can be time-consuming and fraught with rejection and risk. In other words, do your homework before you go down this road!

Control will be a key issue for designers evaluating the possibility of licensing. We designers do not easily give up control and, once you sign a licensing deal, that’s exactly what you’ve done. Most of us would struggle to see our creation taken over by an entity that might not have our exquisite taste in typography and color (not to mention strategy and vision).

In established markets like consumer goods, toys, and publishing, working with a licensing agent is going to be an important consideration. These agents have deep connections in the industry and can quickly introduce you to possibilities that would otherwise take years to develop. A good agent will also offer advice and guidance based on their own industry experience. Of course, an agent will also take their share of the proceeds. Additionally, you will also want to consult an intellectual property attorney before going too deep into this process to make sure your ideas are protected.

I am only scratching the surface of this complex topic here, and I will be writing more about it in the future—and hoping to profile some designers who have traveled this road (please send your ideas).  Until then, I’ve found startupnation.com to be a good resource for basic information about the licensing process. The Sloan Brothers have a very helpful string of posts on this site, some of which I’ve listed here:

10 Tips for Landing a Product Licensing Deal
Key Advice for Licensing an Invention
5 Common and practical steps for pursuing your invention

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Picture 17Good luck to Minnesota Cup applicants!

I was thrilled with the number of friends, colleagues, and Merge readers who submitted applications to the Minnesota Cup Breakthrough Ideas competition last week. According to their Twitter feed, the Cup has had a record turnout. I’ll be watching the process closely, hopeful that designers and creative thinkers are well represented as the field narrows over the next few months.