Finding and approaching companies

If you want a licensing agreement with a company, you must:

• Find the right companies to approach.
• Approach them in the right way.

Finding suitable companies to approach may be harder than you think, because big, well-known companies are often the least likely to want to deal with inventors. 

Many inventors also make the mistake of approaching companies too soon. You should have:

• Detailed knowledge of the market for your idea.
• A finished prototype.
• Evidence that your idea has commercial (not technical) advantages.
• A well-rehearsed presentation that enables you to seize any opportunity to present that evidence.

Big companies

Many inventors approach only the best-known companies in their target market. Regrettably, very few major companies genuinely welcome external ideas. When they have been rejected by all the big names on their list, many inventors have no idea what to do next.

In fact, there are several reasons why it might be better not to approach big companies at all.

• Many are so large that they find it inefficient to deal with individuals and very small companies.
• Most will receive many unsolicited ideas. These are hardly ever regarded as a priority, and so may be automatically rejected.
• Most will be happy with their existing methods for acquiring new ideas.
• Even large companies fear litigation from inventors who accuse them of IP theft. The simplest remedy is not to deal with inventors at all!
• The larger the company, the further ahead they have to plan. It may be impossible for them to do anything with even a good invention for several years.
• In their terms - turnover measured in hundreds of millions of euros - the return from your invention or product may be too small.
• In big companies it can take a very long time for things to happen - often too long for an inventor running out of funds.

Smaller companies

Even if your ultimate objective is a licensing agreement with a large company, it may be a good strategy to start with a smaller company. Smaller companies often have more ability to change and innovate quickly, and it is usually easier to reach their key decision-makers.

There are also, of course, many more small companies than large ones, so you should have far more opportunities to pursue.

Furthermore, most large companies are supplied by smaller companies, so your best route to a large company may be through one of their suppliers.

You may be able to find a small company which specialises in your technology area and has resources scaled to the needs of a new product. (For example, manufacturing equipment suitable for relatively low volume production.)

One disadvantage of smaller companies is that they have less money than large companies. They may therefore like your invention and be keen to license it, but may find it just as difficult as you to fund its development.

A possible solution is for you to work in close partnership with a smaller company, so that the burden of development is shared. Information can also be shared, so an inventor working collaboratively with a small company may benefit significantly by being much more aware of what is going on - even if progress is slow.

Another disadvantage is that smaller companies are less well known, so it may be difficult to identify those who might be (a) interested in your invention and (b) capable of doing anything positive with it.

A solution may be to enlist the help of business and technology advisers employed by your local or regional government, whose job it is to be familiar with the small and medium-sized (SME) business sector. They will also know of funding schemes for which your project may become eligible if you join forces with a small business.

(There are also private companies and consultants who offer to arrange business-to-business introductions. Often large fees are charged and it can be difficult to predict whether you will get value for money. It may be sensible to try all available public sector resources first, many of which will be free.)

Identifying companies

In general, you need to find companies of the right size to whom you can offer the prospect of either a larger market share or an improved product range . Your ideal company may be a major company, but a better choice may be a smaller company with ambitions to be bigger.

Make it your task to find out which companies are active in your target market, and how they rank in terms of product range, market share, size and turnover. (A good source of names is a patent database. Focus on patents in a relevant technology area and you may discover among the applicants many more active companies than you previously knew about.)

After analysing all available information about them - perhaps with the help of a professional adviser - you should be able to produce a shortlist of companies to approach. (It may help to start with those within easy travelling distance. A professional adviser may then be more willing to accompany you to any meetings!)

However: no matter how many companies you list, the result may still be a complete lack of interest. If they all reject your invention but your confidence in it remains high, it may be time to start thinking seriously about switching from a licensing strategy to a business start-up strategy.

First contact

How do you persuade companies to take notice of you?

Communication

• If you have an actual product and adequate IP protection, send a press release to relevant business publications. To do this effectively you may need help from a marketing professional, as information not presented in the format preferred by editors may be ignored.
• Do not phone companies except to find out who best to write to or email. (Ask which is preferred. Email is cheap and simple but much of it will be treated as junk and never read. Mail may be better for a first contact.)
• Target marketing people rather than technical people. The former are more likely to see the sales potential of your invention.

Do not call yourself an inventor. You are simply someone with a business proposition to make to fellow business people.

The mailshot letter or email

• Your aim should be to arouse curiosity, not overwhelm the reader with unnecessary information. Write a brief summary of your invention or product on one side of A4. Concentrate on its commercial benefits, detailing what it does that is special but not how it does it. Use the language of business, not of advertising. For example, instead of: ‘It will make you millions!' say: ‘It may have the potential to increase your sales significantly'.
• Only include a photo if (a) you have adequate IP protection and (b) it is a good quality image of a good quality product or prototype.
• You can mention a patent application but do not disclose any detail, even if it is already published.
• Accompany the summary with a short covering letter. For example:

‘I attach brief details of a novel product which may be of interest to your company. A prototype is available which I would like to show you if this can be done in full confidence.

I can attend a meeting at fairly short notice. Please let me know if you require any further information. I look forward to hearing from you.'

• If there is no reply after two or three weeks, phone or email to find out how your idea has been received. If they are not interested in the invention, do not try to argue. Try instead to find out why. You may learn something that you can use to improve your approach to other companies.
• If you get replies, do not be fooled by flattery. If the company says that your idea is ‘ingenious' or ‘highly original' but there is no offer of a meeting, they are not interested. They are just too polite to admit it. Or they may say that your idea ‘does not at present fit in with our plans'. The truth is that it never will.
• What if you are invited to a meeting or asked for more information but the company will not sign a non-disclosure agreement? You can trust them or you can look elsewhere. If they ask specifically for information that you want to keep confidential, you should politely refuse and explain why. But as we explain in Part 5 , it should be possible to have a first meeting without any need for disclosure of confidential information.

Warning!

During the process of contacting companies, beware of anyone who may contact you expressing an urgent interest in your invention. Some of these approaches may be from fraudulent invention promoters (Part 3 ). Possible clues are:

• However they justify it, they will want money from you.
• They will put a lot of pressure on you to ‘act now'.
• They are based in another country.
• They are keen to visit you or meet in a hotel, but not keen for you to visit them.

As a general rule, be suspicious of any company that appears too enthusiastic about your idea and too willing to arrange a meeting or further phone contact. The chances are high that they just want your money. A genuinely interested company will be much more cautious and non-committal, and will not expect you to pay them for anything.

Meetings

• Assume that a first meeting may last only 30 minutes or so, and prepare a presentation that makes maximum use of a short time.
• Make sure the company knows in advance of any special requirements for demonstrating your product or prototype.
• For your own use only, prepare an information file that you can consult for answers to questions. Make sure it is easy to use and that you know what is and is not in it. But:
• Leave all information about your IP at home. If asked, refuse politely to talk about it at this stage, even if they have signed an NDA. Only when a company shows serious interest in your invention should you make protected IP disclosures, and a first meeting is likely to be much too soon.
• Do not rely on the prototype or product alone to persuade people . They will also be reacting to you : are you the sort of person (or team) they could do business with?
• Try to assess the company people you meet as individuals. Could you do business with them?
• After the meeting, write to them to put on the record your understanding of what has been agreed. If the company's performance fails to match its promises, this may help you decide how much you can trust or rely on them!
• If the meeting is not successful, do not despair. Listen and learn. If the company people know their market well, you may come away with enough useful information to make the meeting worthwhile.
• If they reject your invention ask them to confirm in writing that they have no further interest in pursuing it. This should discourage them from developing a similar product and claiming that they had not formally rejected your idea.

Keep copies of all your and their correspondence, especially any that includes hard figures (percentages, predicted sales volumes etc). This is as much part of your IP protection as a patent application, so you must make the effort. Some companies (and, it has to be said, some inventors) will shamelessly alter facts and figures if they think they can get away with it.