How To Monetize Your Idea S12 Ep33

5 Ways To Create Value From Your Creative Output

An idea has no value on its own. It's when you find a way to monetize your idea is when value gets created and you benefit from your creative output.

There are a number of ways to monetize your idea and here are a few of the ones I've used.

5 ways to monetize your idea

  1. Create a startup around your idea: There are a number of sites that can give you advice on how to create a startup so we won't spend a lot of time giving the specifics. I would encourage you to consider the other options that are available for monetization.
  2. License your product or idea: This is where you grant a license and someone else takes on all of the tasks for translating your idea/product into an offering in the market.
    • Needs to be more than just a raw idea in PowerPoint or on the back of a napkin
    • The other party takes on all of the tasks
    • Your involvement is little to none.
    • Payment is usually structured around a % of gross revenues or a % of net profit.
    • Royalty structures don't last forever.
    • The other party may lose interest in your idea/product of sales don't continue to warrant the investment of time and resources.
    • Critical: Getting the contract in place. I would strongly encourage you to use legal experts in “licensing” to get the best agreement in place.
  3. Licenses/Sell your patents: If you issued patents (not “provisional patents”), then you can look at licensing or selling them.
    • Very hard to do with a single patent.
    • A family of patents in a particular area are much more attractive to potential purchasers.
    • License the patent if you believe there are multiple entities who need it.
    • Sell the patent if an entity needs it to fill out a patent portfolio or possible use in a defensive role if they are in litigation.
    • One of the better options is to find a patent pool (e.g. MPEGLA – MPEG Licensing Authority) and see if they will add your patent as an “essential” patent. If the declare its an essential patent to one of their patent pools, then you get to participate in the royalty stream. They take on all litigation, etc.
  4. Sell your idea outright: This is when you secure a one time payment for all rights, trademarks, etc to your product or idea.
    • You get the money upfront with no linger obligation.
    • In some cases, you may want to negotiate an “earn out” which is where you believe the idea has more value and if it proves out, you get a higher payment than the simple lump some.
    • Its hard to determine the value of an idea. The better equipped you are with data and proof of the value, the more negotiating power you have.
  5. Create a Joint Venture: This is when two or more individuals or entities come together to create a new entity who's mission is to take product or idea and bring it to market. All involved typically have equity in the new entity.
    1. Treat a JV like a marriage. Make sure you really like who you are partnering with and document what happens if it doesn't work out.
    2. Document who contributes what and what each parties obligations are.
    3. Be realistic as to what role you want to have in the JV.

Note: I am NOT an attorney and nothing in this post or show should be construed as legal or business advice. Always consult with a professional as monetizing ideas/products/patents is complex with numerous pitfalls.

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