Corporate IP Acquisition – Harvesting, Hunting, or Trapping
Corporate IP Acquisition – Harvesting, Hunting, or Trapping
If you are trying to get partnership interest from Fortune 500 companies and are not able to get through the door, it might be that you need to change your approach in line with the changes most of these corporations have made in the way they acquire new products.
In the mid-20th century, most of the major corporations (Fortune 500 and more) all had their R&D department. They realized very early that new products were going to be the lifeblood of every business and this knowledge became honed to building new products or reinvented versions of all products in any well-established channel, to ensure the buyers in these channels continued to buy more and would also buy related products.
Two good examples of this are the automotive industry (offering new models with additional features and technologies) and the fast-food industry (offering you a meal when you ask for a burger).
The key reason for this is that if they already have the buyers, it makes sense to sell them more of what they want and leverage off their good reputation. If you have a million people spending $8 on a burger and you offer them a $12 meal, the marketing COSTS YOU NO MORE.
Their first focus was nearly always on creating an R&D department. The problem with this is that the quantities (and sometimes the quality) of the work were always up and down, the outcomes could be dubious, and the creativity was almost always focused on the experience of the team members, meaning R&D team was mostly reinventing their products.
The 21st-century Directors recognize the cost of having a fixed cost R&D department didn’t always match the returns. Many management consultants and advisors now encourage Directors to look outside their organizations to find fresh innovations that can fit their existing channels and make these more profitable.
The industry broke the IP acquisition process down into three distinct practices. Which they call Harvesting, Hunting, and Trapping. As an inventor, you need to understand these processes, if you ever intend to trade-sale or license your project to a large corporate. Here is how they work:
Harvesting: This is very close to the old R&D Department model but brings ideas from across the organization and then creates teams to develop these. The commercial model favored is the staged-gate model, which creates a “hunger games” of development teams where projects are measured at regular intervals and funding allocated to the more promising of the emerging opportunities. Ultimately one project a year is funded, and other projects may be discarded or invited to apply the following year.
Hunting: This is favored by the management consulting fraternity, as they then can target potential merger and acquisition opportunities for the Board to consider and ultimately, there may be substantial transaction fees if these acquisitions are completed. The advantages include target companies are already usually profitable and they are usually taking out a competitor at the same time.
Trapping: This is the most unusual of the practices but is by far the most efficient and affordable for all parties. The premise is that Corporations (as with the staged gate process) will identify up to a dozen different external opportunities and may provide a small amount of early-stage seed capital to encourage these opportunities to develop to a point where all risks are managed, and the projections are firm. They will generally ask for an option, exercisable within a particular period, with the price set by independent appraisers or auditors.
If you are looking for funding, a trade sale, or licensing, then partnering with a large corporation is a very suitable option. Their size and reputation can become a better defense than a patent and although this relationship needs to be documented and managed with a certain competency of legal skills, it can be significantly beneficial for the Inventor for early-stage seed capital.
Would you like to learn more about how corporates set IP traps to entice promising inventors to partner up early?
Would you like to partner up with someone who knows how this process works and helps inventors secure agreements with suitable corporate partnerships that can benefit both of you?
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