Licensing vs. Developing the Invention

Once you come up with an invention, should you license it to a third party or develop and manufacture it yourself?

According to an article in the Forbes magazine that is the decision that separates two types of inventors: the “inventor-for-royalties” and the “entrepreneurial-inventor”. Entrepreneurial inventors should not be confused with innovators, even though the terms are closely related. In my opinion the main difference is that the innovator does not need necessarily to invent something himself, he can innovate with inventions that other people created.

Licensing out the invention has some benefits. It does not require an initial capital investment, it is simpler and it gives the inventor the possibility to focus on what he really likes to do, that is inventing.

Statistically, however, it is estimated that only 13% of the inventors who decide to license their invention are successful. Entrepreneurial-inventors, on the other hand, hit the jackpot half of the times.

It is clear, therefore, that if someone has the competencies to develop the invention himself the probability of success is much higher. But how do you know if you have such competencies? The Forbes article suggests 4 questions to understand it:

  • Are you a gifted salesperson?
  • Are you a talented manager?
  • Are you a business innovator?
  • Are you a risk taker?

If you answered no to all the 4 questions then probably licensing is the best deal for you. If instead 2 or 3 of them apply to you maybe you should consider taking the responsibility on your own shoulders.

You can read the full article here.

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