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Company has requested a sample - what next?

thereeldaniel's Avatar

Hey everyone, I'm new to the forum. I look forward to becoming an active participant, and I'm glad I found you all here.

I wanted to seek the expertise of those who have been there, as I'm approaching my first taste of potential success in product licensing.

I developed a product last year, created prototypes, filed the provisional patent, and built a good looking sell sheet. I have reached out to as many companies as I could find who might have an interest (willing to help anyone who is struggling with any of the aforementioned steps). 

Now, one of the top three companies on my list is showing strong interest, and I feel a bit like a deer in the headlights. They say they want to go further and they want me to send them a prototype. They're a very large international company. My instincts tell me that my next steps are very important ones.

I have some specific questions, but before I ask - is there anyone who can help make some general suggestions to help me move forward?

Questions include - should I send a prototype at all, or try to deepen the relationship first? How do I navigate this?

If and when I do send a prototype, I'm planning on getting a NDA signed first, as I don't think it could kill the deal at this point. Thoughts?

Is it too early to get an attorney to consult with me on the negotiation?

I greatly appreciate any guidance you all can provide. I'm excited and want to proceed armed with as much knowledge as possible.

Thanks!

Daniel

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magurn's Avatar

Hi Daniel and welcome to Edison Nation!

I cannot speak for other companies, but if you are interested in submitting your concept to us to be evaluated for licensing opportunities, we do not require you to submit a prototype. We also do not require a patent or patent-pending status. All products are submitted securely on our site.

To learn more about EN and our process, if you haven't already done so, check out the Edison Nation Help Page.

Best of luck!

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awildx's Avatargold

I agree, send the prototype asap, don't worry about and nda as you've already filed a ppa, save your money for a licensing attorney when they make the first offer.

And YES, your next steps are very important.  Keep yourself on track and cross your fingers.  There are a good handful of quality licensing mentors you can find online who've been in your shoes, licensed deals, and will help you for a small fee.  So far you're on the right track, good luck!

Elizabeth Crouch
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teddywd's Avatar

Hi Daniel,  You are on the right track. six months ago I was in the same situation don't let this opportunity pass you by. They wanted to see my prototype after reviewing it by e-mail. After signing an agreement I mailed it. Within six I have sign two license agreements with the same company. Now they are welcoming more Ideas from me.

Sometime we could be our own road block. Make it HAPPEN !

Elizabeth Crouch
Adam W.
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thereeldaniel's Avatar

Thanks for all the replies!

@Eduardo: Thanks, and I like the enthusiasm! I did ask some contacts for attorney referrals, with the thought to hold off until I absolutely need one.

@Adam, after developing this product and looking into licensing I came across Stephen Key and read his book. I've also watched some of the videos. I know that they do have a 1-year program for helping people through the process (for $2500).

Based on the information I have on the company and led by some of Stephen's videos, I told the company I would gladly send them a prototype but would like to speak more in-depth on the phone first. They agreed to that and I'll be speaking with them tomorrow.

@Roger: Thanks for your insight as well. Since I have already gone through the process with a contract manufacturer of pricing out production, should I volunteer that information, or let them go about it on their own? Or just remind them for later that I do have the numbers already?

@W D: Wow! That's awesome. I hope to be in your shoes soon. Doing my best to stay out of my own way! 

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thereeldaniel's Avatar

Thanks, Roger. Yes - I did speak with one of the coaches yesterday. She would hypothetically be my coach. She did say that once terms are discussed, Stephen comes in directly. 

Since I seem to have done well on my own so far, I'm confident moving forward in the same way. However, I have no experience and very little knowledge of negotiating licensing terms. Is there a book/resource you can recommend?

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thereeldaniel's Avatar

Thanks Frank (and Roger for writing the book, of course)!

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thereeldaniel's Avatar

After a few scheduling conflicts I had a great call with the Licensee company. They asked a lot of questions to which I mostly had easy answers.

They only raised two concerns - one of which was about the design, and that one I quickly put to rest. The other was about cost possibly being too high.

They'll take a look at the prototype and get back to me within a few weeks, they said. 

I'm about to send the prototype. Would you suggest sending a letter with some key points from our call along with it?

Thanks!

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thereeldaniel's Avatar

Ok. I wasn't going to say a lot. I just tried to post the attachment but I guess I have to be a paid member to do that.

The basic text is: 

Thank you for taking a look at the enclosed prototypes. The [redacted] used for these has limited durability, so I've shipped them with [redacted] to make sure they hold up well to shipping.

My design has multiple embodiments (with/without [feature redacted] and other supplemental features, with the [redacted] attached differently).

I look forward to hearing your thoughts.

Sincerely,

Daniel Larsen

The idea is I don't want them to look at it with a closed mind and think it's too expensive and can't be changed. I have a lot of potential changes that aren't the fullest embodiment, and those would bring the cost down.

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thereeldaniel's Avatar

Ok, thanks. I like that approach. I'll change it up.

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ccanderson's Avatar

Daniel,

Following this thread and wondering how this turned out? I'm seeking the advice you offered on the first stage of this - the contacting part.

1- Did you have better luck calling first or emailing? Did you try to go though mutual connections? 

2- Can you share some of the general questions you got back? 

3 - What sort of visuals did you include on your sell sheet? 

4. Did you include information on estimated margins? 

Elizabeth Crouch
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thereeldaniel's Avatar

Hey Carrie,

I am still working on it. It is going very slowly, but still alive. Seems to be the norm for a large company like this.

Happy to help where I can :)

1- I did not try email first with anyone, I called first. Even when a gatekeeper would give me someone's email I would try to get their direct phone number as well. I had pretty good luck with calling, but it's all about how you frame it. You're not trying to sell. You're trying to see if you can help them.

2- How much does it cost to produce? Are you already in production? Have you sold any? The rest are mostly market specific. It is very important, IMO to know the market for the product, as well as the products of the company to which you're trying to license.

3- I had a 3D artist make 3D art using the photographs of my prototype, all remotely. He gave me an intro deal, I paid him $120. I'll have to pay him more for the next one. More expensive than fiverr, but it was worth it to have someone get on the phone with me as he was drawing it. 

I had a graphic designer friend throw together a sell sheet including the 3D images and the copy I wrote. I paid him $50, but he knows I'll bring him bigger projects with a good budget when/if I have them.

4- I didn't, but I offered to show them my projections. They declined, but asked for ballpark figures, which I gave them verbally. An important note here is that this product could sell for a lot more through a different channel than they want to use. Retail channel would be ~900% profit margin, but the channel they prefer is ~200% margin. This is specific to my product, but it's important to know who you're working with and what they want out of it.

Hope this helps!

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