Introducing the ILO (Initial License Offering) for potential licensees!
What is it?
The ILO is a way for companies to license the technology and processes that underpin the product or service that they are releasing in order to aid the development of the product.
By purchasing a co-creator license, you are helping young firms get the community support that they need to take the next step, much as you would be if you were crowdfunding.
The difference is that in licensing the technology:
- You become part of the creation team in name due to your support
- You gain distribution rights for the product or service if the company chooses to use a distribution network.
- If specified, you will receive real-estate equity in company or division-owned property to help back your license fee purchase.
- If the company so specifies, you will receive royalties quarterly after the first year that will be part of a pool that represents a percentage of their net sales.
- After two years, a date will be set for a buyback of your signup fee at face value
Why would I want to license an early stage company’s technology?
Simply because although not every company ends up getting off the ground in a spectacular fashion, the ones that do make many people wealthy. By locking in a specific buyback ownership percentage for the pool of licensees at an early stage, the company is signaling that you will be a potentially significant partner.
Are their any helpful variables?
1. The buyback percentage indicates how much of a company’s overall stock they will commit to the entire pool of licensees if their buyback were 100% paid with equity. If paid in equity, your share will be the portion of pool that your signup fees convert to in terms of the overall monies paid in to the company. We invite you to ask questions publicly about products or companies, but do not allow you to post disparaging public comments as these are early stage companies. If you attempt to disparage a company on or off-site and are found out, your license will be nullified owing to the fact that it could irreparably damage the company’s ability to gain enough license support to release the product. In other words, play nice.
2. The royalties percentage indicates how much of a company’s net sales of product will be paid to the pool of licensees. Royalties start accruing in the first quarter of the year after you pay (5th quarter overall). Your portion of royalties is dependent up the percentage of the pool that your license fees make up.
3. The real estate percentage represents the percentage of real estate owned by that division or company that will be used to back the license fees that are paid up front. Licensees will receive real equity in company-owned real estate until their initial license fee is repaid in cash or stock. If the value of the real estate increases while the licensee owns equity, they will receive additional stock or cash in the amount of the increase. As the percentage of real-estate investment for each company or division will never equal the sum amount of license purchases, any equity received will be proportional to the total pool and the percentage of real estate equity offered. Therefore, if a company receives $500,000 in license sales and purchases a building for $300,000 and is offering 33% real-estate equity, a licensee that purchased a $10,000 license could expect that $2,000 of their purchase would be guaranteed by equity that they receive in company real estate until their initial $10,000 was paid off in stock or equity.
4. Venture capital startups. When you look at an ILO that is being introduced, it will either have a company or team name on it, or it will have the name of a firm that is promoting the concept. Imaginot itself seeds and incubates concepts and so lists such projects appropriately.
Because the ILO Market is about providing a superlative set of options for people that want license access to early stage firms, we have a quality program running in the form of a Challenge contest. The idea is that since only 33 to 37 percent of firms that are backed by venture capital firms in the early stage go on to become successful, we want to see if we can increase those numbers by rewarding firms that promote concepts successfully.
Success in our eyes is a product or service release and all obligations to you the licensee met. The firm that has the highest percentage of successful ILOs each year after the first year, will therefore be named “Venture Firm of the Year”. Imaginot will then give them 10% of Imaginot’s share of the net sales of ILOs for one entire year. As the results will be published, you will be able to see just who is performing and in what categories. It may sound like a generous reward, then again, they do have to beat us every year.
How does the process work?
1. You find a company that you want to buy a license from in the Imaginot ILO Market.
2. When you pay for a license, you receive a receipt promising you:
A. Co-creator rights- (not inventor or trade secret rights)
B. Right to be a distributor
C. Right to applicable royalties, buyback and real estate equity.
3. We then send a license agreement to the licensor to sign. They will sign it and mail it to you.
4. After one year, if the licensor is shipping their product or selling their service, they start tracking royalties and make payments on a quarterly basis.
5. After two years, they will announce they buyback date to issue cash or equity with a value that pays back the signup fee that you made.
What if a company does not make it?
If you were buying stock, it would be a straight loss for you. With a co-creator license, if the licensor obligations are not met, as a licensee, you receive a perpetual license to make and sell the product. You may also resell the license at any point. If you had real-estate equity, you will be listed as a primary creditor, allowing you to retain your equity
Other License Types Offered:
Imaginot also offers two other types of license campaign on the ILO marketplace: the user license campaign and the IP license campaign.
- The user license campaign is for companies that are selling software or other products that are licensed. They can sell licenses directly within the marketplace.
- The IP license campaign is for companies that are licensing their technology to licensees without using the features of the ILO. In most cases, the difference is that with an IP license campaign, the technology has been independently fully-developed and so the sale does not in part fund develop of an initial product. If the offering is intended to fund develop of an initial product or service, the licensor will use an ILO.