In today’s business world, it is difficult to license a commercially unrealized product -- one which is not on the market -- to a large established company.Large companies will generally not license a product even if it has been developed to the finished prototype stage. Even the existence of a production model is not sufficient to guarantee a technology transfer.

Large corporations have made an active business decision that the acquisition of an ongoing business with a proven product is a much better investment than is the licensing and development of a product from a concept or prototype stage. Consequently, most large businesses will rarely consider the direct licensing of a product without there being at least some proof of the marketability of that product. What large corporations do well is marketing and sales. What they do poorly is invention and development. Moreover, most large corporations tend to be risk averse. Consequently, the managers who are responsible for making decisions regarding technology acquisition will tend to favor deals with technology which represents a sure bet, rather than risk a wrong decision. The decision makers do not wish to lose their jobs. Large corporations do not wish to have the negative publicity associated with a product launch which has failed.

The only way a product is proven is in the marketplace. The product must be the subject of sales, if only in a small market. The favorable results in a market may convince a corporate executive to take on that product and distribute it to a much larger market, but at a much higher cost than had the corporation obtained rights in the product at an earlier stage. The corporation often will pay a premium to acquire the technology and the small company marketing the product.

It is possible to license a commercially unrealized product or invention to a corporation or start-up, where the decision making executives have an entrepreneurial spirit and outlook, i.e., they are less risk averse. The e-commerce and Internet companies today are generally of this adventurous mentality as are some of the biotechnology companies.

Recognizing this trend in industry may make it more difficult at the early stages of developing an idea into a marketed product, but the risks you bear in developing the product will often result in a higher payoff in the future if you are successful.