Here's the scenario:
One of my friends has a cool piece of software that is in the lifestyle business. It is geared towards people that are into tattoos and bridges the virtual/physical divide. It's a pretty cool idea. However, it's more than just an idea. He's got it to the point of a few random customers - not friends and family - but no more than 5 customers. The company's software is built. He's identified a niche and is building a list via a landing page. The product works and doesn't have major bugs. It's a complete Minimum Viable Product (MVP). Basically, the whole product is ready to scale - it seems.
However, he sucks at marketing. He's a builder, but he's looking to license his tech instead of growing the company himself.
I've got a chance to make an offer for the technology and essentially get a worldwide, exclusive license to grow this tech. I'd own any improvements I make, but as long as it has his tech in it, I'd owe royalty fees. If I fail, he wants the tech back, minus my improvements, so he can try to re-sell it again. Makes sense to me.
I know that INEs are about $100-1k based on this forum.
This isn't an INE, because it is a working product. But it's not a business, because it's like the business engine is built, but there's no gas. I'm not certain the business will work beyond the 5 or so customers thus far. But it's also working well enough that those 5 customers came in with what little marketing is being done. It seems the product has a product / market fit based on initial customers.
He's asking for $5,000 - $10,000 for the license, payment terms negotiable, likely over 12 months. Plus 5% royalty license fee on the revenue I make, minimum $1k / mo royalty payment after 3 months. Additional software support / tech support / system maintenance support would be a monthly retainer, about $1-2k per month for as long as I need it. He's put in about 3+ months of building the software, website, mailing list, audience, marketing strategy, etc. He's a full-stack dev, so replicating the tech would be paying someone like a $140,000 yearly salary for 3 months or so.
Help me understand how to best value this. It seems like it's worth more than an idea. It seems like it's copyright-able in the US, so there is a license legally that can be granted. But it seems far short of a working business where a normal cashflow model would be the way to go. It also seems that boosting this with some marketing could result in a very valuable business for me to own and sell.
Thoughts on what I should counteroffer? Is this cheap or expensive based on what you guys have seen before?
One of my friends has a cool piece of software that is in the lifestyle business. It is geared towards people that are into tattoos and bridges the virtual/physical divide. It's a pretty cool idea. However, it's more than just an idea. He's got it to the point of a few random customers - not friends and family - but no more than 5 customers. The company's software is built. He's identified a niche and is building a list via a landing page. The product works and doesn't have major bugs. It's a complete Minimum Viable Product (MVP). Basically, the whole product is ready to scale - it seems.
However, he sucks at marketing. He's a builder, but he's looking to license his tech instead of growing the company himself.
I've got a chance to make an offer for the technology and essentially get a worldwide, exclusive license to grow this tech. I'd own any improvements I make, but as long as it has his tech in it, I'd owe royalty fees. If I fail, he wants the tech back, minus my improvements, so he can try to re-sell it again. Makes sense to me.
I know that INEs are about $100-1k based on this forum.
This isn't an INE, because it is a working product. But it's not a business, because it's like the business engine is built, but there's no gas. I'm not certain the business will work beyond the 5 or so customers thus far. But it's also working well enough that those 5 customers came in with what little marketing is being done. It seems the product has a product / market fit based on initial customers.
He's asking for $5,000 - $10,000 for the license, payment terms negotiable, likely over 12 months. Plus 5% royalty license fee on the revenue I make, minimum $1k / mo royalty payment after 3 months. Additional software support / tech support / system maintenance support would be a monthly retainer, about $1-2k per month for as long as I need it. He's put in about 3+ months of building the software, website, mailing list, audience, marketing strategy, etc. He's a full-stack dev, so replicating the tech would be paying someone like a $140,000 yearly salary for 3 months or so.
Help me understand how to best value this. It seems like it's worth more than an idea. It seems like it's copyright-able in the US, so there is a license legally that can be granted. But it seems far short of a working business where a normal cashflow model would be the way to go. It also seems that boosting this with some marketing could result in a very valuable business for me to own and sell.
Thoughts on what I should counteroffer? Is this cheap or expensive based on what you guys have seen before?
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