Licensing, Buy-out or Project Finance?
When your startup reaches the "First of a Kind" (FOAK) stage, scaling beyond it is the next big challenge. Typically, there are three ways to take your startup to the next level:
1. Switch to a Licensing Business Model
2. Exit Through Acquisition by an Incumbent
3. Rinse-and-Repeat Through Project Finance
Choosing the right path depends on several factors, starting with the existence of a market and its participants.
🔍 Licensing Your Technology
If your innovation is something like a new method for making anodes or cathodes for lithium-ion batteries, licensing might be your best bet. Why? Because there are already battery manufacturers out there who are ready to adopt and apply new technologies. The licensing model has worked well for many companies in wind turbine manufacturing, allowing them to scale without the need for massive capital investment.
🏢 Exit Through Acquisition
Getting acquired by an incumbent can be a solid strategy, but it usually requires more than just a FOAK. Big players will buy your business for one of three reasons:
1. Niche Expertise: Your product or service thrives in a niche market not covered by the incumbent.
2. Geographic Expansion: Your company is gaining traction in a geographic market that the incumbent hasn’t tapped into. By acquiring you, they get both a new product and a new market.
3. Eliminating Competition: You pose a threat to their existing business, and they want to eliminate you before you grow too big.
🚀 Go Big and Scale
The final option is to plow ahead and grow into a big business yourself. This route is tough but can be rewarding, especially if there are no incumbents with similar technology in your market. Think of the early days of EVs—there were no established players, which allowed companies like Tesla to rise. Green hydrogen is another area where the first big companies are yet to emerge, offering a rare opportunity for new players.
Which Path Will You Choose?
Each path has its pros and cons, and the right choice depends on your technology, market, and long-term vision. Whether you license, sell, or scale, the key is to make an informed decision that aligns with your goals.