Post #1

12-02-2004, 10:34 AM
cdgan
Newsletter/Forums Member

We are producing quite a good series of web-based application modules for the web development market. The best way of selling is to have people to resell for us, or using the product bundling method.

When they approach to resell our products, the first thing that they are looking into is to private label our products without any of our name. Although we get the revenue, but we are not comfortable with it, because we want to build our brand name around.

So, what is the best way to overcome this?

Post #2

12-02-2004, 11:04 AM
TomSweeny
Moderator

A few thoughts...

You can always develop a powered by campaign that requires your customers to recognize that their end applications are “powered by your product” If “powered by” is to “over powering” you can develop a more subtle approach such as “enhanced by.”

Also consider a tiered licensing schedule based on the extent to which you are buried in the end product. For example you charge more for full private labeling rights and provide discounts for greater visibility of your products.

__________________

Tom Sweeny
ServiceXRG
Helping companies achieve service excellence
tsweeny@servicexrg.com

Post #3

12-02-2004, 12:22 PM
Jim Geisman
Moderator

I think Tom is right... The more they want to bury you, the more they pay because it will cost you money to get the equivalent amount of promotion.

I think anyone who is concerned about their brand is a bit misguided... If you want to build a brand, it can cost literarally 100's of millions -- if not billions -- and decades.

If you mean product name recognition that is another thing completely. I doubt an OEM who want to repackage your product will allow you to promote your product name... They might allow you to promote your company name as in a copyright legend in documentation, on splash screens, on the Add/Remove program list, etc...

And of course, if your company name is the same as your product.... (then you are promoting the product hiding behind your promotion of the company name. -- just in case I was being too subtle. )

Hope this helps.

Jim

__________________

Marketshare, Inc. // Wayland, MA
Helping technology companies realize greater value ...
... from the products they sell and the professionals who sell them.
Value-Driven Pricing -- Discount Management -- Value-Based Selling
Tel: 508-647-0330 or visit http://www.softwarepricing.com

Post #4

12-02-2004, 04:45 PM
LisaMoody
Moderator

Don't lock yourself out of being able to discuss that relationship in marketing or other locations. Some contracts have clauses that say that mums the word on these agreements. Don't agree to that. If the OEM company becomes outrageously successful because of your product then that is a good case study for you and something that you should keep open for touting. Oftentimes the story of how the other company became successful with your product is far better than the individual users of the product. You might be able to pick up more OEM opportunities.

Second thing, don't lock yourself into exclusivity. You need to leave yourself open for other OEM deals that come along, you know the ones who read the above case study and want in on the higher cost (as the others pointed out) action.

Lisa

Post #5

12-02-2004, 05:32 PM
hadley
Site Founder

Wow -- great advice so far -- and my thoughts only parrot what's already been said: Brand-building is vastly overrated and horribly expensive. Without knowing much (or anything) about the deals you've already inked, it sounds to me like you've got a great business model already underway -- and I don't see that you need to "overcome" anything, other than (maybe) a bit of pride. Focus on revenue, profit, and growth -- things that make your accountant (and potential investors/acquirers) happy. Brand recognition might give you bragging rights at your high school reunion, but that's about it.

Post #6

12-02-2004, 08:01 PM
cdgan
Newsletter/Forums Member

I'm surprised that this has become a good topic to discuss over. Ok, revealing ourselves, our product is named as "Comdev One Admin". "Comdev" is our company name and "One Admin" is really something unique that describes everything about our products. We are producing lots of web components, which sit on a core platform and streamlined administration environment.

We just got a reply for a potential partner that he really likes our "One Admin" name. I guess, what we can try is to maintain the "One Admin" product name, and let them to incorporate their company name such as "ABC One Admin". Then, in some where we can put a smaller text that "One Admin is a trademark and copyright of Comdev".

Just a simple question, do you think the partner will like if the copyright has a hyperlink to our website?

Post #7

12-03-2004, 05:03 AM
Jim Geisman
Moderator

[Quote] Originally Posted by cdgan

Just a simple question, do you think the partner will like if the copyright has a hyperlink to our website? Don't negotiate against yourself. What would you have to do to make that hyperlink desirable? Make a case for it... Then ask.

It's probably better (in this case) to talk yourself in to how the deal could work rather than talk yourself out of asking for something.

You'll never get anything you don't ask for... (unless you are dealing with a mind reader.)

Good luck.

Jim Geisman

__________________

Marketshare, Inc. // Wayland, MA
Helping technology companies realize greater value ...
... from the products they sell and the professionals who sell them.
Value-Driven Pricing -- Discount Management -- Value-Based Selling
Tel: 508-647-0330 or visit http://www.softwarepricing.com

Post #8

12-03-2004, 09:02 AM
Charles Mills
Principal Moderator

Don't run the issues of copyright and brand together.

Branding is one thing. The other posts have discussed it pretty thoroughly and I don't have much to add. My only thought was the issue of "should they pay more to remove your brand" could go either way. Jim has argued it should cost them more; OTOH lots of branded vendors sell the same product unbranded for less money. An examples would be supermarket house brand jam, which might be made by a name-brand jam vendor, but sold for less money.

Copyright is another. Your resellers may want to put their brand on it, but you should retain and do everything necessary to maintain the copyright. Although a splash screen with your copyright notice is a good idea, it is ***probably*** (usual disclaimer, not legal advice) not absolutely necessary for maintaining your copyright. You have embedded a machine-readable copyright notice in your object code, right? And registered your copyrights?

On a related but separate topic, you should register your trademark in One Admin and license the TM to your resellers on explicitly stated terms. If you fail to protect that trademark, then your resellers could a year or two from now decide to find someone who could provide more or less your functionailty in their software, and sell it under the One Admin name. Copyright, you know, protects "expression," not function. You could copyright a program that does some particular job. That does not prevent me from writing and selling a program that does the same job, just so long as I write my own original program, I don't steal your source code (short version of a complicated topic). Copyright also does not protect "short phrases" like One Admin; you need trademark for that.

__________________

Charles
CharlesMillsConsulting.com
StrategicDueDiligence.com

Post #9

12-31-2004, 12:24 PM
rvonder
Newsletter/Forums Member

More on this topic...

Hi -

I was just about to open a new thread when I found this discussion. I am also looking for advice on private branding vs. straight reseller deals.

We're a small company that developed a specialized software tool with large revenue/services potential. A larger firm in the same industry tried to develop a similar tool but failed, and now wants to relicense our technology on a private-branded basis.

They have already agreed to make a small ($1.5m) investment in our firm. We're positioning two reseller deals separately (one for us to resell their products; the other to for them to resell ours). We are not planning to private-label their stuff, but they want to do so with ours.

Am looking for suggestions on how to structure this. I agree with the prior posters who think that they should pay more for the right to position our product as if it was their own, vs. simply being a reseller. Any thoughts on HOW MUCH of a premium this should carry? In other words, if they would pay x% royalty for a straight reseller deal, what should x+y% be for a private-branded arrangement? And what other terms should we push for (prepaid royalties, etc.)? In particular, I'm looking for any "real-world" examples that I can use to defend this position in negotiating with them, as they don't seem to think that a private-branded offering justifies a premium.

Any and all advice welcomed!

Thanks,

Rob Vonderhaar

Post #10

01-02-2005, 05:58 AM
cdgan
Newsletter/Forums Member

To my opinion , the $1.5m investment sounds like a big amount. However, don't get yourself tied up with them involving in your company management, and decision making. I would suggest that you can resell the full rights to distribute your products with that kind of money, or give them a large quantity of licenses.

Post #11

01-02-2005, 06:41 AM
Jim Geisman
Moderator

Before considering a corporate investment, learn something about them. They seem to fall in two camps: financial and strategic. Financial is all about ROI; strategic is all about R&D, marketing, corporate growth.

Consider the issue of relative size in strategic investments. It is different when the pairing occurs between equals vs. unequals. Equals often have the same objectives; unequals have more transient objectives. I suspect pairing of smaller companies fare less well because of experience and skill but large companies aren't clearly any better at the game.

Unless you have worked with these folks for a long time, don't take an investment. Investments are permanent. Think of them as a marriage...

They have a lot in common... Common trajectory:

Initial hopes followed by reality leading to dissilusionment ending in dissolution accompanied by bad feelings and high costs....

If you want to end in a successful relationship, work closely together, do a lot of dating. The attorneys can give you some options that give both sides the flexibility they need: rights of first refusal, commitment payments.

At the end of the day, distribution deals are probably the best way to get to know each other. Then, if things go well, you can do more things jointly. If things go poorly, no one takes it personally...

Jim Geisman

__________________

Marketshare, Inc. // Wayland, MA
Helping technology companies realize greater value ...
... from the products they sell and the professionals who sell them.
Value-Driven Pricing -- Discount Management -- Value-Based Selling
Tel: 508-647-0330 or visit http://www.softwarepricing.com

Post #12

01-02-2005, 11:22 AM
rvonder
Newsletter/Forums Member

cdgan,

Guess everything's relative - I've been working with venture equity over the years where a larger round nets $5 to $20 million, so $1.5 seems pretty small. :-)

However, this is a pretty early-stage company, so for that amount this potential partner gained a minority equity stake (about 15%) in the company and a Board seat which means they do have some input into decision-making. We didn't give that away willingly, of course, but this is the first investment that we've taken and figured that doing it with a partner in the same industry would be better than taking pure venture capital.

At the same time, we're trying hard to position the equity investment as separate from the bi-directional reseller deals - and in fact, they've been put together as totally separate legal contracts. They already received value for their $1.5m in the form of full-valued equity, so our view is that's now done and finished. Next we're negotiating the follow-on reseller deals. The real question is: What's a reasonable upcharge for the right to private-label our product (over and above what they'd pay for a simple reseller deal), and does anyone have any real-world examples they can cite to help us defend this position? And should business terms be any different for private-branding vs. straight reselling (e.g., upfront royalties, discount percentages, etc.)?

Thanks for the response!

Rob

Post #13

01-02-2005, 11:32 AM
rvonder
Newsletter/Forums Member

We plan on grandfathering everyone. Additionally we have a mandatory maintenance in year one so...

Post #14

03-09-2005, 12:07 PM
Dave45000
Newsletter/Forums Member

[Quote] Originally Posted by Jim Geisman

Unless you have worked with these folks for a long time, don't take an investment. Investments are permanent. Think of them as a marriage...

Hi Jim,

I agree with everything you say. However, my involvement with this is at a stage where the investment is already a done deal. In this case, it's truly a strategic investment: the parties have very complementary business interests so it's a true "win-win" situation. The partner desperately needs our product; we need their products to create a more complete solution ourselves; and we can gain substantial market credibility by leveraging their brand recognition and the strategic nature of this partnership. After suffering the downsides of dealing with purely financial (ie, VC) investors over the years, I'm inclined to view a strategic investor who's also a business partner as a much better source of equity funding - assuming the deal is structured well and you carefully maintain your independence and flexibility for the future (which is definitely the case here).

The real question here is the compensation and terms for a private-branding vs. straight reselling agreement - I mentioned the equity investment just so everyone has the complete picture.

Thanks,

Rob