Licensing & Transactions
Structuring IP Agreements That Enable Growth Without Giving It Away
In the early stages of a startup’s lifecycle, licensing is less about monetizing a mature IP portfolio and more about making the right strategic moves to advance the business. Whether entering a pilot agreement, integrating with a commercial partner, or spinning out of a university lab, startups frequently encounter transactions where intellectual property must be licensed—in or out.
These early agreements often occur under pressure: a prospective customer wants access, a partner needs integration rights, or a funding source requires a collaboration agreement. In these moments, founders are often focused on closing the deal, not structuring the IP rights for long-term value. But how these rights are allocated—what’s exclusive, what’s retained, what’s restricted—can have lasting implications for the company’s flexibility, leverage, and valuation.
At Schmeiser Olsen, we work with startup teams and investors to ensure that licensing agreements support the business model without constraining its evolution. The goal is to extract commercial benefit while preserving optionality—now and in future financing, growth, or exit events.
Early Licensing Is Not About Royalties—It’s About Access and Leverage
Unlike large operating companies that rely on licensing for revenue streams, startups use licensing primarily to gain something else: traction. A pilot deal may require the grant of limited rights to a core technology. A strategic partnership may require access to proprietary methods or systems. A university spinout must formalize rights to foundational research.
In these settings, licensing is a tool to enable collaboration, funding, validation, or distribution. But even when no money changes hands, the value of the IP involved is real—and mistakes can be costly.
The most common licensing missteps at the startup stage include:
- Broad, perpetual licenses granted to customers or partners in exchange for a short-term benefit
- Exclusive licenses without performance obligations, termination rights, or geographic limits
- Failure to retain the right to sublicense or pivot use to other fields or products
These terms, once agreed to, can box a company into a narrow market, create conflicts with future investors or acquirers, or prevent the startup from leveraging its own technology across industries or verticals. In many cases, the terms were agreed to under time pressure and without full legal context—leaving the founders with limited recourse when the business outgrows the deal.
Critical takeaway: Even low-revenue licensing deals can quietly restrict future growth if the rights granted are too broad, exclusive, or unstructured.
Negotiating Agreements That Reflect Business Realities
Founders should approach IP licensing with the same discipline as they would equity or financing terms. Every clause—scope, exclusivity, improvements, field of use—should reflect the company’s roadmap and the risks of premature constraint.
Rather than defaulting to standard templates or relying on counterparties to “fill in the blanks,” founders should work with counsel to define:
- What rights are being granted (e.g., software, patents, know-how, deliverables), and what is excluded
- How long the license lasts, and under what conditions it can be terminated or renewed
- What territory, industry, or use cases it applies to, and whether those terms are clearly defined
- Whether improvements or derivatives are shared, retained, or jointly owned
- What happens if the deal ends or milestones aren’t met
The agreement should also anticipate future events—fundraising, customer growth, product changes—and build in flexibility where possible. Narrow, revocable licenses with defined scopes are often far safer than broad, one-size-fits-all language.
Licensing-In Technology from Universities or Industry Partners
For startups emerging from research environments—whether university-affiliated or industry-backed—licensing-in technology is a foundational step. These agreements form the legal basis for product development and investor claims. But many of these licenses are drafted for risk-averse institutions, not growth-stage companies.
Founders should understand exactly what they’re getting—and what they’re committing to. Common concerns in tech transfer and research licenses include:
- Ongoing royalty obligations that escalate with commercial success
- Vague or open-ended diligence or milestone clauses that can trigger termination
- Restrictions on sublicensing, which may limit commercialization models
- Limitations on field of use or geography that block expansion
While some of these terms are negotiable upfront, others may need to be restructured later as the company scales or prepares for investment. Ensuring clarity around sublicensing rights, termination conditions, and improvements ownership is especially important in Series A diligence and in preparing for strategic partnerships.
Critical takeaway: Licensing-in foundational IP should come with clear boundaries—and avoid terms that compromise the company’s ability to grow or raise capital.
Early Customer and Partner Agreements Involving IP
Startups often enter into deals with enterprise customers, integrators, or OEM partners where IP is part of the equation. A proof-of-concept deployment might include source code access. A hardware pilot might transfer limited rights to operate or modify components. In each case, the temptation is to “get the deal done,” especially when validation or early revenue is on the table.
But these deals must be negotiated with future stages in mind. Terms that seem harmless—like mutual IP ownership, unlimited use of deliverables, or unrestricted field access—can have serious implications down the line. In diligence, acquirers and investors will scrutinize these agreements for encumbrances: places where your IP is contractually tied up, diluted, or shared.
Founders should be able to explain why IP terms were negotiated a certain way, what limitations are in place, and how the company retains the ability to repurpose or repackage its core technology. If those answers aren’t clear, it may signal to funders that the IP is not fully available or defensible.
Final Thought
For startups, IP licensing is rarely about extracting royalties—it’s about enabling progress without sacrificing control. The best IP transactions are those that serve a clear business purpose, preserve downstream flexibility, and withstand scrutiny during funding, diligence, or acquisition.
At Schmeiser Olsen, we help startups and venture-backed teams structure licensing and IP transactions that align with long-term strategy. Whether you’re negotiating a pilot program, finalizing a spinout, or preparing for a strategic partnership, we bring legal clarity to high-value technology deals.
To discuss how we can support your next IP-related transaction, contact us here.