The Power of Exclusivity

I’m often approached by entrepreneurs who may not have a patentable technology or process, and inquire as to how they might position their companies for investment from JumpStart. I like to first stress to entrepreneurs that one of the keys is to focus on “High Growth” opportunities, not necessarily just “High Tech” opportunities. Secondly, I like to stress that the real value of a patent is the differentiation it creates against potential competitors. This differentiation also represents value to investors who take a degree of comfort in knowing that some other company (perhaps with even more resources) cannot immediately come along and do the exact same thing that your business claims to do.

So without the patent, how else can you create that level of differentiation? How else can you create something that another business cannot come along and easily duplicate? Arguably, one of the single largest differentiators is an exclusive contract with a major organization that can provide your business with significant sales opportunities. This contract could be from a governmental agency such as the Departments of Defense, Development or Agriculture (to name a few), or from a major corporation that is one of the “top 10” (in terms of sales) in your chosen market.

Much like a patent, an exclusive contract is valuable to potential investors in that it represents a barrier against competing businesses who of course are unable to bid on the contract for the term of your exclusive agreement. Additionally, since the contract is with a major organization in the industry, it is likely to lead to other sales opportunities as your business develops a strong track record and additional credibility.

While much can be written on how to effectively pursue large contractual opportunities, one important consideration is developing the necessary infrastructure to do business on a substantially larger scale than perhaps your business has done historically. Consider what other businesses (likely existing competitors) could become strategic alliances for you that could bring additional resources (people, equipment, facilities) to the equation, or how much additional investment you would require to develop the infrastructure on your own. The key is understanding the needs of some of the largest customers in your chosen market; networking to make sure you get in front of the right people in the organization; and presenting a compelling business proposition that warrants exclusivity for up to 36 months while further providing you with ample time to rectify any performance issues that could arise.

I welcome any additional thoughts or questions on this topic as it is often a key component in raising capital.

Darrin is Chief Economic Inclusion Officer of JumpStart. He founded and ran his own strategic planning and management assistance firm and spent 16 years in the commercial banking and finance industry. Darrin has an MBA from Baldwin Wallace College and an undergraduate degree from Mount Union College. He has led a series of workshops and seminars on matters of economic development and diversity.