Product Startup Podcast Episode 081: License Brands and Celebrities

00:00:00 Kevin Mako: Hello, product innovators. Today we learn from one of the top experts on inbound licensing on how you can partner with major brands and celebrities to get their trademark put on your product.

00:00:12 Narrator: You're listening to the Product Startup Podcast, the show that helps bring your product idea to life by chatting with successful inventors, product developers,

00:00:23 Narrator: manufacturers, and hardware industry professionals. Our goal here is to get to the bottom of what makes a product successful, from initial idea to getting your product on store shelves.

00:00:33 Narrator: We're taking you step by step to build a functional product and scale your product business. Hosted by Kevin Mako, one of North America's leading experts on hardware development for small product businesses.

00:00:46 Rhett Silverstein: Now, on to the show. Welcome back, everyone.

00:00:50 Kevin Mako: Today, I'm very excited to introduce Rhett Silverstein to the show. Rhett's the founder of Hegemon, an agency that represents consumer product manufacturers in partnering with big brands, celebrities, and athletes. Before founding Hegemon, he was the brand licensing agency.

00:01:03 Kevin Mako: at Beanstock and before that a New York lawyer. Today, Rhett's going to share some valuable knowledge on how inventors, startups, and small manufacturers can license big brands and celebrities for your products. Now on the episode.

00:01:16 Kevin Mako: Rhett, welcome to the show. Thank you for wrapping me. Yeah, looking forward to talking about inbound licensing today. And I know that you're in Florida and you bought a dog in the middle of COVID. You're getting outside. You learn to play tennis,

00:01:28 Rhett Silverstein: all this sort of stuff, or at least practicing your game there. Well, I'm actually, I'm back in my home office in New Jersey, inching closer and closer back to New York City where the business

00:01:40 Rhett Silverstein: is based. But I did hibernate during COVID down in Florida for quite a bit of time, took in the raise, played some tennis, trying to raise this Labradoodle, like you said.

00:01:52 Rhett Silverstein: But the beautiful thing about working in intellectual property is that it exists everywhere, right? So we were able

00:02:01 Rhett Silverstein: to keep the agency going and service our clients and stay in contact with brands all over the

00:02:09 Rhett Silverstein: world, just the same as before COVID. So yeah, it's been an interesting year. There's been some interesting market phenomenon that have come out of it that in many cases our clients have benefited from.

00:02:24 Kevin Mako: But yeah,

00:02:26 Kevin Mako: slowly, slowly but surely getting things back to normal. Wow, that smart man going down to the sunny south in the midst of all this. And then I guess you're working your way back now. And you're right.

00:02:37 Kevin Mako: I mean, especially when it comes to these sorts of licensing deals and this sort of IP, and it's a global market. You can do it from home. And I think we're very excited to learn today about what inbound licensing is.

00:02:50 Kevin Mako: It's not something that's understood too much by hardware startups.

00:02:54 Kevin Mako: And I'm really looking forward to diving in deep with it because it's amazing what you do, essentially connecting big brands with,

00:03:00 Rhett Silverstein: startup. So why don't you just give everybody kind of a high level overview of what is inbound licensing with brands? Yeah, absolutely. It might actually be helpful to give you my quick background

00:03:15 Rhett Silverstein: and let you know how I actually discovered inbound licensing. Right on. So my background is actually as an attorney as an IP attorney, you know, working on behalf of brands.

00:03:29 Rhett Silverstein: And, and, intellectual property owners.

00:03:33 Rhett Silverstein: And when I moved over to the agency space, I was first a sports agent for a big French company called Lagardeer, and I was part of the tennis division representing Andy Rodic

00:03:46 Rhett Silverstein: among other pro tennis players. And they were looking for an in-house entrepreneur to expand the sports that they serviced.

00:03:59 Rhett Silverstein: And so this is around 2009,

00:04:04 Rhett Silverstein: MMA mixed martial arts was the fastest growing sport in the world. And I decided that we should start the first global MMA division representing all of the top fighters.

00:04:17 Rhett Silverstein: And that was a real learning experience for me. And kind of my first taste of licensing on the celebrity space where we were in charge.

00:04:29 Rhett Silverstein: of helping legitimize these fighters as pro athletes. And a big part of that was developing their brands and finding product categories that made sense for them. And so the, you know,

00:04:43 Rhett Silverstein: working on the talent side kind of opened my eyes to how a person, a well-known person can become a brand. And that attracted me to doing more and more of these consumer product type deals,

00:04:58 Rhett Silverstein: which led me to my next phase at a very big agency owned by Omnacom that was focused on representing corporate brands and helping those brands extend into new product categories

00:05:12 Rhett Silverstein: that they would never make in-house, but that the brand still made sense in these other categories, and they just needed to find the right manufacturing partner to develop those products with.

00:05:28 Rhett Silverstein: And so during the course of that period of my career, I was working on the, I was working on the IP side. I was representing the brand or the celebrity. And I was out there

00:05:39 Rhett Silverstein: knocking on doors, trying to find manufacturers who were interested in developing product

00:05:47 Rhett Silverstein: collections with my clients. And what I noticed over and over and over again was that every time

00:05:55 Rhett Silverstein: I knocked on one of those doors and sat across the table from the CEO of some manufacturing company, they never had

00:06:05 Rhett Silverstein: counter-representation. I was always in there as the agent on behalf of the brand, on behalf of the athlete, and this manufacturer was kind of taking my word for everything

00:06:17 Rhett Silverstein: and essentially choosing from my menu of options instead of studying the market and going out and finding the best fit for their business.

00:06:30 Rhett Silverstein: And so about seven years ago, I said there's a real need in the agency landscape for an agency that's fully dedicated to representing manufacturers

00:06:41 Rhett Silverstein: and being their eyes and ears and their hired gun to go out and find the right partnerships for them.

00:06:50 Rhett Silverstein: And so I hung out my shingle about seven years ago. The agency is called Hegemon,

00:06:57 Kevin Mako: which means leader in ancient Greek. And we dubbed ourselves the leader in product identity because we're really trying to help clients that make really great products give those products and identity with the right

00:07:12 Kevin Mako: brand on them. And hopefully that's the silver bullet that opens up retail opportunities for them. That's really cool. So simply put, right,

00:07:24 Rhett Silverstein: adding, you're essentially taking either a celebrity brand or some existing brand and cutting a deal essentially with a product manufacturer, product startup. Somebody owns the actual product or has

00:07:37 Rhett Silverstein: developed this thing and is looking to sell it to essentially slap that celebrity's name or

00:07:42 Kevin Mako: brand or logo, whatever else on this new startup or hardware product or whatever else, right? First tip for your audience,

00:07:51 Kevin Mako: never say label slap. That's a. that's that's that is that is that is a no no in the licensing world every brand wants to feel like

00:08:00 Kevin Mako: you are making something custom and authentic for their brand and you're not just slapping their brand onto some product well and that's good for both sides right because as i can tell you from

00:08:11 Kevin Mako: from a hardware startup's perspective um you know what better than to have some athlete or celebrity a big brand that you know working together collaboratively for mutual success yeah so especially from

00:08:23 Kevin Mako: the small startup world, you know, it's amazing that they want the same thing because the reality is that's going to make a much better partnership long term in any case. Absolutely. Absolutely. That's spot on.

00:08:36 Kevin Mako: Great. So in terms of how this all works, like why would, I mean,

00:08:41 Rhett Silverstein: I'm sure a lot of ideas are already coming to listeners' minds on why this would be great. But like from your perspective, what really here is the value to a, you know, to let's say it's a new

00:08:53 Rhett Silverstein: hardware startup or even somebody who's manufacturing product for for a long time and they want to increase exposure or whatever else. Like what are the best value items that you see that help

00:09:04 Rhett Silverstein: these manufacturers or these product companies or product startups when forming these sorts of brand or celebrity relationships?

00:09:12 Rhett Silverstein: Yeah, look,

00:09:14 Rhett Silverstein: for the longest time,

00:09:17 Rhett Silverstein: endorsement deals were the big thing. And that was kind of the solution. out there for a brand that was not so well-known to try to become more well-known. Right.

00:09:31 Rhett Silverstein: And what you do is you cut a celebrity,

00:09:33 Kevin Mako: a really big check,

00:09:36 Rhett Silverstein: and hopefully through their endorsement of your product and your brand, you would get the recognition and your brand would become a player in a certain space.

00:09:50 Rhett Silverstein: And the problem with those endorsement deals is that it's almost impossible. to measure the return on investment because you don't know, even if your sales pick up,

00:10:00 Rhett Silverstein: you don't know if it's exactly because of that endorsement deal. And you don't know if your sales have picked up enough to cover the expense of that endorsement deal.

00:10:10 Rhett Silverstein: And at the end of the day,

00:10:13 Rhett Silverstein: there's the consumer's smart and the consumer wants something that's authentic. And sometimes these celebrity endorsement deals just look like a money grab and that it's not really a partnership.

00:10:27 Rhett Silverstein: And so a way to do things in a much more, I think, seamless way is to actually

00:10:36 Rhett Silverstein: partner with a brand or celebrity and use that on your product itself. When licensing is done well,

00:10:45 Rhett Silverstein: the consumer who's shopping down the aisle doesn't even realize that the product they're pulling off the shelf with a brand they know on it, they don't even realize that it's

00:10:56 Rhett Silverstein: made by a completely unrelated company that's just in partnership with this brand.

00:11:01 Rhett Silverstein: And so I think that licensing is unique because you actually get to step in the shoes of this famous brand,

00:11:12 Rhett Silverstein: rather than rolling the dice on building your own brand from the ground up and taking the time

00:11:19 Rhett Silverstein: and the money to hopefully establish that and eventually have break your way into retail if you do if you

00:11:28 Rhett Silverstein: if you use licensing the right way you become that famous brand overnight and if you have the

00:11:34 Kevin Mako: product to back it up then you have the winning recipe to really become a force at retail and and break through the noise and get the buyer's attention and get that test you've been looking for

00:11:47 Kevin Mako: and if that partnership with the brand works, you're going to know it because it's going to generate sales and you're going to know what products are selling with what brand on it. And what's a beautiful thing about licensing is that it's royalty-based.

00:12:03 Kevin Mako: And so if you do well, the brand does well.

00:12:07 Kevin Mako: And so you're really in it together. And it's just a question of marrying the right product with the right brand and having a thoughtful strategy to execute.

00:12:22 Kevin Mako: It's amazing because one of the biggest things I can think of for hardware startups is that overnight instant recognition. It takes decades to build a reputable national or international brand that people know.

00:12:35 Kevin Mako: And with the right inbound licensing deal, you can all of a sudden have that logo,

00:12:41 Rhett Silverstein: that celebrity, that brand partnership or whatever that automatically places you as a product within that brand. from the eyes of the consumer, or even potentially, as you were mentioning, the retailer. Maybe that gives you access to retailers. Maybe that gives you access to a different type of wholesale buyer.

00:12:56 Rhett Silverstein: Maybe that gives you certain brand recognition that gets a certain investor on board. Maybe that gets you certain brand recognition that gets a certain media coverage. All of these things are tremendously powerful when you're a newer, less established, less known,

00:13:10 Rhett Silverstein: which really, let's be honest, most hardware startups, almost all hardware startups, you are not nationally recognized, and your brand certainly is not naturally recognized for quite a considerable amount of time. So this is a way to bring a great product. So you're coming with the

00:13:23 Rhett Silverstein: innovation. You're coming with the new product. You're coming with something that's changing people's lives. And then you're marrying that with recognition that is global, essentially, if you get the right partner on board. The power of that is incredible for a hardware startup.

00:13:36 Rhett Silverstein: It's crazy. You know, if you're walking down the aisle of your local supermarket and you see you're in the market for a new mop, a new floor mop.

00:13:49 Rhett Silverstein: You might be inclined to buy the Mr. Clean floor mop because you already use the Mr. Clean floor soap. And you would just assume Mr. Clean is making this floor mop. But you'd be wrong.

00:14:04 Rhett Silverstein: You, you know, you're buying a floor mop from some company that's really good at making mops and decided that if they could partner with the right brand that was well known, they would be able to break their way into retail

00:14:18 Rhett Silverstein: as opposed to their obscure brand that no one's heard of. If you go walk the aisle and decide you need a new pot or a pan and you already have Hamilton Beach coffee maker and a Hamilton Beach

00:14:33 Rhett Silverstein: toaster and a Hamilton Beach blender and you see a pan hanging there or you see a set of knives from Hamilton Beach,

00:14:42 Rhett Silverstein: you know that brand. You trust that brand.

00:14:45 Rhett Silverstein: So you pick those up instead of some other brand you haven't heard of.

00:14:50 Rhett Silverstein: And you would just assume that's being made by Hamilton Beach. Well, you'd be wrong. It's made by some manufacturer that does a great job in those categories

00:15:00 Rhett Silverstein: and partnered with Hamilton Beach to develop that brand extension.

00:15:06 Rhett Silverstein: And that's what I meant earlier is when it's done well, you don't even know it's not being made by the brand. Of course, the brand has all

00:15:16 Rhett Silverstein: the oversight and quality control and approval process over whatever you're making so you can't just take a brand and go rogue.

00:15:25 Rhett Silverstein: Everything is approved and aligned with the core brand so that it does tell an authentic story and the consumer does have a good experience and does come back and buy other products from the brand.

00:15:39 Rhett Silverstein: You have to understand from the brand perspective, this is generating royalties, which is great, right? Money's great, but what they're really after is, this is really a marketing strategy from a brand perspective. You know,

00:15:51 Rhett Silverstein: Hamilton Beach is such a big company.

00:15:54 Rhett Silverstein: Procter & Gamble is such a big company. You know,

00:15:57 Rhett Silverstein: the royalty revenues are kind of a rounding error for them. What they're really getting out of this is an opportunity

00:16:04 Kevin Mako: to enter into a new product category, that they would never otherwise do themselves and have all of a sudden this new touch point with consumers who are walking down this aisle and they don't normally see Mr. Clean on a pair

00:16:19 Kevin Mako: of gloves or Hamilton Beach on a set of pots and pans. But now they do. And that may say, oh, yeah, we need a new coffee maker. So they're going to go hook around to the next aisle and pick up a Hamilton Beach coffee maker.

00:16:32 Kevin Mako: And so that's how that that's kind of the virtuous cycle of of licensing. Now,

00:16:38 Kevin Mako: from the manufacturer perspective,

00:16:41 Kevin Mako: this really is all about the dollars and cents. And this really does need to move the needle on sales. This is not a marketing exercise for what's

00:16:51 Kevin Mako: called licensee, which is the manufacturer. The manufacturer has this great product, hopefully has capabilities to manufacture on scale or knows how to go about sourcing products at large scale.

00:17:06 Kevin Mako: And it's just missing that brand that's that's going to be recognizable enough to help them cut through the noise and break into retail. I like that you mentioned there. Well, you kind of highlighted about the brand reputation.

00:17:19 Kevin Mako: I want to unpack that a bit because I think it's important to know. And people probably can derive this already. But a great brand wants to ensure that they're pairing up with a great product.

00:17:33 Kevin Mako: So there's a number of things that if you've got your product, I mean, first of all, for most of the folks developing a product on this show, they're making something amazing. They're creating something new or proprietary. They're developing something that is going to change a particular category or whatever else.

00:17:48 Kevin Mako: So we're already in a good position.

00:17:50 Rhett Silverstein: But then there's really some key things when you get into manufacturing that, that these brands want to see to make sure that you're a good partner for them. Now, you know, and it's important to understand the difference here.

00:18:01 Rhett Silverstein: Traditionally, when you think about the word licensing, generally inventors and startups are thinking, okay, well, somebody is going to take my design or my engineering and they're going to go take it. They're going to manufacture. They're going to sell it.

00:18:13 Rhett Silverstein: Well, first of all, that's very, very rare for that actually to happen before you're actually in sales, as we know.

00:18:19 Rhett Silverstein: But second of all, it's important to understand that like this is a type of licensing that is actually much more probable and much more and essentially happening a lot more around you and potentially much more powerful. It's really important to understand the difference here.

00:18:33 Rhett Silverstein: you as creating the product, you know, essentially you are a manufacturer, you are actually reaching out to them. You're trying to license their brand to be applied to your product. And this is

00:18:45 Rhett Silverstein: the real world of licensing. And this is really how it goes down with people like Rhett here, right? So let's break it down for the audience here. What is important to understand as a hardware startup? What do we as the producers,

00:18:58 Rhett Silverstein: as the people of the ideas, what do we need to do? What do we need to have ready to be in a great position to start reaching out to these brands to try and

00:19:07 Rhett Silverstein: attract them to to our product yeah i think that's that's a great question and uh i don't know if

00:19:14 Rhett Silverstein: there's one single answer um we you know many of our clients do you know billions of dollars

00:19:24 Rhett Silverstein: of retail sales um they have already existing footprints at all of the major retailers and

00:19:33 Rhett Silverstein: And they're, you know, they're looking to add brands to their portfolio that are allowing them to kind of fill in the white space opportunities that they're not currently selling.

00:19:44 Rhett Silverstein: Because no matter how big your company is, you still want, you still want to find ways to grow.

00:19:51 Rhett Silverstein: And so when you're talking about companies that are already established and operating and in retail, what you're looking to do, you don't want to cannibalize the sales.

00:20:03 Rhett Silverstein: you're already doing. You want to find a brand that you can use and leverage to either reach a new consumer or hit a different price point or open a new retail door that you haven't been in

00:20:16 Rhett Silverstein: or essentially find some other way to grow your business using this brand. Now, what I think we're

00:20:26 Rhett Silverstein: really talking about when you ask me this question is how do smaller companies go about this? And why do they, what do they need to do? And I think that there's actually,

00:20:39 Rhett Silverstein: even though I have to say, you do want, when you're approaching these brands, you do want to have your ducks in a row. You do need to look like a real company. You do need to have an ability. You do obviously

00:20:52 Rhett Silverstein: need to have capabilities in a certain product category. I think if there's something special about your products, that's even better.

00:21:00 Rhett Silverstein: And anything beyond that, if you have a, if you have distribution, if you have, um, the ability to, you know, source at, you know, at good margins and things that, you know, things that would,

00:21:14 Rhett Silverstein: a, a top notch manufacturer would be able to do. Um, those are all great. But if, if you're really tinkering in

00:21:23 Rhett Silverstein: your basement and you have a true hero product on your hands, there's actually hope for you too, because these big brands are approached all the time by, you know, Me Too products that

00:21:36 Rhett Silverstein: really are our commodities. And the brand can sniff that out and say, you're looking to label slap. You just want to take our brand, slap it on your product,

00:21:49 Rhett Silverstein: and, you know, do incremental sales for yourself. And that's not really serving our purpose. We want to be associated with products that are special.

00:21:59 Rhett Silverstein: And there are brands, there are brands out there that have different kind of thresholds around innovation and things of that nature. And there are brands that can

00:22:10 Rhett Silverstein: see past a company that's small or maybe not even in the market yet, but they love the products so much that and they believe in their own brand enough that if you put them together, there really could be a business there.

00:22:25 Rhett Silverstein: I think a cool example is when a client of hours won toy of the year in 2018, they were a small startup, you know, very experienced management, but a small startup.

00:22:39 Rhett Silverstein: And if you know anything about the toy space, there's a few major players and they get the licenses to all of the biggest character properties.

00:22:50 Rhett Silverstein: So it's tough to go out there as a startup toy company and get the license for all the Disney characters. That's already been gobbled up. And it's hard to go get the license for the hottest show on Nickelodeon.

00:23:04 Rhett Silverstein: That's all been gobbled up. So you have to start, you have to really get creative. I think like a lot of your listeners, they need to get creative.

00:23:13 Rhett Silverstein: And so I think this is a cool and inspiring story that really,

00:23:19 Rhett Silverstein: shows that if you can make the product special, you can make it, you can make it even if you're

00:23:29 Rhett Silverstein: not a big company. And our clients, they grew up in the 80s and they used to, they used to play with the old Teddy Ruxpin doll. I don't know, Kevin, if you're old enough to remember that,

00:23:43 Rhett Silverstein: but it was the talking teddy bear and you put a cassette in his belly. And he'd tell you stories and sing you songs,

00:23:51 Rhett Silverstein: and that went away. It was a phenomenon in the 80s, 90s, and it went away. And so we were able to, you know, unearth that intellectual property to Teddy

00:24:03 Rhett Silverstein: Ruxpin. And all of the original stories he told were still archived and available. And our client said, well, let's bring Teddy back, but let's bring Teddy back 2.0.

00:24:18 Rhett Silverstein: with all of the technology that he that's available today. So Teddy Ruxman didn't take a cassette tape anymore.

00:24:27 Kevin Mako: Teddy Ruxpin had LEDIs and a synced app with unlimited stories and things you could download.

00:24:37 Kevin Mako: And, you know,

00:24:42 Kevin Mako: a surround sound voice and all of the cool features that were available. to rebuild Teddy Ruxbin today. And that ended up winning toy the year.

00:24:57 Kevin Mako: And the client who made that product ended up being bought out by a publicly traded toy company for hundreds of millions of dollars.

00:25:05 Kevin Mako: And it's because of their out-of-the-box thinking and their innovation. And your top wish list of brands that you'd love to license may not be available to you. It may not be a realistic,

00:25:18 Kevin Mako: at this point. So you have to get creative and you have to think of ways to set yourself apart. And in this case,

00:25:26 Kevin Mako: it was really the product. And then we found, you know, we found this legacy IP that hadn't been touched for a couple decades and we dusted it off and we found a way to bring it back. And that sold in every single Walmart,

00:25:40 Kevin Mako: Amazon, Target, Toys R Us while they we're still around.

00:25:45 Kevin Mako: And it was a huge success story. And I think that should be inspiring for your listeners who have a great product, not even a collection of products, but just have one great product.

00:25:54 Kevin Mako: I think that plus the right licensed brand or character or sports team or whatever it may be,

00:26:03 Kevin Mako: you know, that can actually end up building you a business. I know on Shark Tank, they like to say, this is a product, not a business. But a lot of times it's not a business because it doesn't have. have the right brand on it yet.

00:26:15 Kevin Mako: Right. And that's great. You know, first and foremost, make sure that you've got an innovation, something unique, something different, something special. I love how you keep coming around to that and then look for the right partner. I think a lot of startups, especially,

00:26:27 Kevin Mako: they shoot for the moon and they say, you know, I want the biggest celebrity that's out there right now. I think they'd be a great partner. Well, they'll probably be right. That particular tier one celebrity may be a great partner, but you're not going to get access to them. So think a little bit

00:26:42 Kevin Mako: outside the box, think creatively. Think of where you can, where you can start or what alternative or like you said, legacy options are available to find also a great partner, but it's accessible

00:26:52 Kevin Mako: to a startup that can make it, like you said, worth hundreds of millions of dollars. And that's not going with the tier one or the A list or whatever else.

00:27:02 Kevin Mako: One of the things that I always find is very important as well in the startup space when they're looking at these kind of deals is you have to prove that you can execute as well. Because this brand, if they're going to trust you with this license. They're going to say, okay, I'm going to trust you with our brand name or our

00:27:15 Kevin Mako: character or celebrity name or whatever it else it is. We want to know that you can execute. So if you can prove that, look, I designed, developed, engineered, I got into production. I've sold

00:27:25 Rhett Silverstein: even a few hundred or a few thousand units. People are loving them. And now with your brand, we could do a hundred times of sales. Well, that's very attractive to a brand now. But if you're missing on a lot of those things and you're just at the idea phase or whatever else, you're going to have

00:27:40 Rhett Silverstein: to push a lot harder because execution is huge. And it really, in this sort of a licensing situation, it is on you to make sure that that product is delivered and it's delivered great because now

00:27:50 Rhett Silverstein: you have a brand reputation behind it. And they're, you know, they're looking for that long-term relationship and they need to make sure that that brand isn't tarnished. And they need to make sure that you're going to represent it and create something amazing that looks good. Obviously,

00:28:02 Rhett Silverstein: just for you and your product, but also just for them and their brand as well. Like you said, a lot of this, too, it's not even about the return on investment for them. It's not as much about the dollars and cents for them.

00:28:15 Rhett Silverstein: It's a bigger marketing play, being in more verticals, having more eyeballs on their particular brand and being the brand behind that cool new product or that hot new innovation. So this is where I think is very special for startups to consider how am I unique and then

00:28:29 Rhett Silverstein: realize that that is your golden goose egg and leverage that that uniqueness or that specialness,

00:28:35 Rhett Silverstein: have a brand understand that, that what makes you really tick and what makes you special. And that's what creates an amazing partnership. So let's assume that we're a startup or even established, we're in production as a hardware startup or as a hardware company

00:28:50 Rhett Silverstein: with one of our products.

00:28:52 Rhett Silverstein: And we want to, we want to make this happen. We've got some ideas or we want to work with somebody to make ideas. How does somebody work with an agency like yours? How does somebody, you know, work with you to discover and find these relationships?

00:29:07 Rhett Silverstein: And then, you know, with that, how are these deals somewhat like structured? I'm curious to how they actually flow and what that relationship looks like, kind of a bit of nuts and bolts behind that. Sure.

00:29:19 Rhett Silverstein: Well, look, not to not to promote myself,

00:29:24 Rhett Silverstein: but the reality is there really aren't many agencies out there at all that work on. our side of the business. In other words, work on behalf of the manufacturer. This is a not necessarily

00:29:38 Rhett Silverstein: a model we created, but I think it's safe to say we are the leading agency at this point representing manufacturers and only manufacturers, laser focused on their side and their

00:29:50 Rhett Silverstein: interests. There's, there are other shops that, you know, represent a portfolio brands and then on the side, you know, help manufacturers. But to us, that was always a conflict of interest. we feel that to be effective, you have to pick one side of the fence.

00:30:05 Rhett Silverstein: And so the vast majorities of agencies out there are focused on representing the intellectual property, whether that's the agent, whether that's the celebrities and the athletes, whether

00:30:17 Rhett Silverstein: that's, you know, the corporate brands or the cartoon properties, that's kind of the sexy side of the business. And that's where, you know, most of the agencies have gravitated.

00:30:29 Rhett Silverstein: And that's really what gave me an entrepreneurial opportunity to go out on my own was to really

00:30:38 Rhett Silverstein: kind of serve this underserved side. But to do a deal every single time there's a manufacturer involved. So we represent close to 100 different companies today across pretty much every island channel of retail.

00:30:53 Rhett Silverstein: And whether they're making luggage, jewelry, consumer electronics,

00:30:59 Rhett Silverstein: betting, clothes, you name it, we kind of wear the same hat the whole time. We say, okay, you know, how do we get you from point A to point B via licensing? And let's look at your business

00:31:11 Rhett Silverstein: and let's look at what you bring to the table and make sure that you're making the right decision for your company and to your point earlier that you can execute and that you do believe

00:31:23 Rhett Silverstein: that this is going to move the needle because, you know, one little dose of reality for your listeners is that licensing is a pay-to-play business. So you will be asked to build projections.

00:31:38 Rhett Silverstein: You will be asked to sign a two or three or four-year deal. And you're going to have to guarantee a portion of royalties back to the brand, whether you make, you know, whether you

00:31:51 Rhett Silverstein: make a sale of even one product. So it is a calculated risk. And so you really want to go eyes wide open and know all of your options ahead of time, you don't want to be making a decision

00:32:04 Rhett Silverstein: based on who comes knocking on your door.

00:32:08 Kevin Mako: And so I would, of course, encourage anyone who is new

00:32:13 Kevin Mako: or even experience in licensing to seek outside help and making sure that, one, you understand

00:32:23 Kevin Mako: you know the full universe of options out there for you and two that um you are you are getting a good

00:32:31 Kevin Mako: deal um you know these these license agreements um they're not rocket science but there are moving pieces and there are uh it's not the same as going and buying a house and being able to see

00:32:45 Kevin Mako: what it sold for last time there's no MLS there's no um going rate uh every deal

00:32:53 Kevin Mako: takes its own shape and form based on the business plan that you present. And you're going to have

00:33:00 Kevin Mako: to negotiate a deal that is exciting to the brand, but also viable commercially for you. And

00:33:08 Kevin Mako: that's a thoughtful process. And there's a lot of tips and tricks involved. And you want to make sure that you sign the right contract for yourself because you're probably going to be

00:33:19 Kevin Mako: making a two or a three-year bet and putting a lot of resources into the endeavor.

00:33:27 Kevin Mako: And to me,

00:33:30 Rhett Silverstein: it's totally worth it. If you look at the dollars and cents, you're investing in becoming that famous brand overnight via license, as opposed to taking those same dollars and cents and going all

00:33:44 Rhett Silverstein: in on your own brand, which may never end up turning the corner. And that's, you know, that's not to be blib, but it's really, really difficult to build a brand

00:33:55 Rhett Silverstein: from the ground up. And you may even have a better chance of building a brand from the ground up after you've been successful with a license.

00:34:04 Rhett Silverstein: Because at least at that point, you have this track record and this credibility and retail relationships that may allow you to introduce a second brand in your portfolio that maybe you started yourself. And I think a lot of,

00:34:18 Rhett Silverstein: A lot of startups really aren't, you know, many love the idea of building a brand and many don't like that idea at all. Have no interest in getting their social media following up and all this sort of stuff around it. They say, no, look, I've got a great product.

00:34:32 Rhett Silverstein: I want to partner with somebody who has that. And I just want to be the product person. I want to focus on making this product great. Or maybe even my, you know, after this, I want to make a new version. I have this whole idea for a line of products. I want to focus on that and I want to leverage somebody else who's focused on brand building,

00:34:47 Rhett Silverstein: which is an entirely almost separate industry, separate thing, almost entirely than it is building a great product. So how did you mentioned, you kind of mentioned a bit there about the deal structure. And it's important to understand.

00:34:59 Rhett Silverstein: Like, of course, when you're getting involved with these brands, you have to give something up, as is to be expected, right? And you mentioned that. It's generally in the form of royalties. And just explain that kind of at a high level, how generally royalties work.

00:35:12 Rhett Silverstein: You know, if you're to sell $100,000 worth of units, you're generally paying a piece. And if you can run through you, even some just ballpark projects, I know every deal is different, but just giving some real general ballparks on consumer products, you know, what does a, what

00:35:25 Rhett Silverstein: does the hardware company give up when they give it around? What is the cost there? Because we've gone through a lot of the benefits, but it is good to know, you know, how the actual structure is there and what you're giving up. And then you can understand it better to make a great partnership. Yeah, sure.

00:35:39 Rhett Silverstein: You know, I guess I was, I was being a little hard on endorsement. years earlier in the conversation because they tend to be very expensive and you can't really measure your return.

00:35:55 Kevin Mako: Whereas licensing, I think, is much more tried and true in that, you know, you're going to know exactly how much that brand is doing for you because it's on your products

00:36:05 Kevin Mako: and you're going to know what your sales are of those products. And so in my mind, licensing's very fair in that sense because the brand's going to be getting a percentage.

00:36:16 Kevin Mako: of those sales and that's what we're alluding to is royalties and that royalty rate can be very low that royalty rate could be very high it real there is no standard um it has to be negotiated and

00:36:30 Kevin Mako: many deals there's there's more than one royalty rate based on what what product we're talking

00:36:35 Rhett Silverstein: about or what distribution channel we're talking about because margins are different maybe when you're selling department stores then you're selling to Costco or maybe you're selling

00:36:46 Rhett Silverstein: direct-to-consumer where you're paying a royalty on a retail price that you're selling rather than a wholesale price. So you really want to know what you're doing before you sign one of

00:36:58 Rhett Silverstein: these contracts. But like you said, you're only interested in licensing a brand that's well-known. Otherwise, you can go with your own brand if obscurity is what you're looking

00:37:10 Rhett Silverstein: for. But if you want a famous brand that's going to really give you a presence in a business. an identity,

00:37:18 Rhett Silverstein: that grant's going to want to know that not only can you execute, but that you will execute. And the way they get you to do that is they want you to put some skin in the game.

00:37:31 Rhett Silverstein: And they want you to basically build sales projections for, call it a three-year deal. What's your annual sales projection? Sometimes you give them a high and a low or sometimes just

00:37:43 Rhett Silverstein: one kind of middle of the road number per year and what royalty rates are you proposing and then multiply those and that's your projected royalties and based on your projected royalties a brand's

00:37:58 Rhett Silverstein: going to say well we're excited about those projected royalties but we want to make sure that

00:38:05 Kevin Mako: you're you know we're not sitting on an egg if you don't execute so we want to at least guarantee a portion of those project royalties so that we know you're motivated to actually

00:38:16 Kevin Mako: execute on what you presented us. That makes sense. So there's like a low bar that you kind of have to hit. And then as it scales up, maybe you get some sort of a discount as you hit major

00:38:27 Kevin Mako: volumes and everybody's happy, right? But it makes sense that there is some, you know, it's somewhat scales. As you mentioned earlier, it scales with sales. So there's a bit of flexibility there. but there's also a bit of like you can't just sit there and do nothing.

00:38:41 Rhett Silverstein: And I think that's important to understand, right? You've got to be ready to go and actually be doing something with this. And hopefully having that brand is the, you know, the fire under you to that lights that spark that says, okay, well, now that they're in, this should allow me to hit or heavily exceed

00:38:55 Rhett Silverstein: at least the minimum targets. And ideally, you hit much bigger targets from there.

00:39:01 Rhett Silverstein: Exactly. You know,

00:39:03 Rhett Silverstein: in these contracts, what we're talking about is to find as minimum guaranteed royalties. So, you know, minimums in the word, in the definition, like these are supposed to be

00:39:15 Rhett Silverstein: achievable and no one's excited if that's all you're achieving, right? We're going to exceed these minimum guarantees, but it's worth talking about because for a smaller company, you know,

00:39:27 Rhett Silverstein: those dollars are at risk. And, and so I think you do, I think you do want to have your finances

00:39:37 Kevin Mako: in order, and you want to have, you know, some cash allocated to the risk you're taking.

00:39:45 Kevin Mako: And there are royalty-only deals out there, but they're hard to find. They're usually not with the brands you're excited about.

00:39:54 Kevin Mako: And you're not going to get nearly the same amount of support from the brand. You know, again, coming back around to what's in it for the brand, it's really the marketing

00:40:05 Rhett Silverstein: and the exposure. And so the more they can, the more excited they are about the business opportunity with your product and the more revenue it's generating for them, the more they can invest

00:40:15 Rhett Silverstein: in supporting the whole program through their marketing arm. And so I would say that

00:40:24 Rhett Silverstein: these deals don't have to be expensive, but they can be very expensive. Again, every deal is different.

00:40:33 Rhett Silverstein: But I wouldn't go into licensing if you're not in a position to bet on yourself.

00:40:43 Rhett Silverstein: Yeah. I think most hardware companies are at the getting to that point, you know, they've already put a big bet into developing the product, getting it ready, get it into production. They've got their first few sales. So to me, it's one of those things where I think it would

00:40:56 Rhett Silverstein: be very exciting for a lot of hardware companies that are looking to brand with somebody. and that is just an amazing opportunity. So if you're one of those companies, how do we get in touch with you, Rhett?

00:41:10 Rhett Silverstein: What's the best way to learn more about the world of inbound licensing and get a hold of you and your agency and whatever else? Yeah, normally I would steer people towards, you know, the contact us tab on our website

00:41:24 Rhett Silverstein: and you can read more about me and you can see the variety of services. We focused on licensing today. We help clients put collaborations together,

00:41:35 Rhett Silverstein: where there's two brands on the product. We help clients form joint ventures. And we even help some companies buy intellectual property.

00:41:44 Rhett Silverstein: But I think, you know, I think, you know, the website's a valuable resource to just get a better feel for what we talked about today.

00:41:55 Rhett Silverstein: But because they're going to be friends of the show, I would welcome them to reach. out to me directly.

00:42:02 Rhett Silverstein: If you want to provide my email address,

00:42:05 Rhett Silverstein: you know, I would be happy to speak to any of your listeners personally and see if we can help grow their business. Brett, that's much appreciated. And for everyone out there, it's it's Hegemoneagency.com,

00:42:20 Rhett Silverstein: H-E-G-E-M-O-N agency.com. And I'll put all the links to your LinkedIn and to Hegemon Agency and all that in the show notes as well. So if anyone, just wants to pop over there to click through. They can do that.

00:42:33 Rhett Silverstein: Rhett, thanks a lot for being on the Product Startup Podcast today. Very excited to talk about Inbound Marketing. We haven't talked about that on the show before, so it was a great overview, and we look forward to chatting to you again. Thanks, Kevin. Take care.

00:42:45 Narrator: Thanks for tuning in to this episode of the Product Startup Podcast, the show that teaches you what it really takes to bring your product to market and turn it

00:42:54 Narrator: into a big success. This podcast series is brought to you by Mako Design and In

00:43:00 Narrator: The original and leading firm in North America to provide global caliber in-to-end physical consumer product development to startups, inventors, and small product business clients.

00:43:11 Narrator: If you're looking for product development help on your invention, head over to Mako-design.com. That's m-a-k-o-design.com for a free consultation from one of Mako Design's Ford Design Studios from coast to coast.

00:43:26 Narrator: Thanks for listening and see you next time.