Best way to commercialize a software
My associates and I own a services business. To improve efficiency we started to developed own software two years ago. The software we developed seems to be very effective and time-saving for us and we believe it has potential to be sold to other firms who are in related services industries. We believe it has good market potential. Because our company is service-based, we are not sure an SaaS would fit within our core activities.
We see some possible scenario's:
- Create a new entity and license out the software to this entity. By doing this we want to ensure control over the source code.
- Create a new entity (spin-off/spin-out), and bring in the software as an asset. (Cost based valuation/multiples/NPV/...?)
- What are the best practices in terms of incentivizing the new executives of the new entity? Equity participation, stock options between 2%-15%?
Thanks in advance for your time!
Software Equity Stock Options Software Licensing Stocks
1 Answer
Why do you think SaaS is not a good fit, if you are unsure about it ? Technically, SaaS is not that a big deal any way depending on what exactly your software does.
If I was you, I would make this software open source and let it out with a GNU/GPL license. Making it open source will augment the software to be improved and made even better than what it is right now. You could earn some license fees if the software was used for commercial purposes. This way you let the open source world evaluate and promote your software too. Also, you can offer paid support services since you are the core inventors and would know the product better.
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First of all, thank you for your response. The logic behind creating a new entity is to protect the existing consulting agency from the increased risk of bringing a new product to the market. Since we are a consulting agency, employing mostly people with marketing backgrounds and not employees with technical background, we think that software development should not become a core activity. On top of this, we believe that some potential customers of the software are other consulting agencies and these firms consider us as their competitors and would thus be reluctant to buy something from a us. – Gauthier 11 years ago
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I am confused. So you say you started developing your own software and now you think software development should not be your core activity ? You say your potential customers are your competitors and thus be reluctant to buy ? Then how come they are your potential customers ? And yours is a service product, who is your target customer base then ? I think you are intermingling/complicating things way too much, IMHO. – Happybuddha 11 years ago
