After spending three years and $10 million, Don Park didn't like where his business was headed. Was it too late to shift gears?
The Backstory
Am I crazy? That's what Don Park kept asking himself during his flight back to Los Angeles from Germany. He had just turned down a multimillion-dollar deal to license his product to one of the largest beverage makers in the world. The deal promised to be his big break into the industry. But Park was beginning to think his venture would fare better by developing its own line of beverages--even though doing so would take months and require a complete overhaul of the business plan.
Park's product was a bottle cap equipped with a nitrogen-pressurized chamber, able to store fresh ingredients and instantly mix them into the bottle once the cap is turned; he had discovered it while scouting business opportunities. Park envisioned the cap being used to make shelf-stable versions of cocktails and other drinks that would normally have to be freshly mixed. Plus, the cap's function produced a striking visual effect that he felt would attract customers. A robust business could be built, Park believed, by licensing the technology to beverage companies.
For the next three years, Park worked on securing the global patents for the cap's technology and further developing the product, which he called the Gizmo. By 2010, he had secured the patents, found a manufacturer in Germany, and begun attracting interest from beverage companies. Park assembled a group of advisers from the food and beverage industries. He also brought on three consultants to head business development and finance; they agreed to work for free in exchange for the opportunity to earn equity.
The Problem
Several of Park's advisers questioned the licensing strategy. Licensing the Gizmo, argued Michael Lemkin, an executive director at the investment firm Oppenheimer, would mean losing control over how the product was used and marketed. "It destroys the value of the brand," he said.
But Park had invested $10 million in the Gizmo and, like his consultants, was not taking a salary. He had several prospects lined up and was confident he could secure a licensing deal before the end of the year. In October 2010, he and two colleagues flew to London to meet with a large beverage company that wanted to license the technology. From there, they planned to travel to Bremen, Germany, to touch base with the Gizmo's manufacturer.
It turned out that the London company wanted to use the Gizmo for a new beverage that would dispense an energy shot akin to Red Bull into a soda. And that bothered Park. A year earlier, he had been found to have a chronic illness. In response, he had improved his diet--and was uncomfortable licensing the Gizmo for such an unhealthful beverage. Park turned down the deal immediately.
Once the group got to Germany, Park proposed changing gears and developing a new brand of beverages. But his colleagues disagreed. They understood Park's passion for health but remained hopeful that they could find a suitable licensing partner. Not only would developing a brand take years, they argued, it was also far riskier. Park ended up leaving Germany alone. He returned to Los Angeles despondent and unsure about his next move. "They believed it would be too expensive to create a brand," he says. "I believed it would be even more expensive to license without a brand around it."
The Decision
Back in Los Angeles, Park consulted his other advisers. Most agreed that in the long term, a successful beverage brand could be more lucrative than licensing the Gizmo. But not everyone thought he should abandon licensing. "More than one strategy can be pursued in good faith," says Greg Cumberford, president of the Asheville, North Carolina-based incubator Bent Creek Institute and one of Park's advisers.
Park considered partnering with a company whose health objectives aligned with his to develop beverages. But because the Gizmo was not yet on the market, he had little leverage in negotiations. He also fielded offers from companies interested in obtaining the patents to the Gizmo outright.
'via Blog this'
No comments:
Post a Comment