Projects, 2: Entrepreneurship Involves Risk

[en·tre·pre·neur] – A person who organizes, operates, and assumes the risk for a business venture

I always forget about the risk part.  Whether it’s shelling out money for a DBA or bottles for product testing, I never think twice.  Going in I never think about sunk costs.

I posted a while ago about a project I had started based on a key chain idea I had.  It was a good idea and research showed there were no others like it in retail stores in the area.  I wanted to take advantage of the the craze over the University of Texas’s mascot, the Longhorn.  I had Chinese manufacturers lined up and a registered DBA.  The only thing holding me up was licensing.

UT’s mark and mascot are of course, trademarked.  They are managed by the Collegiate Licensing Company along with hundreds of other schools.  Those holograms you see on collegiate products, that’s the CLC.  I can not remember where I read it, but UT is the CLC’s most profitable brand.

The CLC is essentially the gatekeeper.  The trademark department personnel at UT are always busy, and any requests for information are best directed to the CLC – that’s their job.  They issue licenses to companies, and licensed companies can use trademarks based on their license restrictions.  There are three types of licenses, the Restricted License, which is for interdepartment use only and not for resale, the Local License, which is good for up to five nearby universities and products can be resold by retailers, and the Standard License, which I am pretty sure is good nationwide.  Each license is harder and more expensive to obtain than the one listed before.  For Local and Standard licensees, the CLC wants to see companies with proven sales histories, distribution channels, and marketing plans.

A Local License made sense for my project but was looking cost prohibitive.  UT’s royalty rates are high, and it would have cost me $1500+ at the outset, just for my license.  I decided to go for the Restricted License and I had secured a contact in the business school that would buy the key chains, with the business school’s logo on the side, and give them out for free during summer orientation.  Bam!  A customer and an order of 1,000 units!

My application for a Restricted License made it through the gatekeepers at the CLC, but once it ended up on somebody’s desk at the Trademark Department at UT, it was denied.  Their reasons were that I was a young company with no proven sales history and only one product.  They have no time limit on reapplying, and encouraged me to expand my product line.

I’m not too worried about it.  I’ll try next year.

Takeaways: Insurance would have been less than I expected.  Comprehensive $1,000,000 business liability insurance for that operation would have cost $500 per year.

Somethings really are out of my control.