Why Online IP Marketplaces Fail

Learnings from 20+ years of yet2 business model evolution

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Why Online IP Marketplaces Fail-IMage of a business woman crossing a hanging bridge from a dead plant labelled "Tech Marketplaces" to a thriving money tree that's labelled "Direct Proactive Service"

yet2 has a long history of facilitating technology transfer deals for our clients, including both technology acquisition and technology out-licensing. yet2 launched in 1999 as an online Intellectual Property (IP) marketplace where buyers and sellers of IP came together online in 1999 with 30 competitors. We’re fortunate to be the only one remaining due to an early pivot to a more sustainable business model for technology transfer. Finding a successful business model did not happen overnight; yet2 went through multiple business models and significant trial-and-error to finally land on a business model that is sustainable.

In those early years as a marketplace, we saw steady growth in the number of large corporate members as well as the number of introductions being made between buyers and sellers. yet2 also facilitated a number of deals for companies such as Dupont, P&G, Battelle, Honeywell, and Caterpillar.

Despite the early traction, the executive team identified the online IP marketplace business model would ultimately fail and transitioned the company to a more sustainable and profitable business model. This new (and current) business model focuses on a direct proactive, service-oriented marketplace. The original yet2.com online marketplace was retired in 2019 in favor of a log-in free experience.

What makes it so challenging to make an online IP marketplace sustainable? And what are the components of a “winning” business model?

Why Building a Profitable Online IP Marketplace Business Is So Challenging

Over the last 20 years there have continued to be 1-2 new IP marketplaces each year. Unfortunately, we have not seen a single pure online marketplace able to sustain profitability. yet2’s executive team shares insights and lessons learned from operating the yet2.com IP marketplace:

  • It’s no longer about a balanced platform for buyers and sellers – buyers are much more prevalent
  • Large companies often are selling technology that is not very interesting and therefore challenging to monetize
  • Representing the startups is a hard way to sustain a business
  • Digital “stickiness” of an IP exchange platform is not that relevant
  • Success-fee based approaches to market-making have not been sustainable

These are real challenges the yet2 team faced when operating the early version of the yet2.com marketplace, and ultimately what led them to pivot the business model.

A Winning Model

Given these challenges, yet2 began transitioning to a direct, proactive, service-oriented business model in the mid-2000s and has continued to operate under this model today. Four key components of this winning model are:

Focus on Technology Acquisition

Technology scouting/acquisition deals are more common than technology out-licensing deals, a trend the yet2 executive team noticed in the early days of the yet2.com marketplace. Starting with the Needs, and ‘pulling’ solutions, is way more successful than ‘pushing’ technologies looking for problems. yet2 has built expertise in technology scouting through a range of proactive searching services and approaches.

Find Motivated Technology Buyers and Help them Execute

yet2’s mission is to help our clients get to deal and impact; we support our clients all the way from scouting to introductions and NDAs to sample evaluations and deal negotiations. In addition to scouting, yet2 provides clients Open Innovation Training and benchmarking to recommend best practices in running an OI function, and partnering internally with stakeholders and externally with startups.  From yet2’s perspective, this searching/scouting activity is only really interesting when you identify technologies and companies with compelling value propositions that accelerates chances of deal and impact for the client.

Identify Technologies for Clients that Have Very Strong Comparative Value Propositions – CVPTM

yet2 has found over 20 years and tens of thousands of introductions, that a strong technology CVP must have strong, quantitative data showing significant cost and/or performance advantage compared to an incumbent technology and other new technologies in that application. If a technology does not have a compelling CVP it will be very difficult to realize impact and value-add for your efforts. All yet2 scouting efforts are rooted in identifying technologies and companies that have compelling CVPs.

In closing, we’d like to thank our clients. yet2’s business model evolution and continued innovation around our services would not be possible without the close partnership and collaboration you’ve provided over the years.

Contact us if you’re interested in learning more insights.

Read more about our specific services and service-focused approach.

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Photo Credit: Mohamed Hassan from Pixabay

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