A licensing contract is created by a company, guaranteeing anyone who buys it a percent of their total sales - providing they share information about the company with their friends, acquaintances, or social followers. These licenses are sold on ILOCX, the Initial License Offering Contract Exchange.
Using our framework, companies are legally required to pay you from their gross sales. This means when a company makes a sale, it is accounted for and a percent of the value of each sale is placed aside for ILO buyers. These funds are then distributed evenly amongst all licenses.
Sarah loved her Sunclash sunglasses. She wore them all the time, and couldn't wait for more styles to come out. She never missed a newsletter, so when Sunclash announced an ILO Sarah bought one straight away. What better way to support a great brand she thought.
To qualify her ILO she shared the good word about Sunclash wherever she went, to friends and family, on her social media, to the girl that sat down next to her on the tube and Sunclash suddenly had more orders, combining that and the money raised through ILOs they promoted their brand further, opened a new flagship shop and developed new styles.
Sarah also got a referral code with her ILO that meant her friends got a discount on new sunnies and she got a commission on any sales. More money for sunglasses! She thought.
Now all of Sarah’s friends have Sunclash sunglasses and love them too, they want to support the company by buying ILOs and they’re sharing the story with everyone they know. Sarah’s ILO is now worth 10 times what it was when she bought it because the company is doing great.
She’s even getting annual royalties paid into her account. She can finally add some new Sunclash styles to her collection from their new flagship store down the road.
In short, Sarah, Sunclash and Sarah’s friends are winning.
In capital markets, small scaling businesses are expected to sign up to undesirable conditions, unrealistic targets, and give away control and equity, all to get the money they need to scale. Smaller, distributed buyers are locked out of this system, having to wait for companies to mature to be able to participate, missing out on the most lucrative stages of company growth.
Companies – offer the opportunity to participate in their growth to all, receiving the money and promotion they need, when they need it. They give away no equity or control of their company.
ILO Buyers – back companies they believe in by purchasing a license, and receive a royalty tied directly to the company’s sales.
In return for the promised royalty, buyers promote the company, assisting in the company's marketing efforts. This helps them make more sales.
Companies receive necessary capital, and reward their license buyers directly where they make an impact, by paying a royalty on sales.
When a company does well, buyers do well. Further to royalties, licenses gain value as an asset, and can be sold on a secondary market.
