Selling Concept Design or Co-Developing

My little studio (South Europe) was recently approached by an entrepreneur (UK), initially, to buy a concept design for an IoT device that we had uploaded sometime ago to our website. Just some 3Ds with super basic ME research on components (to define dimensions mainly).
Responding to his very short message if we sell the design, we stated that this is just a concept and that it needs lots of work to go to proof-of-concept and then design-for-manufacturing development levels. We asked if he is interested in co-development, explaining that we would consider our involvement to further develop it together under an Agreement and the agreed Fee.

We will have a vc call within the next few days and I am trying to put together a preliminary collaboration model for the co-development. I would like to hear your opinion on my brainstorming of how to break-down phases, content etc.


I am thinking to break the whole project in 3 phases & 3 payments.

  1. Down-payment (flat fee) - Client actually buys the right to commercialize the concept and our studio stops talking to anyone else interested in this specific one (actually we did have a meeting with a local manufacturer interested to the concept but things seem not to move on as well as the concept has been forwarded by our contacts to the big 3 international players on this Market and the one is processing it internally as we were informed by our contact window there).
    This price will be lower than the buy-off at once the concept that the Client could further develop by himself.

  2. Proof of Concept - Here we will need to work together with the Client and the Manufacturer’s MEs/EEs (perhaps we can involve our freelance partners in that up to a point), to possibly re-design the concept, assess whether the current form factor, dimensions comply with engineering/manufacturing/cost requirements and limitations.
    There is a chance that because of these unforeseen and specialized requirements, the concept may not be able to be produced. Then, the project stops here.
    I wonder which is the best payment method in this phase as it is unpredictable the time/effort needed. A kind of monthly retainer with the option of hourly rates for extra hours?

  3. Design for Manufacturing - Similar to the above.

What makes me a bit hesitant is the fact that the entrepreneur comes from the Services sector and has no prior experience developing a hardware product (the same applies to his partners). I had bad experience with such entrepreneurs as they constantly go off track in terms of time and budget and 2 out of 3 bankrupt prior producing anything. We try to warn them, advise them but they have fixed ideas difficult to change.

Someone may ask, why don’t we wait for one of the big companies to see if they are interested. The problem is that we have no idea when and IF they may be eventually interested as it is very hard to push an idea to an established company (we feel lucky already we found contact windows to forward our material internally). In the end is very likely this concept to remain a concept so we are willing to risk it with this person.

or, shall we just back off the co-development and just try to push a sell off the concept in its present status (actually just the main idea), get the money and run so that we do not waste time later on?

Does the above sound reasonable? Any quick suggestion?

Thanks in advance

(ps. there is no design or utility patent for the concept. Just the fact that has been posted online some months ago and its form product-architecture is so different than anything else in the market that is so obvious if it is copied).

Sorry I forgot to respond to this. I read it when I was on the go, and never came back to it.

There are so many ways to approach this and so many ways it can go wrong or just go nowhere. At least in my experience. The outline you wrote above for phases and fees seemed pretty reasonable to me.

Did it work out?

Hi Michael, no worries! Besides I even just saw your post. Thanks!
Well, in the end we discussed a bit further with the potential client about co-development as they had no resources in ID, ME etc. .However, during the talks we started slowly mentioning issues regarding the time-to-market, realistic development time-frame and resources as well as overall budget requirements (not our fee only, but what budget should the company should have available for such project). The above, we mentioned them pretty soon in the discussion so we could understand whether the client has realistic goals and if the company is serious in its presented strategy.
In the end, things did not move on as we stated a development time of 1-1,5 year(s) for the intended IoT device we were discussing. Then, we mentioned a budget of 500.000-1.000.000euros to develop, produce (moq) and brand the first batch of the device.
The potential client was shocked by all this info and as we understood will go to brand the device of an oem manufacturer in china eventually, like most of the companies do.
This is the thing with hardware startups initiated by non-hardware people. The strange thing is that the specific entrepreneur was coming from banking but he had done no homework on numbers.

People are funny. I could see your price estimate being a bit conservative. I’ve worked with a few hardware startups and it has been more like $1.5m-$2m needed (depending on what it is, and of course dollar to Euro conversion makes it a closer number).

Conversely I’ve seen the opposite where there was all this caution around what was essentially reskinning an OEM product to make it more on brand and tweak a few functional things.

Michael, apologies, I did not express correctly that the 500.000-1.000.000 € budget was the budget we mentioned that should be immediately committed (not spent) to start such a project and that along the process it could get to 1.500.000 € (even though we were aware it could even exceed this number, we did not mention higher numbers as we had no data neither we wanted to dishearten them).
More and more I really understand the reason that so many OEMs exist, something that I found peculiar while I was working/living in Taiwan. I had done designs for quite some OEMs (for different industries). Designing for an OEM is absolutely different case compared to designing for an OBM. I realized the importance of OEMs’ offering to OBMs only after I moved back to Europe and started contacting, working with OBMs.

Thanks for following up, some great experiences to share here.

I don’t often work with start ups, but I have a short list of questions I ask them before we even start discussions. sometimes that list of questions dissuades them all together, which isn’t my intention, but I feel like part of being a good design consultant is not just taking money for design fees, but truly partnering with clients. A partner shouldn’t just take money for time and materials only to watch their client fall off a proverbial financial cliff. I probably should figure out some way to productize this as a “start up commercialization costing workshop” or something…