This is a subscriber-only article. Join Entrepreneur+ today for access

Learn More

Already have an account?

Sign in
Entrepreneur Plus - Short White
For Subscribers

Paying for Tech Help With Future Royalties An entrepreneur sees the funding light when she agrees to pay her engineer in royalties based on future sales.

By Michelle Goodman

Opinions expressed by Entrepreneur contributors are their own.

FAB Light
Flash of genius: Linda Pond and her co-founders have sold 136,000 FAB Lights so far.
Photo courtesy of the Fab Light

Linda Pond didn't have the funds she needed to build the FAB Light--an LED light for coolers, toolboxes or tackle boxes--which she and four partners dreamed up during an evening softball game. What the Ottawa, Ontario, entrepreneur did have was a rough prototype of the product and a professional relationship with a local engineer.

To finish developing the lights, Pond struck a royalty arrangement with that engineer, Steve Carkner, CEO of Ottawa firm Panacis, agreeing to pay him a portion of sales once the product hit stores. By deferring product development costs, Pond saved approximately $60,000, which allowed her to funnel the $40,000 she had into patent fees, product materials and travel.