Beth Marcus knew she had her hands on a marketable technology, but she didn't see how she could turn it into a start-up company. For one thing, it was owned by her employer, the giant Arthur D. Little Inc. (ADL) consulting firm. The technology, which converts the motion of finger joints into control signals for robots, had many potential uses. Marcus knew of at least five large companies that wanted it. She also knew she'd be crazy to try to outbid them.
So she made her employer an unusual proposal. Instead of an up-front fee, she would pay ADL a huge chunk of money from each of her first five sales, essentially a pay-as-you-go licensing agreement. "It was much better for me than trying to raise the funds from the outside," says Marcus, 31. The deal was also better for ADL, she argued, because it wouldn't have to spend the time and money negotiating with a slow-moving big company. And even under a worst-case scenario -- that her start-up, Exos Inc., collapsed -- the consulting firm would only have lost "a little bit of time."
After a few months of haggling over percentages, Marcus set off on her own, operating out of the basement of her house in Lexington, Mass. (She has since moved to an office in nearby Burlington.) As of the middle of November, she had booked enough orders to be able to pay off the licensing agreement by the end of last year. From then on, ADL will simply get a royalty. "It's working out very well," says Marcus. "The only other way I could have done this would have been to raise tiny sums from lots of people who believed in me. This is much better." -- Joshua Hyatt