Agreements · Investing

To use White Label software or develop our own? (Intellectual property rights)

Rutger Hoffman Entrepeneur, MScBA.

Last updated on December 24th, 2020

We aim to launch a platform that allows customers to order their groceries and receive them within two hours. Orders are fulfilled by independent drivers (comparable to Deliveroo). Existing examples in the US are Instacart and Shipt, although it is a new concept to our geographic region.

For the platform to work we need a system that handles the back-end, basically a delivery management software. Several companies offer white label solutions, such as Onfleet and Shipox.

Our question is as follows: if we start by using a White Label solution for the back-end, and after we manage to gain traction, build our own platform. Is there a risk that they can claim intellectual property rights?

The user agreement clearly states that copying any of their work and/or making a derivative of their work is prohibited. We have no intention of copying the platform, but as many of the functions are necessary for any delivery management platform, this would imply that if we develop our own platform in the future they could claim intellectual property rights.

The reason for our worry is that a possible claim to intellectual property rights could cause problems in future investment rounds and/or when selling the company. If there is a risk we might have to avoid using White Label, even if this means having to wait longer due to development.

Thank you all.

Edit: The reason we want to launch quickly is due to the very high demand during the Covid-19 crisis.

Dane Madsen Organizational and Operational Strategy Consultant

December 24th, 2020

You should get clarification now where those lines are drawn prior to licensing the solution. They would need to be able to articulate the IP they want to protect versus generic functions and methods they cannot protect. You would be well served to have an IP lawyer guide on this part. They can help you get comfortable with the license and what risks you may have in the future.

However, if white label systems exist for your space, and they have reasonable customization options, unless you see yourself a direct competitor (versus a service provider whose highest and best use is the operations side of your model) do you need to develop a proprietary platform?

Rich Cleeve CEO of Codestream, helping startups build great products

December 25th, 2020

Do whatever gets you up and running the fastest. I think is more about your brand promise - the tech is readily available.

If you have a brand, sales and are on your way to profit then investors will be interested.

Paul Garcia marketing exec & business advisor

Last updated on December 27th, 2020

I agree with @Dane. Why would you develop a proprietary platform unless you plan to be so unique that it's nothing like what's available out-of-the-box with regular customization? Perhaps the licensing fee is unattractive right now, but imagine the fully-loaded cost of building your own software, constantly updating and maintaining it, and employing software coders to both write and fix it forever?

Be warned, even in an established market like the US with many, many delivery services, we haven't figured it out. The ground is still shifting. Attitudes do not change quickly, and customer reactions are perilously polarized.

Be sure that you consider how your business will survive when the crisis is over.