While I’m on a roll with questions (re: my post here yesterday), here’s another one that comes up a lot. Specifically, it came up this week in Ask Entrepreneur:
Question: How can I approach investors for my invention? My patent professional says I should look for capital. I have no idea what it would cost to manufacture, and patents aren’t cheap. How can I write a business plan when I have no information?
First, some facts:
Before I give you the formal answer posted on the Web, let’s take a minute to contemplate reality. The chance that your idea is really worth something is very, very small. You have so much going against you. Selling an idea is something like selling a book, a movie or a painting before the book is written, the movie filmed or the painting painted. The value ahead of time is very low. It’s after you realize the idea, by turning it into a business, that gives it real value.
Sadly, when an idea is turned into a business, it’s the building of the business that creates the value. Not the idea. You’re an idea person, I suppose, so you hate that, but it’s pretty much realistic. IMHO, as they say.
People dream about thinking up some new thing and getting a lot of money for it, but who’s going to pay you that money? The manufacturer or large company that you think can use the idea? Fat chance. They have teams of researchers. They don’t even want to talk to you about it because your idea, if it’s really interesting, is one in a million, and to talk to you they’d have to talk to the other 999,999 people.
Furthermore–and here’s where the patent comes in–you’re on the right track there. But still, you don’t really own that idea. The government protects creative works with copyright and inventions with patents, but those are rare. Most patents are worthless.
So, after that burst of cynicism, let’s get to the more optimistic side of all this. I am not saying inventions are worthless or that your ideas are worthless, just that they are more likely to be worthless if you think you can just sit around thinking up things and make money while somebody else builds the business. That’s not realistic. Maybe you are the one-in-a-million exception, but only then.
And now, the answer I gave:
Answer: Sorry, but nobody will take you seriously if you say, “I have no idea what my product will cost.” If you don’t know, who does? You are expected to come up with a good estimate. It doesn’t have to be exactly correct; everybody understands that it’s just an estimate and that you’ll eventually get detailed costs from a manufacturer (or somebody will).
So your next step is to get an idea of what your product will cost. Find a way to make a reasonable estimate. Call somebody who might know more than you do and, if that first person doesn’t know, ask him or her to suggest somebody else who might.
And don’t overestimate patent protection. Not only is it not cheap, but it won’t protect you that well, either. Our patent system is broken.
You need some estimated numbers. Costs are essential. Sales price is, too. And in truth, the likelihood of being able just to sell your patent rights is low.
I agree with your patent professional. You need to ally with somebody who has useful experience in this area and whom you can trust. You can’t get this to the point where you can talk to arms-length investors without having a stronger team. You can’t take the next steps without having a much better idea of what goes on, or a trusted ally. You also need some good professional advice. If (and only if) you really have something that is a real business opportunity, then you’re in very dangerous waters, full of sharks. Get an attorney you can trust. If you know somebody you can trust with more business experience in your field–and I mean real experience–ask him or her for help.
Sorry. I’d like to be more positive, but I think this is the truth.
This entry was posted on Wednesday, January 23rd, 2008 at 4:14 am and is filed under startup advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.2 Responses to “Real Truth About Selling Your Invention”
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February 3rd, 2008 at 5:25 am
Excellent realistic advice. Raise the bar to stop wasting people’s time.
So what next should people do - just give up?
Certainly they should, if the “People, Process and Technology” plan of the idea are not in place, then give up - you’re just being lazy and self indulgent. A joke that gets real designers a bad name. Go and watch soap operas and drink soda, you will have plenty of company.
The World is populated by 6 billion people that repeat everything, every day. You need to be one of first to bite the bullet and move from Repeat everything to Change everything.
250,000 years of homo sapiens on the planet has 99.999% been wasted with the “same old, same old.” Don’t let that happen in your lifetime, put the pedal to the metal and drive through useful ideas. If everyone on the planet realized one real improvement to everyone’s life each year, we could achieve generations of development in a minimum of time. Everything that happens later can be done now. Everything that happens after you are dead is useless to you.
So, if you genuinely are willing to do the hard yards in production engineering and selling - then do that. Don’t listen to the one in a million inventor tails of rags to riches, listen to this one of hard work and a high tolerance to failure.
The good news is that having done this, you don’t need or want anyone else. You don’t need resources or a manufacturer or a buyer - they will be brought to heel by you eating their lunch. You create, make, communicate, market and sell. Chasing others to do what you avoid is madness.
Don’t design and throw it over the wall, knock down the wall and build your road to market through it.
How, you say?
Learn, learn and learn.
Follow the route from customer life cycle, to buy, to use, to make, to design, to create. Learn about your customer, talk to them first, learn how they make a market, learn what is valuable and how to value engineer, learn how to effectively make an efficient service from a product, how to resource efficiently manufacture and distribute, how to generate 100 times the number of ideas (if you had one idea you’re a fool), how to write and submit a preliminary patent (easy), how to kill off good ideas that aren’t great ideas, and how to deliver the entire process package.
Without delivery there is nothing
February 3rd, 2008 at 8:53 am
Thanks Waldo, that’s a very welcome addition to my original post. Tim