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Passion is a great thing! In fact, we started Product QuickStart because we thrive on the passion that entrepreneurs have for their businesses. But, sometimes passion can blind even the most business savvy of entrepreneurs. In my career, I’ve seen inventors do some brilliant things, and I’ve seen some brilliant inventors do things they wish they hadn’t.
I’m sure that someone can refute every example I give in this article with an anecdote about some inventor they know who did exactly one of these things, and things worked out great for them. The truth is, even questionable strategies work out some times. People win the lottery every week, but that doesn’t necessarily make it a good financial planning approach.
If you are an entrepreneur looking to capitalize on your invention or to succeed with product development, I encourage you to think long and hard about the following points.
Crazy: Using their own money and savings.
Of course, if you are launching a new venture, you are going to spend some of your own money, and you are going to invest a whole bunch of time to reach success. But, don’t bet the farm, sell grandma’s ring, and steal your kid’s tooth fairy money to fund the venture. Think of inventing and developing a product just as you would any other investment. The potential rewards are very high, but so are the risks. Most savvy investors wouldn’t put their entire portfolio into one stock, or even one business segment. You shouldn’t either.
Following a good product development process, like the one provided by Product QuickStart, helps reduce risk, but cannot eliminate it entirely. You could do everything right, and your product business still may not succeed. There are simply too many forces that are out of your control that could impact your success.
As an example, a friend of mine once launched a product on a home shopping channel, and it was expected to be a huge success. Twenty minutes before it went on the air, OJ Simpson started leading police around Los Angeles in a white SUV. Almost every TV in the country was tuned to CNN, and the product introduction tanked.
Try this instead:
Invest an amount you are comfortable with, understanding that you may not see a return. Beyond that, get other people (outside your family) to invest with you. One thing to consider… if you can’t convince an investor that your business is a great idea, maybe you should consider the possibility that it isn’t a great idea.
Crazy: Patent it, no matter what.
Some people are obsessed with patents, and think that getting a patent is the first and most necessary step of their path to product development success. They ask questions like “can my idea be patented?”, to which the answer is almost always ‘yes’. Indeed, almost any idea has some element which could be protected with intellectual property. The problem is, in many cases, the protectable elements are so narrow, or so easy to design around, that the patent provides no real protection. Sadly, I’ve met many inventors that have dropped thousands of dollars on patents without questioning the value of what they were protecting. In many cases what they ended up with were worthless design patents, or utility patents with very narrow claims that are easily maneuvered around.
Patents, can, of course be very powerful and valuable things. Just be sure you are buying something valuable before you invest in a patent.
Try this instead:
Don’t ask if something can be patented, ask how broadly the idea can be protected. Before spending your start up cash on a patent, be sure you have something that is worth patenting, and be certain that your business model requires a patent to succeed. A good patent attorney, or patent strategist will help you think through these things before you jump into the expense of building a patent filing.
Crazy: Thinking of themselves, or their family as the target market.
The inventor is actually the worst person to decide if the world wants his or her product. The inventor is emotionally invested, and has put blood sweat and tears into developing the product idea. He may be an expert in the field related to the invention, and he may have started his product development process to solve a real problem, but he doesn’t represent a good focus group. In fact, the inventor represents the worst possible focus group: an opt-in, emotionally invested focus group participant who can’t possibly fathom why someone wouldn’t want to buy his product.
Established companies often spend tens of thousands, or hundreds of thousands of dollars conducting market research before introducing a new product. This level of research is, clearly, out of reach for most inventors and early stage companies, but there are some less costly ways to get some unbiased market insights.
Try this instead:
Find people that are not related to you, and who don’t know you, but would have relevant opinions for your product. If you have invented a new type of baby bottle, for example, find some parents of babies to talk to. Conduct your own round table discussion or survey, but don’t tell the participants that it’s your invention. Often times, people will try to tell you what you want to hear, so as not to hurt your feelings. Instead, tell them that you are conducting an independent survey for another company, and you need honest answers. Also, instead of asking “do you like this?”, try asking something more relevant to your business, such as “how much would you pay for this?”.
Crazy: Insisting on owning XX%
Inventing a successful new product is hard work, and should be well rewarded. But, sometimes inventors place a lot more relative value on the act of invention than they do on the work and risk involved in rolling the product out to market. Yes, the inventor has poured countless hours into the product, has sacrificed time and money to get the product to a licensing or investor event… and, yes, the inventor had the brilliant epiphany that lead to the idea. But, as large as this investment and risk is, it is still relatively small compared to the investment that will be made to launch the product on a mass scale. Often, if an established company is going to license an invention, or an investor is going to invest in an invention company, they will be bearing the burden of hundreds of thousands or millions of dollars of cost for tooling, marketing, inventory, distribution, insurance, and a myriad of other expenses.
Inventors are sometimes shocked that the company they are pitching to will only pay them 3-5% royalty on their amazing product concept, or that an investor will require that they give up a large percentage of the ownership of the idea/company. But, upon careful analysis, these types of arrangements are often (not always) quite fair for all parties, and reflect a good balance of risk and reward. Unfortunately, some inventors can’t see this, and they walk away from a 5% royalty deal, which would have been worth far more to them than the 100% stake of the company they now own.
Try this instead:
Do some due diligence and understand how your licensee or investor is looking at the deal. What are the risks that concern them? Will they guarantee minimum performance (for licensing)? What are they going to be investing to make sure the venture is a success? Remember, owning 3% of something valuable is a lot better than owning 100% of something that has no value.