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Why Do It?

You need to consider how you’re actually going to make money out of your invention. You have three main choices: royalties from a company (from now on known as licensing), or becoming an entrepreneur, or forming a joint venture. They can be quite different options but you should make the same strategic move whichever you choose: start a business.

Don’t panic if the last thing you want to do is run a business. Most inventors will prefer, and be right to prefer, licensing. So point one: the business you’ll start will be low cost and relatively risk free. And point two: if you don’t do it your chances of a licensing agreement with a company will range from not very good to nil.


Exploiting Your Idea

There are basically three ways of exploiting your idea:

  • A licensing agreement with a company.
  • Become an entrepreneur and get your idea to market yourself.
  • A mutually beneficial joint venture.
There is a fourth: somebody offers you a lump sum to take your idea off you in its entirety. This could be a good way of making quick, effortless cash and if the offer is tempting enough, consider it seriously. But such offers are rare, so we’ll stick with the big three.

The abettermousetrap.co.uk formula for success

Whatever you do, you’ll make much more progress if you follow our regrettably unpatentable formula for success. Which is to make a business of exploiting your invention. We’ll be the first to admit it doesn’t sound much, but hear us out.

To be a successful inventor you need more than a good invention. You also need the drive to do something with it, because if you don’t make it happen, it never will. Nobody will beat a path to your door. You have to beat a path to theirs. So: if you want your invention to be a commercial success, you have to start acting commercially. And you do that by starting a business.

We don’t mean a full-time business or a limited company. We mean a small, spare time, sole trader or partnership business that exists largely and perhaps entirely on paper and has the sole aim of exploiting your idea. Forming a business makes strategic sense even if you want to license your idea to a company. In that case, what you’ll be doing is setting up a business with the limited aim of achieving a licensing agreement. Once that’s done, you can if you wish dissolve your business immediately.

It doesn’t matter if your business physically consists of not much more than a box of letterheads, a few business cards and a small desk with a phone and computer. You’re in business. In the world of enterprise that makes you an insider, not an outsider.

Commitment, commitment, commitment

You must however be committed to your business aims, however limited they may be, because to most potential stakeholders that matters enormously. They won’t care if you’re deeply in love with your invention. They won’t care if you think it can make the world a better place. They want to see you focused totally on the sales and profit that your invention can generate. That’s the way it is. You can’t beat them without joining them first.

Commitment to the business of invention matters because too many inventors fail to show any at all. An inventor we once knew asked an enterprise agency for support to set up a business. It was a strong idea so agency people willingly spent weeks helping him to refine the business plan, locate premises and line up funding. But when the other stakeholders quite reasonably insisted that he devote more time to the business, the truth came out. Far from being a fearless entrepreneur, he was on sabbatical leave from a teaching job he had no intention of quitting. No matter how enthusiastic he might have seemed about his idea, his commitment to the hard graft of exploiting it was minimal. The project collapsed immediately.

Such cases are not rare, and they make stakeholders brave enough to back inventions justifiably wary of anyone who wants everything done for them while making no real effort or sacrifice themselves. That brings us back to our argument that the best way to convince stakeholders that you’re not a closet slacker is to lead from the front by running the development of your idea as a business. Some advantages of operating as a business are:

  • It’s easier to keep track of your invention expenses, many of which may become tax deductible. (You’ll need a business bank account though.)
  • It should make companies and professionals take you more seriously.
  • It should make you take yourself more seriously.
  • You can present yourself as an entrepreneur (positive image) rather than an inventor (somewhat negative image).
  • Being a business gives you access to forms of help not normally available to individuals: grants, technology support, advice, training etc.
  • Psychologically, you can compartmentalise your invention activities. Your family and friends may be grateful for this.
  • The most convincing form of market research is to sell product. If your business can do this even on a small scale, you’ll have evidence of sales to help persuade potential stakeholders of the value of your idea.
Assuming you’re with us on the wisdom of going forth kitted up as a business rather than a private individual, let’s look in more detail at our three main exploitation options.

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Licensing

Like most individuals, few inventors have much desire to be entrepreneurs. All they want to do is find one or more companies willing to pay them royalties for the use of their idea.

Or, more accurately, for the right to use their IPR. The terms on which those rights are given and received are enshrined in a legally binding licensing agreement. For most inventors, a licensing agreement is the holy grail.

The main reasons why licensing is often the most sensible exploitation option are:

  • Very few inventors have all the skills, experience and resources needed to manage every stage of the development and launch of a new product.
  • Some ideas with major potential are only realistically exploitable by large companies.
  • Licensing can provide a good income over many years for relatively little effort.
  • Licensing offers the lowest personal financial risk.

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Entrepreneurship

What do you do if you can’t interest a company in a licensing agreement, yet you’re still convinced your idea is a winner? You can give up, or you can consider starting your own business.

We stress 'consider' because not everyone is cut out to run a business and there are many risks even for those who are. Self-employment can be liberating but it has drawbacks too. If you really want to change status from solid citizen to wobbly credit risk, becoming your own boss is a good way of doing it.

That said, becoming an entrepreneur to get a product that you believe in to market should be seen as a positive option, not a last resort. Nor need it mean abandoning your goal of a licensing deal with a company. It can simply mean going out into the market-place for long enough to prove that your product really does sell. Then you go back to companies with the evidence.

Entrepreneurship, enterprise, self-employment, starting in business - call it what you will, there are plenty of books on it so there’s no point duplicating them here. From our own experience only three things really matter:

  • Knowing at all times where you stand financially.
  • Finding customers.
  • Getting paid.
The first is straightforward but there’s no guaranteed way of doing the other two. Everything else is detail you can easily pick up as you go along. What we want to dwell on is how to survive, as that has to be your absolute priority. All small businesses are at risk in their start-up phase but new small businesses based on inventions are even more vulnerable. The following bits of miscellaneous wisdom have been collected from successful entrepreneurs whose businesses all had modest beginnings.

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Joint Ventures

What if you’ve done the rounds of companies and no one has shown any interest in licensing, but you’re convinced that your best long-term plan is still to place your idea or product with a company? An alternative to starting your own business is another form of entrepreneurship: a joint venture with someone whose expertise and resources you need. That ‘someone’ is most likely to be a company but it could be another individual if - and only if - they have strengths you lack: money, technical or marketing expertise, a business track-record etc.

It could also be a university, as most now have business units looking for opportunities to exploit their own research or specialised resources. If your product has sufficient profit and innovation potential and their expertise can help get it to market, they may be interested in a joint venture. Different universities have different technology interests and areas of special (often world-class) expertise, so you may have to shop around.

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Project 6 Checklist

The following checklist is partly an action planner and partly a reminder of what matters. If you’re tempted to think ‘I don’t need to do all this stuff’, it may help to point out that we’ve modeled the checklist on questions professionals are very likely to ask if you want their advice, support or money. We therefore have to be stern and say that if you aim to be a respected and successful inventor, you can’t afford to duck any of it.

 
State your preferred exploitation strategy - licensing, business start-up or joint venture - with reasons.
 
State what you yourself are prepared to do to help your invention succeed.
 
State what you’ll do to minimise your own risk and that of other stakeholders.
 
Remember:
A licensing agreement with a company is the safest option for most inventors, but the more entrepreneurially you behave, the better your chances of getting one. It can therefore help enormously to form a small business dedicated to exploiting your invention.

Next Project…..
PROJECT 7
Project 7

Raising people and finance

This Project is about improving the resources available to help you exploit your idea.


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