Nathanial wish's Blog Entries
Licensing or Small Business Start-Up?
January 24, 2010
When you have a great new idea, there is a point where you need to consider the pros and cons of licensing versus starting a small business to manufacturer, market, and ship a new product. Both are viable options, but have different degrees of risk and profit. Licensing is fast, requires little in resources, and relatively risk free. The manufacturer who is the licensee has assumed all the risk for the length of your license agreement, which in exchange they will keep the bulk of the profits, while giving the inventor a percentage of sales anywhere from 3% to 15%. There is often a good faith payment made upon signing a contract, a prepayment of expected royalties, that should further motivate the manufacturer to produce the product and make back its investment. The manufacturer knows their market, has existing relationships for distribution, and deep pockets for launching a new product. Six months is not an unreasonable time frame to seeing your product produced. Small business start-up is slow, requires a large amount resources, and risky. The increase risk is directly in proportion to the possibility of increased profits. You assume all risk, from development of a functioning product, to finance, sourcing, manufacturing, fulfillment/shipment, marketing, advertising, and sales. It can take years to bring a new product to market and as a small business you are competing with established players who have the home field advantage. These larger companies can negotiate more favorable deals with suppliers, can afford commercials, fancy packaging and design. Even if you can produce your product, it may not be able to compete against the larger companies out there. It’s a very uneven playing field. Someone with a new idea has to ask themselves what are their business goals, is it to make money, quickly, and sell their idea or is to be a business owner, investing the time and energy into building a company, not just inventing new products. Not every inventor is cut out to manage a company, to deal with and all the aspects of ownership that have nothing to do with the process of inventing. Ask yourself if your passion is research and development of a new idea or is it the commercialization of that new idea.
Crowdsourcing for Inventors
January 24, 2010
One of the hottest trends is crowdsourcing, which is mass collaboration to achieve business goals. Wikipedia, is often cited, as it counts on the public to gather huge amounts of information to create its online encyclopedia. Another well known example is the Apple iPhone, which invited developers to come up with applications that could then be sold to consumers (Apple now offers endless cool apps and the inventors are paid directly by the users). Companies may even go to customers and ask for their assistance in designing commercials, new product names, or new product designs, etc. Often there is a phase of open brainstorming of ideas online, the public may be able to vote for the best submissions during this time, narrow down the finalists. Usually the winner is rewarded with money, prizes, or recognition. The Kindle stop motion commercial with that catchy ‘Fly Me Away’ song was created in this fashion, winning $20,000 in Amazon.com gift certificates for its creators. Nice for the folks in Fortune 500 companies to be able to take advantage of crowdsourcing, but how can the independent inventor benefit from a similar open exchange of ideas? Well, I came across an interesting site, http://www.creativitypool.com/free_ideas.php, which seems to be the answer to my question. This site is dedicated to people releasing their abandoned, or rejected, ideas to the public. The site’s rules make it very clear that those who submit the ideas online are no longer able to patent them, or benefit from them, if they should happen to go into commercial production. The site does suggest a reward, if such a thing happens, but that it should be minor, like one copy of the produced item. The idea submitters can further suggest what this reward can be. The rewards posted have been as creative as the ideas, “Virgin Sacrifice, haha,” and “Nobel Prize for the Stupid” were a few of the tongue-in-cheek suggestions. Now I’m not suggesting that you should post your ideas on this site, but use it, instead, as springboard for your own creative juices. I looked through some of these ideas, most of them were not at all feasible or developed enough to merit protection (a toy that walks, but no technical solution on how to make it walk), but they usually identified a need or want that could be fulfilled. In my own personal experience of brainstorming, sometimes the wackiest idea—the instantaneous reject, can be the springboard to a successful new solution. Too often inventors work in isolation and they lack the free exchange of ideas that can be really helpful. Some of the best ideas are built on the unusable ideas of others. I was excited to find this site and share it with my clients. Who knows, maybe one of these rejected ideas, with their help, will turn into an actual new product!
