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Lesson # 93 Interest From a Company In Your Invention Does Not Mean a Deal Is Guaranteed

rogerbrown's Avatargold

Keep in mind when a company says they have "interest" in your idea/product that does not mean go out and buy a new car, plan your Hawaiian vacation or quit your job. It means they are going to take a harder look at your idea/product and do their due diligence to see if your idea/product makes sense for them to consider for their product line.

A lot of things still have to fall in place for you to move to the next step of negotiating a licensing contract. If all you had to do was get interest I would have about 45 products on the market right now. It is fine to get excited that you found a company that sees value in your idea/product and wants to take a closer look. Just don't let that emotion make you do something that can harm you financially.

Companies will want the chance to gather information on a new product they are interested in along with estimating the cost per unit, molds, and (ROI) return on investment. Some will want to show it to buyers to gain interest so they can gauge potential sales. They may want to do a focus group and a myriad of other tests.

So, when a company says they have interest you are just starting to get the ball rolling. I have seen a number of Inventors post online that company X is interested in their idea/product only to have that interest quickly fade once they got further into their due diligence.

Also seen interest drop when the company found out the Inventor was all over the internet posting about their companies interest without their permission. Inventors forget companies like to have any advantage possible when they release a new product on the market. Having an Inventor telling about the new product can give their competition time to develop their own product to compete with the new one, which cuts into their sales. And if the other companies’ product is better than what the first company planned to release it can kill the first one before it even gets on store shelves.

I tell Inventors to hold off the excitement until they receive that first royalty check and it clears the bank.

Jeremy C
Charlie Lumsden
Rob F
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rogerbrown's Avatargold

Another  thing to keep in mind is once a company says they have interest in your idea/product is not the time to start the negotiations on what you want from them. Wait to hear back from them that the interest is serious and they are wanting to discuss terms . Negotiating before you know they want the product can hamper your ability to get a better deal. Consider you go in saying you would take 4% royalty when they would have given you 6% or higher had you waited. 

I have seen Inventors shot themselves in the foot quickly because they are so excited of the possibility of a deal they say they are willing to take just about anything to see their product on the shelf. 

Remember inventing is a business, treat it like one.

Jeremy C
Rob F
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vitaminguy's Avatargold

Yep, I know this one first hand. And I know it from both sides, as the licensor and licensee. I've been very sure that a company was so interested in my idea/product that a deal was inevitable, only to be rejected in the end. I've also been presented products by people who believed in the product so much, they couldn't fathom that my company was not interested enough to buy in. Based on that perspective, it is very important that you don't anger the potential licensor. If you think a company can't live without your product, or that it is worth millions, before it's ever been marketed, think again. Arrogance will get your idea shot down. What's worse, if you upset a potential licensor enough, they'll never look at you seriously again. So don't burn your bridges. This doesn't mean you have to accept an unfair deal. But if you decline a licensor, do it nicely and professionally. You never know if your next idea will be a perfect fit for them. 

Oh and also, "something" is always better than nothing. I know a few inventors who spent thousands on their inventions/patents, only to have them sit around for 20 years and ultimately expire. A couple of them actually had interest from licensors and developers, but were too intransigent with their ambitions for their inventions, and that just turned off the very people they needed to succeed. One person had an invention that they wanted to make for professionals in a field. A company showed interest to make it into a child's toy. The inventor didn't like it. Now the patent is about to expire and the inventor hasn't made a dime. Better to have gone with a kids toy and created the professional version later. Just my two cents. :)

Jeremy C
Rob F
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rogerbrown's Avatargold

Good points Rafael. In a lot of cases the Inventor can be their own worst enemy and keep themselves from the success they seek.

Jeremy C
Rafael Avila
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rogerbrown's Avatargold

Rafael, I would say about 30% of the Inventors I have met that have a patent wait until the patent is on its last 2 years and then are scrambling for anyone to give them any deal. Prior to that they were very adamant about they would only take X and nothing else would do. It is great to hold out for what you want, but if everyone you approach that has interest will not meet your goal you may have to look at the long term and decide if a little lower profit and longer life on the market may get you more than holding out.

Jeremy C
Rafael Avila
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vitaminguy's Avatargold

Agreed, Roger. You have many posts that describe different aspects of "inventor hubris." I think several of your posts,  like this one should be required reading for anyone who thinks he or she has a million dollar idea. Pride is good. But just like everything in life, too much of a good thing can be bad.

Jeremy C
Frank White
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