funding

The objective for this text is to cause INTELLIVENTORS to give serious thought to seeking funding from investors and suggests advantages for deferring it. But, there is no discouraging having investors.

The unavailability of finances is often the single reason for inventions not coming to fruition. Funds would be required for:

  1. attorney’s fees
  2. United States Patent & Trademark Office (USPTO) fees
  3. bringing the invention to a small market

Angel Investors and Venture Capitalists
Resorting to investors is a widely used strategy. They have funded numerous entrepreneurs that presented good business plans. Those that had patented or patent pending inventions, copyrighted technologies, and/or had strong trademarks in addition to the business plans, were given more considerations for funding.

The BITTER PILL: 20% of something vs. 100% of nothing

Be prepared for the majority of your company’s shares and profits to go to the investor(s) as conditions for funding. It may be as much as 80%, depending on the type of project (a service, manufacturing, or high-tech).

When it’s the investor(s) that assume all the risks for launching a venture it’s the investor(s) that will be in control to oversee the investment(s) to maximize the potential of 300% to 400% returns in three to five years. Having an initial public offering (IPO) would likely be the investors strategy.

Being in control often means the investor(s) employing a “hand-picked” management team to literally run the company. The entrepreneur/inventor would also be apart of the team, maybe in the capacity of a vice president.

The investor being in control is not greed, it’s good business sense. Investors WILL NOT just hand over substantial sums to strangers even if they are the most creditable entrepreneurs and say, do your best. They are going to know how the funds are used and therefore be in control. So, be ready for the question: how much would you be willing to give up?

ABC's Shark Tank

SUGGESTION: Review some episodes from ABC Network’s Shark Tank featuring entrepreneurs/inventors presenting ideas to investors. Watching them would give you some ideas of what investors expect in comparison to what is stated above. Decide if their demeanor justifies the name, Shark Tank.

The guidelines for funding vary amongst investors. The images below link to the Go BIG Network (of Angel Investors) and Top 100 Venture Capital Firms. Each investor has a specific focus for funding and requirements. Contact information is on their respective websites.

 

Go Big Network of Angel Investors
Top 100 Venture Capital Firms

 

Deferring the need for investors: one step back, two steps forward

The one step back would be to start a carefully selected home-based business that gives the realistic expectation of generating $100,000 the first year working full time or the second year working part time. That amount would likely be enough to launch a small scale start-up (including the cost of the patent process) of the company that would market your patent pending invention and bring it to profitability.

It would be imperative for the business to have two streams of income: passive (commissions) and residual (recurring income after the initial sale with little effort required to maintain it). The residual income could conceivably sustain you during the early growth stages of your new company. The residuals could also be your backup should the new company face challenging times or fail: just being realistic.

This strategy would be a remarkable accomplishment. The two steps forward would be you having proved your fortitude as a businessperson and your aptitude for independently generating the finances for the start-up and operation of your new company to give it a track record for profitability.

Entrepreneurs/Inventors eventually resorting to investors is common. Should that time come, you would have experience and confidence with which to leverage negotiations.

Whereas investors may want more stock in your company than you would be willing to give up, your posture could give the perception that you have the tenacity to continue at a slower growth rate to decrease the amount sought after while increasing the value of having stock in your company. Resultantly, smaller shares of the company could be sold at higher prices with you conceivably retaining more than 51%. This could be your leverage in negotiating.

“Patience and Diligence, like faith, remove mountains.” William Penn

Bear in mind that once your achievement without the aid of investors is publicized more than one would undoubtedly be interested in your company. But, first confer with an attorney and any recommended sources before publicizing your success.

Given that the psychology behind investors is profitability do not appear to be anxious for funding when the first inquiry is made. Assume your posture!

If you are willing to give up controlling interest to have faster growth, consider this. Realizing the probability of other investors being aware of your company could cause the first investor(s) to be willing to negotiate for a smaller percentage of controlling interest rather than having 100% of nothing. Also, for you to hold out for better offers may be risky; get an attorney’s advice on either decision.

Deciding on a home-based business

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Watch the movie. Be 100% honest with yourself. If you KNOW that when you were 4-years old that you would have pass the test, there is a program with which you would very likely have high success. But, if you KNOW that you would not have passed the test, please look for another opportunity.

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