Howdy As the title says I am interested to hear from any and all Stackers that may be involved or invested in inventions. I am curious if someone has launched and sold a successful Product. Some questions I have are - What structure did you setup Have you bothered with a Patent ? What share did you allocate to Investors How did you put a value on your company I have read that a Patent is only good once you have something to protect, that is if you are going to market yourself. If you are looking at selling your idea to a company then you need a patent to protect their earnings. Has anyone had some experience here. Also how did you, or how do you put a value on a business. I have got multiple ideas that I have scrutinized beyond just being a good idea. They have commercial value and a market. As example this is how I see one of my products. Simple widget - Cost per unit - $0.15 Sell per unit - $0.50 Pack of 10 = $5.00 to distributors RRP = $9.99 as example Potential sales - Year 1 = 100,000 units of 10 - $500,000 Turnover - $350,000 Profit before tax etc... Year 2 = 500,000 units of 10 - $2.5M - $1.75M Profit Year 3 = 1,000,000 + units 10 $5M - $3.5M Profit Year 4 = Global if not before Investors - How do you look at what % return you want for $ invested. Is there a ratio or formula you use to risk etc... I am interested in hearing your stories, good and bad. If anyone is in Perth and would like to chat always keen to talk
Have you thought about Kickstarter? http://www.kickstarter.com/ Basically someone gets an idea and looks for funding by offering rewards. Browsers see the widget, identify a level of investment/reward they are after and commit that money via credit card. The rewards can be the widget itself, a t-shirt with a picture of the widget, all sorts of things. If you meet your funding goal, set by you and based on cost to manufacture etc. then you get the cash. The funds raised go towards the manufacture of the widget, the more funds you get the more widgets you make. This also raises awareness of the project and if no one wants the widget then you know it probably isn't worth making. You won't reach your funding goal and you won't get any money, all the pledged money goes back to the supporters. Amazon handles the money gathering and Kickstarter provides the platform, needless to say, both take a cut. There is an Australia version http://www.pozible.com as apparently you will need a silent partner in the US with a US address and credit card
kickstarter is an american only company you need a social security number and etc. consider the Australian alternative pozible.com
Google 'crowdfunding' for more places along the same lines. I have backed a few kickstarter projects, mostly niche products that will probably never make it to the shelves any other way. Some established companies are chosing the crowdfunding platform to guage interest in a proposed project.
Some great ideas and comments, has anyone had experience in the company setup ? For ease of selling and splitting how do you structure it. Would you use a unit trust and issue units Or do you setup a Company (large costs associated though) thinking of the longer goal. With me I have several ideas, each one is unique as such I was thinking something like below - Family Trust - Aus Inventions (Holds all the Patents and IP) - Widget Company 1 (Aus Super widgets) Sells to market - Widget Company 2 (Aus Hurts my Head Widget) Has a distribution company to market approach - Widget Company 3 (Aus that is better widget) Has a manufacturing deal and commission Any help is appreciated, would the investors want to be in each Widget company or more in the "Aus Inventions" company ?
Here is pretty close to real world for anyone interested - I am looking for approx $500K invested into - Widget Company 1 this is what the above figures roughly represent. In that you would get 30-50% share in the company. Depending if it was cash only, or you had other skills. This is purely a buy in figure. Skills needed - Injection Moulding, or Prototyping Internet, websites, CAD design etc... A lot to be discussed of course. Is there another way you can setup equity in a company. So perhaps you could split those skill sets into equity shares perhaps ?
Are patents still relevant today? I only ask because it seems to be a lot of expense for a piece of paper which is ignored by several countries. I am not bashing China but many patented and copyrighted items are made in China and if Hollywood and Silicon Valley can't protect their companies then I don't think you will have much luck. We had a local fabricator who made custom bull bars, a chinese customer bought some and now he is competing against his own designs which are made and imported cheaper than he makes them. Are your widgets going to stand the test of time, there are plenty of widgets to make ipads more user friendly but once the ipad is replaced those widgets are going to be worthless and the patents irrelevant. If you have a widget that can be made fast and distributed then you can get in before the competition and get out while it is still profitable. The guy who invented those clip on flags for cars, you wind the window down and insert them and wind the window back up. He made a fortune during the world cup in England, every car that went by had a couple sticking out. He had them made up in China and now there are many people manufacturing them and the market is pretty much flooded but he got in quick, made his money and I can't imagine that he still bothers trying to compete with the cheaper imports. I am not sure if he patented his design or if it would have made any difference. I have never actually made or sold an invention but I have thought of many, a quick Google usually shows me that quite a few people have had the same idea before me and actually got off their backside and did something about it. As an investor I am not interested in getting shares from a company, I only invest in an item I would like to get hold of, and I only get a couple of them. If the company brings out another item I would be interested but not guaranteed to buy it. From a crowfunding sort of idea... Simple widget - Cost per unit - $0.15 Pack of 10 = $7.00 to crowd funders Just like eBay, your customers come to you, no distributors, no shop front, no staff to pay, no advertising fees, no website to maintain. You do pay the company hosting though. Just like eBay you can have your own sales going on elsewhere and use the popularity of the site to catch customers and sent them to your own site where you can showcase your other products if necessary. No distributors taking a cut but you do spend a long time addressing envelopes and boxing up items. However many of the crowd funding start-ups make money on the postage as well, they don't charge the exact amount, often $15 to sell to Australia for something that you know costs about $6, I guess they charge for their time whereas eBay sellers don't. You also don't get left with a garage full of unsold product, you only produce what you can sell. This may be defined by the fabricator who may ask for a minimum order, in which case you set your funding goal higher to match this, if you don't get enough to cover the funding goal you don't go into production. You sound like you are going for a much larger scale than crowdfunding would allow but check out some of the popular projects http://www.kickstarter.com/discover/most-funded?ref=sidebar there is some money out there to be made with this model.
This is my whole ethos ATM, two minds it is too simple and would be copied easily in some shape or form. The other option is it does fill a hole for a particular market, that companies do not get involved currently, but should. This is totally new business growth while not effecting their current business model. It adds value overall and secure their market share for the company that takes it on. I am assuming you look at larger value items in this statement ? All I need is a working production model. Which is not too difficult with the right skills. From there It would either be option (A) Take orders of batches and sell in advance. Forward orders to larger accounts directly. Container loads (B) Pursue Patent and sell the rights for a commission. It is not so much the funding, as this could be off the ground with minimal cost. It is the skills required to get to that stage, as above. I have been speaking to a few people about outsourcing this is similar to above but with designs etc... Some new market opportunities right there for the smart people.
I am assuming you look at larger value items in this statement ? Not so much, I have invested in a pack of Christmas Cards (Cthulu themed and waaay overpriced for a pack of Christmas cards, as is the postage!), a community currency, a computer game, two board games, two card games, a film and launching a TARDIS into (near) space. I have another three games on the go which should be funded shortly (I like games). The most I have funded is about $90, they were after $4k to make a board game, they ended up with $81k. I looked at getting a prototype made up, using existing technology and cheap material, a bit of a no-brainer for anyone in the trade or even an experienced hobbiest. The prototype costs were going to be around $4k for a simple vacuuformed clam shell, slightly different from an off the shelf example. These things sell very cheaply and it would have taken many box loads in order to get back the initial money back, plus the company making the prototype wanted the right to continue making them for their own product line. The trouble is you are going to need people with the skills and if they are in the trade you will need to protect yourself from them stealing the idea and manufacturing it after charging you an arm and a leg in development fees!
First things First....DON'T TELL ANYONE YOUR IDEA....if you do you have forfieted all your I.P. rights. 2nd, go and see a patent lawyer. Even if it's just an idea...you can still patent an idea. That's what Intellectual Property laws were designed for. 3rdly Harden the **** up. The number of innovators and inventors that have been screwed to the wall in this country would make you cry. The companies that will likely get on board will have made serious $ exploiting the small guys so don't give anyone an inch, or anything more than you have to (including investors). Start your negotiation at 99.9% of profits. This is YOUR IDEA and the world today is run on ideas...innovation is the only way out of this mess we're in and every business worth it's salt is looking for something new to expand into. (I ask you this, How would you like 0.1% of apple's next widget?!? )
Would you have the money to take someone to court to fight for your intellectual property rights? Could you afford to take a large company to court? I am pretty sure that most of the large companies would be happy to steal your idea and bankrupt you in court before you can get a settlement but then I am just very untrusting of companies in general. Patents will probably go some way to protecting you within Australia and I guess you have to trust someone at some stage, particularly if you have several ideas worthy of them exploring, they might not be so keen to fleece you over the first one if they know you will come back with more golden eggs.
Agree with some, just to clarify once you have told someone you have one year to register your intent. If not you loose this and your mate can go and register it or produce it. The only proviso here is if you have signed a NDA for development, proof of concept, prototypes etc... Patent lawyer even. This is to protect your IP while developing your idea and strategy. In saying that I do have an idea on something for system that would be interesting to see if it can be patented. #3 I agree in concept but I also agree in everyone winning, if you all come out of the deal feeling good. You will want to do business again, if it is sour or you feel you got the short end of the bargain, then you may not want to get involved next time. I know which I prefer. In saying that I get what you mean how the big boys will eat you alive if you are not careful. Having 25 years in Sales dealing from grease monkeys to company CEO's I can deal at all levels, having negotiated similar deals and introduced new products I understand the process. Except this has always been with a company backing it and paying my salary
I've done a handshake over a cup of coffee and a complicated corporate trustee structure with some other standard Pty Ltd companies in between. It depends on the situation. One that will be patented when its finished, a couple of others that could be patented but it isn't really worth bothering with. You actually have to defend patents in court to stop people infringing them so consider whether the potential cost of litigation is worth more than just being "The Original" or "The First" in your market. If you're prepared to accept others copying you, make sure you copy any improvements they make to your idea and roll out your own Version 2. Personally, I've never been involved with a venture where the founders needed to give up a controlling interest. Take the annual earnings and multiply it by certain number of years. This is the Price-to-Earnings (PE) ratio. This is a very rough way of valuing businesses and loads of stuff isn't taken into account, but get used to thinking that way so that when someone comes along and makes you an offer you can say "I can earn that just doing what I'm doing now for another 9 months and I'll still have the business after that too, so kindly sod off". If you've got plant and equipment, real estate (like factories) and inventory, you'll need to work out how to value all that stuff and work it into the package. It depends what type of patent is applicable to the thing you've developed. There are several different types of patent and you'd probably be best off having some short meetings with a couple of different intellectual property lawyers to get a better idea of where your thing fits into the weird and wonderful world of IP law. Make it up? (Honestly, some people do just make it up but it helps to be able to justify the made up number somehow). Seriously though, it depends on what stage of the venture you're at. You might want to look at convertible debt as a possible option because it means you don't have to put a value on your venture straight away. Essentially, people lend you money at the outset and their loan can be converted into equity in your company later on, usually at a discount. The idea is that the conversion doesn't happen until you've got a second round of venture capital or are about to sell out, in which case the value of the now more established business has just been worked out by you and the new investors/buyers. Depends on the business, the people and what the deal is. Personally, I like to have my initial investment back after 18-24 months. I like it even more when that actually happens. I don't invest in things I don't understand. I don't invest in things I don't personally see any value in. I don't invest in things that are based solely on doing something cheaper than everybody else. I value my time more than I value my money.
