Business start-up/investment

[JonathanW]

Thread for you entrepreneurs. I have a few questions.

If you wanted to start up a business and you have patent pending on your invention idea. Is it a good idea to seek out an angel investor in-order to raise fund to perfect the prototype and bring the invention to market in a shorter period time while losing 20-40% ownership of the idea? Or is it better to keep 100% ownership and slowly raise the funds to full develop your invention and bring it to market in a vastly longer time period?

For the firearms industry, is it better to license your idea to one of the big manufacturers or try to bring it to market in a partnership or as an individual?

I may have more questions in the coming days

Thanks for any advice or answers

[mountainman]

It all depends on the angel investor. Maybe you can't come across some one who has all the moolah cause they are not much of a shark and then some one who has all the money turns out to be a low down good for nothing money grubber. se la vie.

[tdb59]

Patents are cool, but having to spend the capital to defend them can kill a business even if the legal action is successful.

Getting the item to market as quick as possible may be more critical.


It depends on the item, of course.


........

[SAFN49]

How much are we talking about and what would the demand be for the item? What is your business plan? First year sales and GPM?

Some investors don't want a piece of the business and only want RoI.

Licensing patents is the easy way, you won't make as much money, but you need to have a full patent and not just pat pending.

I have 3, and have only sold products I manufactured under one of them. The other 2 were a waste of money.

http://patents.justia.com/inventor/david-j-millar

[C2A1]

Yep, this above, keep in mind.
Patents are a ticket for a front row seat in court, especially if is a good one. I have been involved in cases where they keep the tech guy in court, stalling the IP and development of the product.
Is your a patent pending or a provisional? If provisional, go like hell and use that year to your advantage. Can you file second and third refinements? Don't do it yet but have them ready. NDAs are useful in court buy they have been used both ways so they are sometimes frowned upon. Can what you are doing be made in China or some other SH place without rule of law. I know the guy who invented several common consumer electronic devices and the Chinese just stole everything. Flooded the market with cheap crap and told him so sorry!
Does it have military applications? ITAR on one hand but if you're clever you can have SBIR protection.
At the moment there is a lot of money out there. Returns are not great and the stock market over valued. I have maybe a dozen patents and have 2 dozen more ready to be filed. What I did in one case, I licensed it to my start-up brought in investors. Developed the prototypes in JV with a big guy, with first right to buy. They ordered ten systems and liked what they saw, did a valuation and then bought out the start-up. Put cash from the company sale in my pocket and investors and continue to get royalties paid to me. If you don't have history, a lot of investors want a big slice. By setting up your royalties it protects you when these folks try and run a tech/IP based company into the ground.

[cotter]

How about going with the current fad- crowd funding? Most people will throw $20 away on anything. How long does the process take to become patented?

[SAFN49]

Originally Posted by cotter

How about going with the current fad- crowd funding? Most people will throw $20 away on anything. How long does the process take to become patented?

Years. One of mine is going on 6 years now.

[STG_58_guy]

Originally Posted by tdb59

Patents are cool, but having to spend the capital to defend them can kill a business even if the legal action is successful.

Getting the item to market as quick as possible may be more critical.


It depends on the item, of course.


........

I'll go further and say inventions and patents are currently useless unless you are a giant corp trying to stifle competition.

There are only two ways to make money with an invention. Be first to market and do that very well, or sell the rights to some large firm to recoup your development costs plus some profit.

I have a few patents. The patent pending path can buy you enough time to be a presence in the marketplace, and mostly protects you from a copycat selling through Walmart. It doesn't stop the copycat, it stops Walmart (deep pockets). The cost of defense is usually far more than the ROI on the product.

Ideas and inventions are worth very little. Executing the idea and marketing it is where the value lies, sadly.

[JonathanW]

My functional prototype is in the process of being machined at the moment, last step is heat treating. The ammunition Is almost ready as well. I will hopefully begin ballistic testing next year, January-February. After I have results, and everything works as designed, I will make a presentation and be ready to market the new design to companies. I have my patent application filed and everyone I’ve worked with has signed NDAs so far for extra protection.

[def90]

If you are shopping this out to investors or potential business partners you need to lawyer up and get a serious NDA put together. If it is a money making product it would be wise to have your lawyer accompany you to these meetings as well.

The other side is going to have their lawyers at the table, you better have yours.