Invention financing requires a plan and a strategy. You need a plan, to go along with your invention, if you want to attract finances.
Individuals that may be potential investors understand plans and proposals.
If you want to communicate effectively to them about invention financing you should know their language.
A business plan contains the language they understand. It tells them the potential for a profitable return on their investment. Financiers know from experience that just because a product solves a problem, or has benefits, it doesn't mean it will make money.
Purpose in Preparation
Your business plan is a detailed description of how your invention will be manufactured, packaged, promoted, shipped, distributed and marketed for a profit. These are required details for invention financing.
You would not invest in a home without knowing the details about what you were buying. You would not expect the seller to tell you, "It's a beautiful home in a nice neighborhood - everybody wants to live here - what else do you need to know?"
A business plan for an inventor is like planning a road trip. You have a starting point and a final destination. It is a prediction based on research, knowledge and experience.
Your plan may not be completely accurate nor will it reflect what actually will happen.
When someone reads your plan, they must have confidence that you have a good potential for arriving at your destination.
Your invention financing is dependent on the perceived potential for reaching profitability.
Importance of Planning
During my association with the Walt Disney Company, I had the opportunity to meet many interesting people. On one such occasion, I was having lunch with a wealthy businessman that controlled dozens of companies.
The companies he owned were very diverse - consumer product manufacturers, restaurants, gold mines... and I was curious about this diversity.
Most wealthy individuals are usually involved in businesses that are related in some way. I asked him about this and here is what he said -
"Randy, I don't invest in businesses. I invest in people."
He went on to explain that profitable ventures are operated by people that know how to make profits.
I found this very interesting. Over the years, I discovered that investors are often as interested in the inventor as they are in their invention.
They want to know if the inventor is someone they can work with. They want to appreciate the inventor as a talented resource and asset - someone that could contribute to their business.
This is probably one of the reasons that inventors, who are also entrepreneurs, have the highest success rate for marketing their inventions.
There are numerous ways to get invention financing, depending on your invention.
When you approach someone about finances, you're actually proposing to them an opportunity to make money. If you have done your homework, you will have an idea of who may be interested.
It could be a manufacturer, or a distributor, that sell products to customers that would be users of your invention.
It could be a retailer or packaging company that could easily see the potential of your product.
It could be anyone who is just really interested in the field of your invention. In Five Big Lies. I show you a very effective "proven" way that successful inventors use to attract these people to them.
Smaller amounts of financing from a few sources is easier than trying to get large amounts from one source. Smaller sources are easier to contact and approach. They are not as concerned about disclosure issues.
You can talk about your invention (without disclosing any confidential details) to see if someone be may be interested in your opportunity.
If someone wants more details, it means you did a good job getting them interested. You could then ask them to complete a non-disclosure agreement so you can show them the details.
You could sell shares in a company you organized for your invention. You could grant specific rights to your invention in exchange for financing. A specific right could be just about anything - the rights to manufacturer, the right to market in a specific geographic territory, the rights to use part of your invention in another product, the rights to sell your invention in catalogs, on television, in retail stores etc.
The process of trying to get invention financing is the test of how good you are at convincing people about the merits of your invention. If you can't get anyone interested then you must consider whether your invention is really viable or not.
The inventor who understands how profits are made has a better chance of receiving financing. An inventor who can prove their invention makes money, has even a better chance of attracting financing.