Very little is written about the real world of inventing.
Many wannabe inventors love to do the following:
- Come up with ideas for new products
- Create working prototypes of our ideas
- Hope to find someone to “buy” the idea or invention
To succeed as an inventor, however, requires vastly more that the above three actions which just about anyone can do.
If you are genuinely interested in becoming a successful inventor to make a serious income and perhaps a lucrative living as inventor, you need to consider three reality checks at the start.
Reality Check One: Inventing is Very Risky and Capital Intensive
Thousands of new products are introduced into the market each year and most fail. Success rate for top, middle and lower tier companies who launch new products range from as high as 62% success and as low as less than 49%. These rates apply to companies with a history of introducing new products.
There are no accurate figures on success rates for independent inventors with new product introductions, but the oft quoted anecdotal success rate is less than 5%. Discouraging, isn’t it? Also, there are a lot of front-loaded costs including patent prosecution, prototype development, manufacturing, packaging and distribution.
An inventor can greatly reduce the risk of failure and simultaneously increase success potential by licensing his or her product to a large company.
Reality Check Two: Most Companies are Afraid of New Products
A great urban legend or myth is that in today’s high-tech world most companies are committed to innovation and are actively looking for new products.
This is simply not true. Shareholders and institutional investors seek out companies who can increase earnings every quarter. New products cost money to launch and require time to succeed and have high risk. As a result, most large companies are afraid of new, unproven products and would rather stick with existing products with proven sales results.
An inventor must be extremely persistent to break through this resistance barrier of fear to new products. You may have to present your product several times to a company before they seriously consider it – which could take years. Persistence and patience are essential.
Reality Check Three: The Inventor is Paid Less than any other Partner
Inventors often seek to license their product to a large company in exchange a small royalty percentage of all sales each quarter. Inventors develop an almost parental attachment to their products and have unrealistic expectations from any business relationship. Licensing deals may involve many business partners who risk large sums of capital and labor in developing the product and rolling it out into the marketplace. The inventor is the only partner who has virtually no capital risk: he or she risks only their “sweat equity” in the form of intellectual property – a patent. The partner who risks least is likewise rewarded least – and that low-risk partner is the inventor.
A small royalty (perhaps 3 – 5%) may seem an unfair compensation, but it could amount to a very lucrative income if the product is a success. Many licensing deals fall through only because the inventor becomes too greedy and demands far more than the partnership will bear.
My advice to any serious inventor is to consider greatly reducing risk by licensing the product. Then study the marketplace and understand where the product fits in, why it is a better solution than what is already being sold. Lastly, understand business partnerships and have a realistic expectation regarding royalties for your product.