Options for Commercializing Inventions If an individual (or someone who represents them) has a new technology, there are many options for trying to extract value from it. Except in very rare situations, all of these options involve giving up some level of control and ownership. The question isn’t “How does an entrepreneur maintain control?” It’s really a question of when, to whom and how much do they give away. The primary options for commercializing an invention or technology include: 1. Starting a new company 2. Licensing the technology 3. Selling the technology 4. Partnering with a third party (e.g. Manifold) Depending on the particular situation, and the experience and resources of the invention holder, the merits of each path will differ. Partnering with Manifold is one alternative among many. 1. Starting a New Company If an individual inventor (or someone who represents them) has a great technology or product and has the financial resources, the experience and the motivation to start a new company, then this may well be a good option. If done with limited outside capital and interference, a new company can provide an inventor/entrepreneur with maximum control and ownership (minimum dilution). And, a good case can be made for an inventor being the best champion to maintain control and drive his or her product to success. The other options all rely more heavily on another party to execute and extract value. With the right drive and skill set, an inventor can be successful as an entrepreneur, building a team around the technology and engaging external consultants for expertise where necessary. The down side of starting a new company? Most inventors are not entrepreneurs and many that do choose the new company path are eventually replaced as CEO by a “more experienced” person. Moreover, inventors frequently lack the understanding that the vast majority of work associated with monetizing an invention comes well after the invention itself. Unless an inventor is independently wealthy, he/she will need to find financing. And, finding the right investors with sufficient money is a task unto itself. The legal fees and complexity of an investment offering can far outweigh that of the already non-trivial patent process. Assuming someone successfully raises capital to start a new company, it is very likely that the investors will insist on a level of control that insures they can “protect” their investment – in most cases, this means being able to fire the entrepreneur. Although it is possible for an inventor/entrepreneur to maintain more ownership under the new company scenario, significant dilution will still take place from investors and hiring key employees. 2. Licensing a Technology In order to license an invention, generally, one has to have already been issued a patent. Given that many years may pass between when a patent is applied for and ultimately issued, an inventor can be in a holding pattern for quite a while. Furthermore, as most inventors know, the vast majority of companies are set up to keep individual inventors away. Most of these companies will have some established “process” for dealing with outside submissions, but this is frequently a dead end. Even if an inventor can connect to the “right” decision maker inside a large company, it is very rare that he/she will go out on a limb and commit to any meaningful contract for an unproven idea when their compensation and review is based on how well they’ve handled their existing business. Furthermore, unless an individual has taken a product to the point where it is “production ready,” there is great risk for both sides in moving forward with a license. While this path is not nearly as capital intensive as starting a new company, the legal, patent and travel costs can quickly mount. Additionally, as is customary in licensing contracts, the onus is usually put on the licensee to aggressively defend the patent from infringers and challengers. Depending on the circumstances, this can represent a significant financial commitment. However, if successfully executed, the licensing route can provide the inventor with substantially less risk and allows them to share in the success of their inventions while an experienced party handles the responsibility of executing on it. 3. Selling a Technology Like licensing, having a patent first is important if someone wishes to sell an invention. In general, if you have something valuable, it is better to license it than to sell it outright (see Independent Inventors and Innovation, Weick and Eakin, 02/05). This makes sense, since the licensor will be conservative in their estimation of the technology's value and will greatly discount a success scenario. Unlike a license, a sale does not allow the licensor to participate in runaway market success. The reverse is also true – selling something up front may be the wisest thing to do if the product doesn’t sell well, or just as likely, never makes it to market at all. However, if a product has already been commercialized and established its value in the market, selling the rights can make good sense for both the seller and buyer. Of course, there are many types of transactions and contracts, some of which include ongoing royalties and earn-outs. 4. Partnering with a Third Party For those inventors who want someone to help them commercialize their invention, there are a multitude of “Invention Assistance” firms. These companies offer a variety of services, from help in developing and marketing inventions to manufacturing them. Some are undoubtedly scams and others are probably legitimate businesses. All of them, including Manifold, offer a similar message – “We can help you try to make money from your invention.” Only research and references will enable someone to sort out the good firms from the bad. For more details on partnering with Manifold, click here. The Final Option – Taking it to the Grave Many independent inventors, fearing their idea will be stolen or that one day, they’ll have the time and money to pursue it, ultimately will do nothing with it. All the while, they have convinced themselves that the world is out to steal their idea. It is true, that if someone has a good idea and no protection, it is only a matter of time until it is copied. It is also true that patent protection without sufficient funds to protect that patent is not an enviable position. However, one has to weigh the risk of being copied with the risk of never doing anything at all. To summarize, if you have financing, experience (technical and business) and are willing to dedicate yourself to championing your product and business, then Manifold will not be a good fit for you. You should maintain control of your idea and go for it.