How to Get The Right People Behind Your Invention
All inventors have, at one time or another, pined for “the right people.” Be they investors, programmers, distributors, writers, architects, butchers, bakers, or candlestick makers, personnel is a crucial ingredient to the success of any invention. But getting the right people behind your invention is a road more easily mapped than traveled. In this article, we’ll walk you through finding and keeping the personnel you need to make your invention a hit. The task can essentially be divided into two categories: investors, and everybody else.
Investors (and how big a slice of future profits to give up for any personnel)
Some inventors are so desperate for investment capital or key personnel that they offer irrationally high percentages of future profits for those people to come aboard. In addition to advertising your desperation, this is a mistake for standard business reasons. John T. Reed, Harvard Business School graduate and real estate guru, explains why:
“At Harvard Business School, one of the lessons we learned was that one’s cost of capital was an indication of one’s competence as a businessperson. To put it briefly, if you are paying 50% interest or 50% of your profits to your silent partners, you are an incompetent businessman. Some successful investors would protest that was how they got their start. I don’t doubt it. I know some of them. But it was still a dumb move and the investors in question are lucky such terms did not blow up in their face and ruin their reputations before they got started.”
If you are a competent, accomplished person in your area of expertise, you should not be giving up half of your future profits for an investor to fund you. The same goes for other personnel you need. Unfortunately, many naïve or beginning inventors fall into this trap because they lack start-up capital or believe they must do whatever it takes to attract X person to their operation.
Instead, use a different approach. The best route is normally to forgo outside investors altogether and bootstrap your invention with savings or small loans from friends or relatives. However, if this cannot be done, you should approach investors after you have a proof-of-concept of your invention. If at all possible, you should try to get some cash flow going before seeking outside capital. Try to drum up some kind of sales or progress with whatever you have accomplished so far. The website AntiVentureCapital.com explains why this helps you to attract investors later:
Pretend for a moment that you are a venture capitalist or angel investor. Two founders visit you about separate deals. You ask them each what progress they have made in the 3 or 6 months that they have been working on their respective projects.
* One entrepreneur answers that he has been able to finish his business plan as well as find a means to generate cashflow which is being used to move the main project further along. Now he needs more money to fully capitalize on this developing opportunity.
* The other entrepreneur can only point to the “great” business plan he’s polished to perfection over the past 6 months and the “great” opportunity lying before him.
Which entrepreneur would you be more impressed by if you were the investor?
This demonstrates that you have something tangible. It also lets you keep your dignity when negotiating terms rather than begging them to accept half of your future profits.
Professionals with special skill sets
Of course, inventors don’t just need money to get their invention off the ground. They also need people with certain special skills to create the invention in the first place. So how do you bring such people into the fold?
The most common response is to promise the personnel in question a share of future profits. While this is acceptable practice (as long as it is not an egregiously high amount as discussed earlier), it is not the most effective way, either. The most effective way to get the right people behind your invention is to pay them to help you.
Not the answer you were looking for? Well, look at it from a realistic standpoint. Pretend that you are an experienced professional with a valuable skill. (If you are inventing things, you probably are such a person.) Now pretend that someone you don’t know is asking you to work on a project you’ve never heard of. That by itself is probably enough to make you a little uncertain. But then, to top it all off, they ask you to work for free, with no base pay, on the hopes that it someday pays off and you can collect when it does. At this point, your well-honed skepticism should kick in and dissuade you from doing the deal. Your time is simply too valuable.
However, imagine a different scenario. The inventor explains his idea to you in a way that sounds persuasive and enticing, and also offers to pay you! It might not be a huge amount, or even what you could get at a salaried job someplace else. But the sheer fact that you will be compensated for your labor will, naturally, make you more confident about the project and being a part of it. When a person sees someone put his own sweat, blood, and tears into something, it just feels easier to trust them.
Therefore, you should either save some money or use a small loan from friends or family to pay the personnel you want. Of course, you can still sweeten the deal by promising them future equity in addition to their base.
When you have some money saved up, it is time to place ads for the personnel you need. The industry you are in will dictate exactly how to go about doing this. If you are creating a new kind of garden hose, for example, you might want to advertise for engineers in a lawn and garden trade journal or magazine. You might try help-wanted ads in the paper, or even Internet resources like Craigslist.com
The idea is to offer something of tangible value to the people you want. This will go a long way toward getting the right people behind your invention.
Eric Corl is the Founder and CEO of IdeaBuyer.com, the online marketplace for intellectual property that gives inventors the opportunity to showcase their intellectual property to consumer product companies, entrepreneurs, retailers, and manufacturers. You can email him at EricCorl@IdeaBuyer.com.