How to make money off your invention without building it yourself: When's a good time to license it out?

So you've invented the next big thing, now what? Most of us struggle to properly assemble a bed from IKEA, let alone put something into production. You have to get a patent, build prototypes, network with suppliers at trade shows, negotiate with manufacturers...the list goes on and on. It’s the rare entrepreneur who can do all of that and take their invention from inception through production. But for those who have a full-time job, kids, and other responsibilities, this can be a huge struggle. Thankfully, there are some other options!

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Some background on your options

When you're trying to get your invention built and into the market, you can either sell it or license it out to manufacturers. If you sell, you can say goodbye to all of the rights to your invention. But that's not necessarily bad news! Although it's no longer yours, you might be able to get a lump sum for the sale. On the other hand, licensing your invention “rents” out your design to a company for the rights to produce it for a certain amount of time. Companies usually pay royalties on sales and you still own your design. Although these might be good options, the focus of this post is licensing your invention with the least amount of time and energy spent on your end.

There are a couple of choices for licensing      

Let’s be clear: If you want to license your invention on your own, it's going to be a lot of work. You're going to have to rub shoulders with companies at trade shows, market your invention whenever you can, and contact as many people as possible to find a manufacturer that's willing to take you on. More importantly, you’ll often have to demonstrate that there’s a market for your product, typically by making sales. Not only does this cost money but it will also cost you something even more valuable: your time.

Another option is submitting your invention to a company like Lambert & Lambert or Enhance Product Development. These companies are both middlemen that provide services like competitive product market research, presenting at trade shows, negotiating with manufacturers, marketing, and eventually getting your invention into production. Lambert & Lambert have an initial $199 fee to evaluate your invention, but then don’t charge you anything until they get your product to a manufacturer to sell. After it's in production they take 25-30% of your royalties. However if your product doesn’t sell, the $199 will be your only cost. Enhance Product Development is basically the same idea except you have to contact them for an initial quote and they only take 20% of your royalties. These are just two examples, but there are numerous companies that with similar business models.

A few other resources

It's probably good to start off your journey by looking at websites like Invention Partner for some background information on the invention process, patent licensing, etc. This isn’t required, but understanding the basic parts of the process will help you in the long run.

You should also do some research on Thomas Net to see which companies manufacture products in your invention's industry. After making sure you have all of the necessary intellectual property protection needed to keep your idea safe from those who can reproduce it (patents, trademarks, NDAs, etc.), it might be good to reach out to the companies you find to see if they're interested in hearing your pitch for the product. It’s possible that they’ll agree to manufacture it for you. If not, they might be able to connect you to someone who will.

Finally, there’s MAGNET’s Incubation Center! We have the resources to help you develop a working prototype with our in-house engineers, figure out your go-to-market strategy, and even coach you on how to pitch to manufacturers or investors. Whether you want to find a manufacturer to build your invention or put it out into the world yourself, we can help.

Licensing is just one of the many ways to bring an idea into commercialization, and there are tons of resources that can benefit you every step of the way. I’ve hit on a few here, but one of the best things you can do is make sure you’re well and truly informed before committing a lot of time, money, and effort into a project. Do your research, talk to as many experienced people as you can, and before you know it you might see your idea on the shelves. Good luck!

[M]SPIRE 2017 Winners Announced!

MAGNET has revealed the names of six entrepreneurs, startups, and small manufacturers who will receive an array of services and connections through the second-annual [M]SPIRE pitch competition.

Announced in late July, the winners span many different areas, backgrounds, and industries. Over 40 applications were received from individuals and companies across Northeast Ohio, including submissions from Cleveland, Youngstown, Akron, Elyria, Lorain, and Canton.

“Entrepreneurship is an essential and irreplaceable component of Northeast Ohio manufacturing, and MAGNET is thrilled to help these individuals and small companies achieve their potential by connecting them to the funding and resources necessary for success in the long-term,” said MAGNET President and CEO Ethan Karp.

Sponsored by Bank of America, AT&T, and Jumpstart, the submission period was held through the month of May. 11 finalists were selected to meet with an expert panel of judges comprising area entrepreneurs, engineers, consultants, and more. The six winners will receive varying types of assistance from MAGNET and MAGNET partners, including grant funding, product development, market research, and specialized consulting services.

These winners include:

  • Holmes Mouthwatering Applesauce – a local manufacturer of 100%, all-natural applesauce
     
  • Karis Doll Collection – a line of dolls that aims to help young girls adapt to diverse, non-traditional family arrangements
     
  • SmartMulch – an innovative landscaping solution that’s lightweight, easy to transport, and cuts down on waste
     
  • Cleveland Sewing Solutions – provides fashionable, adaptive clothing for seniors and other individuals facing physical challenges
     
  • Storm Mountain Coffee – French-press coffee on an industrial scale for use in restaurants and coffee shops
     
  • Peaceful Fruits – fruit snacks using wild, sustainable ingredients ethically harvested from the Amazon

“[M]SPIRE 2017 was a huge success,” said Brandon Cornuke, Vice President of Startup Services at MAGNET. “Our six winners demonstrate the breadth of Northeast Ohio manufacturing. We have consumer goods, food products, clothing, and mulch, and our winners come from all backgrounds. We’re excited to help these businesses grow and have already started working with each of them.”

MAGNET is currently planning to launch [M]SPIRE 2018 in the spring.

The Perks of Punting, Pivoting, and Persevering

The Perks of Punting, Pivoting, and Persevering

If you're starting a business, there's a good chance an assumption you've made will turn out to be wrong. You can hope that day never comes but, trust me, it will. Startups, after all, are full of risky bets and guesses (that's what makes them startups).

But even if you know it's coming - even if you're looking for your own weak assumptions - it's tough to absorb the blow of being wrong. Sometimes it's even harder to know what to do next.

Combating Confirmation Bias: How to Spell Success for Your Startup

Combating Confirmation Bias: How to Spell Success for Your Startup

Entrepreneurs are a self-confident bunch, and for good reason. The old perception of nine-in-ten startups failing remains as true as ever, and you have to have deep faith in yourself and your idea to face down such long odds.

But the gift of self-confidence can also be a liability. As human beings, we're already programmed to find evidence that supports our beliefs. Psychologists call this “Confirmation Bias”, and in ultra-confident entrepreneurs, that bias is often turbo charged… sometimes with expensive consequences.