Conception to company w/o experience 1

[islandeng]

Hello,

I am a recent grad just hopping around performing 'random' small engineering jobs. Basically, that just means I haven't been hired by any large engineering firms, and people that know me personally have been using my education and paying me for what I have learned. This has been working out pretty well, as I have traveled throughout the Caribbean working on boats and islands. It actually has been a great experience thus far.

However, I have and idea for a product/company that would have to penetrate a crowded market. I would really like to develop this idea and make it into a reality. I believe the technology is available, and the current social/political climate is also ready for this product. So I am ready to pack away my sunscreen and work toward my own dream instead of fixing someone else's.

The one thing I know about my product is that I do not have the knowledge, experience, and capital to build a company around it. While I would prefer to have the ability to take all the risk and reap all the reward (optimistically stated), I know it probably isn't feasible.

So my questions:

1) Should I hold off on my idea to gain experience and knowledge even if it means the opportunity may be lost to competition?

2) How does one find qualified people willing to risk their income with no guarantee?

Thank you for your input.

(I have intentionally been vague about the idea/product because I don't think specifics are important here.)

 

[MacGyverS2000]

Go to your local Small Business Organization office and ask for a list of classes and times. Most of their classes are free, a few cost $30-$50, and will help you get a feel for what you need to know to start your own business.

It's easy to start a business, it's not so easy actually running it, as there are sooo many details that have to be taken care of on an almost daily basis. Your idea had better be something truly special if you're trying to push your way into an already crowded market.

Also, if you're only going on your education with little to no practical experience with circuit/software design in the real world, you're probably setting yourself up for an expensive failure. There are all kinds of gotches that real-world circuits have to deal with not found in the classroom environment (or are easily ignored there). All it would take is a push into the market with a product that fails after 2 weeks of use. Not only will you need to recall and repair all of the units sold to date (costly), but you may also need to scrap the units you keep in stock. not to mention the major tarnish your fresh reputation just received from bad products... and that's a hard thing to rub off.

I don't want to discourage you, but be WELL prepared.

 

[GregLocock]

"2) How does one find qualified people willing to risk their income with no guarantee?"

You pay them a lot.

The other way is to pay them in part ownership of the business, but you imply that you don't want to do that.

You might want to check out how succesful various businesses backed by venture capital have been. You'll see that typically the guy with the original bright idea rarely makes any significant proportion of the rewards.

Cheers

Greg Locock

 

[islandeng]

MacGyver,

Thank you for your input. I don't want to trivialize what you said, but you would recommend obtaining experience before going out, even if it means loosing the oppertunity. Is that what you were leaning toward?

Greg,

Thank you as well for your input. You are correct, I would perfer to not give part ownership, however I realize this may be the only way. With that said, how does one recruit the right person/investor, without giving away intellectual property and potentially hurting future patent options? I realize that when the right person is hired or investor is found, then they hold your IP under contract, however how does one explain the concept during the interview process safely?

I just signed on for another month+ down here tonight, so there isn't a huge rush, just something i would eventually like to do. The benifit about working down here for me now is I have no expenses...so that is money which can be put directly into the future! Thanks again to both of you for your advice.

 

[GregLocock]

NDAs, I guess. Having said that many companies won't even talk to you if you require an NDA.

http://www.uiausa.com/NDAProsCons.htm

for an optimist's POV. Also read "Burnrate", an account concerning raising money and spending it.



Cheers

Greg Locock

 

[MacGyverS2000]

Few, if any are going to hand over money without understanding what your invention is all about. A significant portion of those that are interested in talking aren't going to be thrilled about signing an NDA, but will if they believe it's the only way to proceed. Even so, the requirement of one may kill your idea long before you ever get out of the starting gate.

Let's assume for the moment someone knows your idea and fully understands it... they're going to want a serious piece of the pie to float some money. That pie can come in the form of sharing business ownership (the more likely choice as that way they have a definite say in how the business is run), or as simple as taking a fat percentage of any future profits (or worse, you only get a few percent). Think of it as the Golden Rule... the idea goes absolutely nowhere without cash, so whomever has the Gold makes the Rules. If it does go somewhere, they're going to take as much gold as possible because you took relatively little financial risk compared to them.

Also, and this is a major point I was trying to get across earlier... with little to no experience in your field's workforce, you're going to have a difficult time keeping potential investors from laughing at you. If they are investing hard-earned money in something, they want to make sure the people working on it know what they're doing (and a fresh graduate definitely doesn't fit that bill).

As Greg mentioned, the guy with the idea rarely makes much money... the spoils almost always go to the guy with the money.

 

[islandeng]

Greg,

Thanks for the advice about NDA's, I signed a bunch of those when I was interviewing for "real" jobs, and had heard through the grapevine that companies did not sign those (or did on a very limited basis).

Mac,

Regarding your last point, I know and understand that the majority of Investors would laugh me out the door, as I have near zero industry experience, and my education is in General Engineering, not that specific industry. Most would probably look at me like i'm playing dress-up with thier money...not a good situation.

Well, thank you both for your time and responses. I will continue to develop the concept, and try to gain some experience. Thank you again for your contributions.

 

[buzzp]

I would not shelf the idea this will only lead to it being lost to someone else. My immediate advise is
1. Do a patent search on

http://www.uspto.gov

(assuming in the US) as a very preliminary step (uspto.gov is not always up to date). If it shows up here, don't worry it does not mean you can not pursue your idea. Often, very similar designs will show up on this site.
2. Put your idea on paper (preferred logbook).
3. Spend some money and talk to a patent attorney. Attempt to get a patent before talking with the large competitors who may actually buy your idea.
Selling your idea is the only way I see to make a buck unless you have someone who knows the process and who may have contacts to get your product in the door.

I don't think it is worthwhile trying to design and market this yourself given your situation. If you know and trust someone with more experience then solicit them for help in taking it to market. If it is really a novel idea, then marketing the product should not be too difficult. Manufacturing it will be the issue. Obviously, your not set up to manufacturer anything, especially in quantity.
Just some thoughts.

 

[nbucska]

Hi islandeng:
I had 10+ patents in 30 yrs so I know what I am speaking about:
1.) First search at <

http://www.uspto.gov>

patent office for
similar patents.
2.) Find experts who are willing to evaluate it free
AFTER signing non-disclosure agreement [NDE]
3.) Unless you have money and time to waste and are
willing to loose your idea, DO NOT DEAL with commercial
patent/idea/etc. promoting/developing/marketing companies.
4.) You can file a USA provisional patent for $395.-
which protects for 1 year
5.) Self addressed letter is worthless.
6.) after these steps, get more help


<nbucska@pcperipherals DOT com> subj: eng-tips
read FAQ240-1032

 

[nbucska]

Sorry, NDA.

<nbucska@pcperipherals DOT com> subj: eng-tips
read FAQ240-1032

 

[islandeng]

Thanks nbucksa,

I am somewhat familiar with the patent process and patent laws. I took two patent classes and wrote three (fake) patent applications (for what that was worth). I have also taken a course on IP law.

The patent search is difficult as the general product has been around for a long time. (Example: A nut and bolt combination) However the process for production and technology used in the product are different. (Example: A nut and bolt combination made such that the weight is less and the strength is greater for a small price change.)

I know processes are patentable, but searching for a process, I have found is more difficult than searching for a product. I also believe business processes are now patentable. Is this true, and what exactly does that mean? Thanks again for everyone's input.

-islandeng

 

[imagitec]

Ideas are a dime a dozen. Don't get so hung up on protecting it that you don't talk to people who could:

(a) tell you if it really is a good idea
(b) help you make it a success

You have lots of aspects to consider, from market research to distribution. The experts you talk to in each area can give you valuable insight.

I recommend Bringing Your Product to Market, by Don Debelak (

http://www.amazon.com/exec/obidos/tg/detail/-/0471157503/104-3872199-9131135?v=glance).

It discusses these and other issues and emphasizes conservation of capital.

Rob Campbell, PE
Finite Monkeys -

http://www.livejournal.com/users/robcampbell

 

[imagitec]

In addition to conserving capital, the approach Debelak describes also builds value. When you eventually seek outside capital, the more valuable the idea/product, the more equity you will retain for a given amount of money invested.

It will take several rounds of investment to bring a complex product to market. Your equity will diminish with each round, because you won't have the cash to keep up with the increasing valuations. But would you rather have 1% of a multi-million dollar company or 100% of nothing? In addition to your equity, you will also likely being drawing a modest salary. (These are generalizations, all dependent on the product, the market, etc.)

If by some miracle you retain a majority stake after even the first round, you will not retain control. The contract you sign will ensure that the investors have final say over such matters as whether or not to sell the company.

The worst time to seek investment is when you're broke - you'll have no leverage. Don't wait for that to happen.

Rob Campbell, PE
Finite Monkeys -

http://www.livejournal.com/users/robcampbell

 

[imagitec]

I like this quote from one of the Amazon reviews of the book: "The purpose of this book is to get you away from developing a monument to yourself."

Rob Campbell, PE
Finite Monkeys -

http://www.livejournal.com/users/robcampbell

 

[buzzp]

Hmmmm... sounds familiar. Good luck you will need it.

 

[nbucska]

"the spark of genius required by the patent laws consist
of hiring a good patent layer" free quote from R.A.Heinlein

<nbucska@pcperipherals DOT com> subj: eng-tips
read FAQ240-1032

 

[islandeng]

Rob,

Thanks for your great comments. I'll pick up the book next time i go stateside. I think one of the most difficult lines to walk is this IP protection and idea valuation.

Thanks to everyone else for their input as well. Now all I need to do is everything!

-islandeng

 

[nbucska]

rjcjr9:
Ideas are a dime a dozen -- so claim the people who don't have any but want to profit from others' creativity.

The patent laws teach differently: the essence of patentability is an idea, which with the addition of
learned skill can be translated into a usable product.

The patent doesn't protect a piece of hardware, it protects the idea incorporated in it.





<nbucska@pcperipherals DOT com> subj: eng-tips
read FAQ240-1032

 

[imagitec]

I claimed that - so I don't have creativity? Thanks.

We're talking about business - not engineering or science.

If you want to create a successful business, you don't need a patent. You could make lots of money in laundromats or with a superior PCB conveyor that isn't protected by a single patent.

If you don't have the money and you want to create a successful business, patenting your idea as an early step is _probably_ a waste of the limited resources you do have.

If you want to spend other people's money to create a successful business, having a patent will increase the valuation of your idea. Having manufactured and test marketed a sample run, for example, will increase it's valuation a whole hell of a lot more. If an investor had to choose between one or the other, he would probably choose the latter. And the "inventor" in the latter case would get a lot more money.

Rob Campbell, PE
Finite Monkeys -

http://www.livejournal.com/users/robcampbell

 

[islandeng]

nbucska,

i was taught that the patent protected the claims covered in the patent, not the idea itself. The difficult part was (and is) ensuring the claims adequately reflect the idea (so as to protect it from infringing competitors, yet not allow it to infringe on anothers). I also seem to remember that an idea itself is not patentable, as the idea must be 'reduced to practice'. But i know there is some grey area there, as the act of filing for a patent can be considered reduction to practice. I don't dissagree, the patent does not protect the product; but I think it protects the legal description of the product, not the ideas behind the product.

Rob,

Are you suggesting to move foreward in the search before filing for a patent? At a minimum I would file a PPA, but that only covers for a year, then it is shot. The test run example is an interesting one, but I feel that without any IP protection on the product, the investor would not want to throw his money away.

A patent that isn't infringed isn't a patent worth protecting. Some really smart person told me that, and I believe it rings pretty true. If someone sees your idea makes money, they will try to compete with it, leagally or not.

Thanks for the dialogue it keeps me thinking...

-islandeng