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So you’ve got a product idea – congrats! You are an inventor and innovator, a member of an exclusive club!

When I have a new idea, I always feel overwhelmed with emotions, whether it was my first or twentieth. My top three emotions are joy, pride, excitement, optimism, and paranoia. I feel overjoyed that I still got it. I feel proud of my ingenuity. I feel excited about the prospects of developing the idea into a product. I feel optimistic that this is going to be “the one” that will make me millions of dollars. And, finally, I feel paranoid about sharing it with anybody because this is such a great idea that surely everybody would want to copy it. People often say “steal” the idea, but it is impossible to steal an idea, as it stays in the inventor’s head. Ideas can be copied, not stolen… well, at least until they invent a technology to copy them and then delete them from the inventor’s brain. But this is for another futuristic movie script.

So many emotions make you vulnerable. You become vulnerable to various sales professionals trying to convince you to buy their service because your idea is the best, and it will surely make you millions of dollars. These emotions also start affecting your thinking about the business and your decision-making process.

So, let’s think rationally together about what you should do when you come up with a product idea.

First, you need to research if your idea is sufficiently unique. Too often, inventors spend time and money developing a product idea only to discover that a very similar product or a patent already exists. You can follow the Productified step-by-step Guide to do market research and then patent search.

For the sake of this discussion, let’s assume that your idea is unique and possibly patentable.

Next, you need to think about your long-term strategy. Do you want to pursue a licensing deal or develop and sell your product? Our short blog article “What are the pros and cons of licensing?” can help you there.

The good news is that you likely don’t have to decide right away, no matter which path you choose. Work on your patent and your prototype – you’ll need them in both cases, whether you’d like to pursue licensing or move forward with your product development. Our short blog article “What should be my licensing strategy?” has a bit more information.

There are a few questions you may want to ask yourself:

       – Am I okay settling for a licensing deal, or do I have an entrepreneurial itch?

       – Do I have what it takes to become an entrepreneur?

       – How much of my own money can I commit to this business?

       – If I need more money – do I have what it takes to raise money?

Here is the good news: our Productified platform will help you to become an entrepreneur with our step-by-step Guide, expert advice, and access to reliable, affordable freelancers.

And more good news: you don’t need to be a fundraising expert. Follow our Guide and our phased strategy for raising money in multiple steps. Please read our short blog article “How to raise money before making progress, and how to make progress with no money?” to learn about the steps to get there.

Market research and patent search are the first two steps in the idea development process. Start with learning about your market, competitive products, and customers. In most cases, all or most of it can be done online using readily available information. You can do market research yourself or hire an expert freelancer to do this for you. If this is your first time, we recommend hiring a freelancer. Patents search is important because somebody may have already patented an idea similar to yours, and you need to be aware of that. You can do a patents search yourself or hire an expert freelancer to do this for you. Again, if this is your first time, we recommend hiring a freelancer. You can find links to recommended cost-effective expert freelancers in the corresponding chapters of the Productified Inventor’s Guide.

If you believe that your idea is novel and potentially patentable, you should apply for a patent. In most cases, the best strategy is to file a provisional patent application first. A provisional patent application is significantly less expensive to prepare and file than a non-provisional patent application. It will give you 12 months to develop your idea and the potential to come up with additional inventions. Also, you may be able to raise some money to fund the idea development, and therefore you will not need to pay for a non-provisional patent application out of your pocket.

A quick summary of the benefits of a provisional patent application:

1) Establish an early effective filing date.

2) Allows the term “Patent Pending” to be applied in connection with the description of the invention.

3) It has a pendency lasting 12 months from the date the provisional application is filed.

Many inventors are curious about licensing. Well, it’s a complicated business. Here are some pros and cons of licensing that anybody considering it should know:

Pros:

1)  It’s a passive income.

2)  It eliminates the financial risk of developing, marketing, and selling your product on your own.

3)  You get more time and freedom to pursue other opportunities.

Cons:

1)  A probability of getting a licensing deal is low.

2)  The income from the royalties is lower than from selling the product on your own.

3)  It takes longer to get to the income from the royalties, than from the sales of your product on your own.

4)  Upfront legal expenses to negotiate and execute the licensing agreement can be significant.

5)  You will have no control over your product and its branding, marketing and sales.

If your goal is to land a licensing deal, these three activities are essential to improve your chances of getting such a deal and increase the royalties from the product’s sales. The first activity is market research. The goal is to make sure your product solves a real problem and your future customers are willing to pay for it. You need to prove these hypotheses to yourself and to the companies interested in licensing your invention. The second activity is to prepare your intellectual property. Two types of intellectual property are commonly licensed. These are patents and trade secrets, such as a source code, software, algorithm, process, recipe, or a list of ingredients. Lastly, the third activity is to develop and build a functional prototype, if possible and applicable. The goal is to be able to demonstrate the product and prove the feasibility and function. Warren Tuttle, the author of the book “Inventor confidential”, emphasizes the importance of having a functional prototype. The key reason is that companies that consider licensing your intellectual property do not want to take the risk. Why would they spend time and resources developing a prototype of your product to prove feasibility and function? Besides, nothing beats a real demo of a functional prototype. Here is the best thing about this licensing strategy: these three activities are equally needed, no matter if your goal is to get a licensing deal or develop the product independently. Even if you don’t have a licensing deal on the table by the time you have completed all three activities, you can continue product development, and none of your prior efforts will go to waste.
If you are a first-time entrepreneur with no proven track record, it might be too challenging to raise capital from private investors before making some progress first. But how do you make progress without the money to hire experts to help you? This is a well-known inventor’s dilemma. We have a proven recipe for you. Here is the short version of how to go about this: Step 1. Launch a campaign on GoFundMe to get donations from your friends, family, and social network. Use Productified’s GoFundMe Playbook. Step 2. Use the funds raised on GoFundMe and some of your own money to hire expert freelancers that will help you build a mockup of your future product. This mockup should be used in your marketing videos and pictures. Step 3. Launch a reward-based crowdfunding campaign on Kickstarter or Indiegogo to pre-sell your future product at a discounted price. Consider using services of a crowdfunding marketing agency, such as LaunchBoom, to significantly increase your odds of a home run. Step 4. Upon successfully completing the crowdfunding, continue your campaign on Indiegogo InDemand to keep pre-selling your product. Step 5. Use the funds from the pre-sales to develop and mass-produce your product. If you need more capital at this point, you can raise it from private investors on an equity crowdfunding platform or from Angel investors because you’ve achieved a real traction – you’ve got sales! Step 6. Scale-up and grow your business!
Most of us are no strangers to some anxiety when it comes to the legal stuff. It’s understandable: this is not the area of expertise for most inventors, and doing something wrong or not doing something timely may have serious consequences down the road. You only need to form a company, or a “legal entity”, when you need it for tax purposes, to raise outside capital, to sign legal agreements with various third parties, such as freelancers, partners, employees, or vendors. You can apply for a patent as an individual and form a company at a later time. In this case, you will need to assign your invention to the company – this is a simple legal step. And for the “how to form a company”. You don’t need to bear the higher costs of the lawyers early on. Several lower-cost alternatives, such as online legal platforms like LegalZoom, are pretty easy to use. Whatever legal structure you choose today does not necessarily lock you in forever, so you can switch to a different one in the future, according to your needs. It is easier to navigate to a decision on the type of company you need once you understand the fundamentals and the considerations for each. For example, you’re an individual inventor and just getting started. All you care about is minimizing your legal expense while taking advantage of business-related expenses to reduce your taxes. In this case, a sole proprietorship is probably the best option for you. Why? Because it is the least expensive and least complicated type of legal entity to set up and maintain. Or, if you have co-founders, your likely choice is between a Limited Liability Partnership, or LLP,  Limited Liability Company, or LLC, or C-corporation. For example, if you believe you will grow your business explosively and need venture capital soon, it’s best to form a Delaware C-corporation. Why C-corporation? Because venture capitalists typically do not invest in any other type of legal entity, only in C-corporations. Why Delaware? Because this is the most business-friendly state. And the good news – you don’t need to maintain an office or a presence in Delaware; you can hire a proxy agency to represent you at the cost from just a couple of hundreds of dollars a year. Disclaimer: We are not legal experts, and this information does not, and is not intended to, constitute legal advice; instead, all the information, content, and materials in this chapter, and generally available on our website are for general informational purposes only.
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