Invention Investment Companies: Everything You Need to Know
Invention investment companies are those who seek out and invest in the ideas and inventions of others.3 min read
Updated July 6, 2020:
Invention investment companies are those who seek out and invest in the ideas and inventions of others. If you are an inventor who does not have a lot of business experience, licensing may be an ideal option. In this case, other companies/firms would invest in your invention, paying you x-amount to make and distribute your idea.
However, more often than not, you will need to research companies and then pitch your idea. Before you do, ensure that your invention is protected. This can be accomplished by seeking a patent. If you are interested in this approach, here is everything you need to know about licensing your invention.
Invention & Patent Licensing
When it comes to quick profits and commercialization, licensing is the easiest way to meet these goals. Someone else will essentially take your invention, turn it into a product, then manage the day-to-day operations in regards to production and sales.
In this case, by providing another company the right to make and sell your invention, you will be paid as the licensor. In contrast, the company paying you for your invention is known as the licensee. There are various possible payment structures, including an ongoing percentage of sales, which is referred to as a "royalty." Alternatively, you can decide on a one-time payment, known as a "buyout."
Although ideal for many, the downside is that you will gain a smaller share of the profits and experience a lack of control. In contrast, you will be able to work less and face fewer risks. This payment structure also requires less of an investment from you.
On that note, if you are someone who would is willing to work hard and would like to maximize the potential revenue from your invention, licensing may not be the best option for you. This is particularly true for inventors who are confident in their ability to build and manage a business.
However, for all other inventors (those who would not like to face the daily grind associated with running a business), licensing may be the perfect solution. Just remember, most companies will not invest in an undeveloped idea. That is why most Fortune 500 corporations will only ever consider concepts that are patented (or are at the very least, patent pending).
In order to license your idea, the following steps must be taken:
- First, find relevant companies and then conduct market research.
- Once you have narrowed down your list, approach your main targets.
- Prepare a confidentiality agreement to protect you and your invention.
- Prepare for the negotiation process.
- Complete the initial presentation, highlighting your invention.
- Negotiate further before closing the deal.
If you strive to make good money with your invention, you must first identify any weak points. By focusing on how your invention may fail, you can take a proactive approach, addressing those issues before you file a patent, seek a licensing deal, or create a prototype. Also, don't be so quick to file a patent. If you do so before your invention is finished, you may need to file a second patent to cover some of the finer (often most important) details.
Before you do move forward with the patent process, keep your idea confidential. Confide in those you trust to provide an honest opinion regarding your idea. Ideally, this person should be experienced and ethical. Since patents are fairly expensive, you do not want to jump into any unnecessary debt.
Example of Invention Investment Company
Intellectual Ventures is a private invention investment company who strongly believes that ideas are valuable. Intellectual Ventures' funds include Deep Science, Invention Investment Fund (IIF), Invention Science Fund (ISF), and Global Good Fund.
If you have developed an invention that will likely lead to a profitable journey, it is time to seek advice. Moving your idea to market can be a fairly complex task. That is why you need to decide if you would like to form a business around your invention, or transition into a licensing deal (following the patent application process). Since this is such an important step, it is critical that you seek a professional, legal opinion.
If you need help understanding what invention investment companies are and what they can offer you, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.