Key Takeaways:

  • Invention investors are individuals or companies that provide funding and support to inventors to help bring their ideas to market.
  • Licensing is a common route for inventors who prefer not to manage production and sales; it involves granting a company the right to produce and sell the invention.
  • Research and proper legal protection, such as patents, are essential before seeking invention investors.
  • There are multiple types of invention investors, including angel investors, venture capitalists, corporate investors, and invention investment companies.
  • Alternative funding options like crowdfunding, government grants, and small business loans can also support inventors.
  • Successful invention commercialization often requires a combination of funding, legal protection, and strategic partnerships.
  • UpCounsel can connect inventors with experienced attorneys to assist with patent protection and licensing agreements.

Invention investment companies specialize in identifying and funding promising new ideas and inventions. If you are an inventor who does not have a lot of business experience, licensing may be an ideal option. In this case, companies or firms would invest in your invention, compensating you with a predetermined amount to manufacture 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 willing to work hard and maximize the potential revenue from your invention, licensing may not be the best option. 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. JMost companies will not invest in an undeveloped idea, which is why Fortune 500 corporations typically consider only patented or patent-pending concepts.

In order to license your idea, the following steps must be taken:

  1. Research and identify relevant companies.
  2. Conduct market research to validate demand.
  3. Approach potential investors or firms.
  4. Prepare a confidentiality agreement to protect your invention.
  5. Develop and present a compelling pitch.
  6. Enter negotiations and finalize 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.

Types of Invention Investors and How They Operate

When seeking financial support for your invention, understanding the various types of invention investors is crucial. Each investor type operates differently and has unique expectations:

  • Angel Investors: Typically individuals who provide early-stage funding in exchange for equity. They often seek high-potential ideas and may offer mentorship.
  • Venture Capitalists: Firms that invest larger sums into startups with scalable growth potential. They typically seek a significant stake and may influence business decisions.
  • Corporate Investors: Large companies sometimes invest in inventions that align with their business objectives. They may offer partnerships, licensing deals, or acquisitions.
  • Invention Investment Companies: Specialize in funding and commercializing inventions. These firms often acquire rights to the idea and handle production and distribution.

Each investor type values different factors, including market potential, patent protection, and the inventor's business acumen. Researching and aligning with the appropriate investor improves your chances of securing funding.

Alternative Funding Sources for Inventors

While invention investors play a key role, inventors can also explore other funding options:

  • Crowdfunding Platforms: Websites like Kickstarter allow inventors to present their ideas to the public and raise funds from supporters. Success often requires a compelling presentation and marketing effort.
  • Government Grants: Agencies like the Small Business Innovation Research (SBIR) program offer grants to inventors developing innovative technologies.
  • Small Business Loans: Traditional bank loans or Small Business Administration (SBA) loans provide funding for inventors prepared to assume repayment obligations.
  • Friends and Family: Personal networks can offer initial funding, though it is vital to formalize agreements to prevent future conflicts.
  • Incubators and Accelerators: Programs providing funding, mentorship, and workspace to early-stage inventors, helping refine their ideas and prepare for investor presentations.

Combining these methods can supplement investment from invention investors and reduce the reliance on a single funding source.

Preparing to Attract Invention Investors

Before approaching invention investors, thorough preparation increases the likelihood of securing funding:

  1. Develop a Prototype: A tangible model demonstrates functionality and market potential.
  2. Conduct Market Research: Gather data on competitors, target market, and potential demand.
  3. Secure Intellectual Property: Patents, trademarks, or copyrights protect your idea and reassure investors.
  4. Draft a Business Plan: Detail your invention, production plan, marketing strategy, and financial projections.
  5. Practice Your Pitch: Clearly communicate the problem your invention solves, its market appeal, and the expected return on investment.

Investors are more likely to fund inventors who exhibit a clear path to commercialization and robust legal protections.

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.

Notable Invention Investment Companies and Their Role

In addition to Intellectual Ventures, several other invention investment companies actively fund and support inventors:

  • IdeaPros: Partners with inventors to develop, fund, and launch new products.
  • Quirky: A community-driven platform that connects inventors with product development experts and manufacturers.
  • InventRight: Offers education and mentorship to help inventors secure licensing deals.
  • Davison Inventions: Assists inventors with product development and marketing strategies.

These companies often differ in their approach—some acquire rights to the invention, while others guide inventors toward licensing agreements. Understanding their models helps inventors choose the best fit for their goals.

Risks and Considerations When Working with Invention Investors

While securing funding from invention investors can propel your idea forward, it is essential to consider potential risks:

  • Loss of Control: Investors may seek decision-making influence or require equity stakes, reducing your autonomy.
  • Intellectual Property Concerns: Sharing invention details without proper legal protection can expose you to theft or idea misappropriation.
  • Financial Pressure: Investors expect returns; if your invention underperforms, it can strain your financial and professional relationships.
  • Scams: Some fraudulent companies exploit inventors with upfront fees and false promises. Research investor backgrounds and seek legal guidance before signing agreements.

Mitigating these risks involves securing legal protection, carefully vetting potential investors, and clarifying all terms in written agreements. Consulting a qualified attorney through UpCounsel can provide invaluable support during this process.

FAQs

1. What do invention investors look for in an invention?

Invention investors prioritize market potential, patent protection, a functional prototype, and the inventor’s business plan.

2. How can I protect my invention before approaching investors?

Filing for a patent or securing a provisional patent application safeguards your idea. Non-disclosure agreements (NDAs) can also protect sensitive information.

3. Are invention investment companies the same as venture capitalists?

No. Invention investment companies often specialize in funding and developing inventions, while venture capitalists typically fund startups with broader business models.

4. Can I work with more than one invention investor?

Yes. Some inventors secure funding from multiple sources, including angel investors, invention investment firms, and crowdfunding platforms, to diversify support.

5. How do I know if an invention investment company is legitimate?

Research their track record, seek reviews from other inventors, and verify their business registration. Consulting an attorney can help identify red flags.

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.