Wednesday, June 1, 2011

You have a great idea, but then?

I am writing in this blog about a topic which I got many questions in the last few years.

I met a lot of people with great ideas and many people did email me about their ideas. But most of these people were not rich or have no connection to rich people.

Here is the dilemma. We all have many times good ideas of things the world could need, but we never get our idea to live or in a status which would make us rich.

And if we look at the big start ups or success stories then we can always see that these people are either born rich or have the right connections through school, life or family. We hear more about successful kids from Harvard, Stanford or Princeton than from local Kentucky state college. The reason is obvious, not only that these universities have best resources, the people going to these universities have already connections and some start capital. And another important part are that many alumni are now successful managers. It is almost a given circle of success.

However there are many start ups which have not these connections and start capital. But obviously for them it is harder to be very fast successful.

The question is, how can we get successful without connections and start capital.
I don't have a recipe but I have some tips.

I want to take as an example an idea I had once. When my wife was pregnant I went shopping for a mirror I can mount in the car to see my newborn. I did not find anything which worked well with SUVs. I ended up with an idea. First thing I went online to search the Internet if this product does already exist. I found one person who had an similar idea but was never successful. I took my time and filed for design patent. It was time intensive but did cost only $500, $220 for the filing and $300 for a deeper patent search (high level search is free).
Then I did build a prototype and used it in my car and gave some other prototypes to my friend. Everybody loved it. The next thing was, that I got in contact with big retailers like Walmart. They actually did want to buy a few thousand, but this was my problem. They dictated the price they want to pay. I had to produce the product in China, the only way for me to produce it cheap enough to make money.
However I would need to order at 20.000 units, that the Chinese company could produce it to a price I wanted.
I did not want to go into the risk to invest $700k and did not execute the production. I actually did find investors but they all did want half of the shares. I have been stupid and did not want to give so much shares away. Looking back, I think having 50% of 1 Million is better than having 100% of nothing.
I found somebody who did want to buy my pending patent for $15k. I almost sold it, but did not. At the end I, did not make any money, but I still have the pending patent and a happy child.

This was not the first time I had an idea, did build business plan, and did meet with business angels or investors and banks. I did it couple of times and learned a lot.

Here are my tips, if you have an idea but you don't trust anybody. Especially today with all these new things like NFC, QR, AR etc. There are tons of new things possible, we all could get rich, but at the same time everybody tries to steal from everybody. They all do it, it is almost like a game.

1. Ensure your idea is new
The internet is great, it gives us the possibility to search for everything. We can easily find if our idea already exist on the market and if not what comes close.

2. Believe in your idea
Believe and have no doubt. Spend most of your time for your idea. The idea shall be the center of your universe like a newborn.

3. File for patent
Before you talk with anybody about your idea, you need to have a security. If you have a pending patent, then you can sue people if they are using your patent.
If it is too complicated for you to do it yourself, then hire a patent firm. Costs will be mot likely $4,000 to $10,000 if you hire a firm.

4. Build a business plan
A business plan with executive summery is very important, if you want to talk to investors or business angels or banks.
The plan helps you to have the answers they will ask. Questions like, why is your Idea great, who is your target audience, how is the expected growth factor, what is the exit strategy. Palo Alto Software has the best tool for this: Business Plan Pro
I wrote over 30 business plans in my live, mostly as consultant and I used many times Business Plan Pro.

5. Have a NDA on hand when talking with others about your idea. Make sure the NDA empowers you to get a lot of money if the party will break the agreement.

6. Find capital if needed
I tend to prefer to business angels. They usually don't invest big $$ but they don't want neither high shares. And BA have usually good contacts to other investors when it comes to 2nd or 3rd investment round. For round one (which is mostly under $1 million) find 5 to 10 BA, family or outsiders. There are many websites dedicated to Business Angels. Banks don't take enough risks and ask you to have a lot of security. Big investors want to have too much control from the beginning.
Alternative you could use or other similar websites to collect money for your idea. But the risk is high you don't get enough together.

7. Live your idea
Don't do anything else if you can afford. See your idea from the beginning as your full-time job.
Many people are successful in the young years because they have no family and can work 24/7. Many older people are successful because they can utilize their connections and their experience.

These tips should help you to get your idea running and maybe soon I will read about you and your success.

Some useful links:
eHow about patent filing
Patent costs
funding help
startup addict

- Posted using BlogPress, please follow me on twitter @schlotz69

Location:Spinning Wheel Ln,Brooksville,United States

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