Analyzing Your Personality

Your success in gaining financing depends on your intellectual honesty in analyzing your inventor personality. Unsure if you have a strong entrepreneurial drive? Answer the following questions:

• Are you a gifted salesperson? An entrepreneur must sell, sell, and sell to every person in the food chain, whether it is an investor, banker, distributor, or customer. Consider Ron Popeil as an example. His success as a salesperson launched many inventions including the Veg-O-Matic, Pocket Fisherman, Mr. Microphone, the Buttoneer, Food Dehydrator, and, of course, the GLH Formula 9 Hair System (also known as Hair-in-A-Can). Regardless of the quality or intellectual value of his innovations, Popeil embodies the key to the successful entrepreneur and the unstoppable skill at selling. If you lack this skill, you're probably not suited for entrepreneurial endeavors.
• Are you a talented manager? An entrepreneur must juggle many hats, and all of them require management skills. Consider the inventor of an ergonomic computer mouse who must travel abroad each year to supervise the manufacture of his device in a foreign factory, as well as work with various international distributors and resellers. In his "free" time, he must work with the designers of his advertising and websites. If you can't delegate tasks well or find it hard to organize your desk or keep track of complex tasks, do yourself a favor and avoid marketing and manufacturing.
• Are you a business innovator? You can't really call yourself a true entrepreneur unless your product or service involves innovation. Peter Drucker, America's foremost business sage, wrote in Innovation and Entrepreneurship, "Innovation is the specific tool of entrepreneurship, the means by which they exploit change as an opportunity for a different business or service." For example, Ron Popeil perfected an innovation -- the infomercial -- that changed the way products are sold on television. If you can invent only in the lab and not in the business world, then you may lack entrepreneurial skills and be better suited for licensing.
•  Are you a risk taker? Some of us like to bungee jump from the Golden Gate Bridge, and some of us don't. Entrepreneurs are willing to risk the whole pot on one hand. Every entrepreneur, whether it's Donald Trump, Richard Branson, Ron Popeil, or Ray Kroc, is willing to face down creditors or bankruptcy for a chance to come back for another round. If you're not a risk taker, then pursuing manufacturing and marketing is a poor decision.

Differences in Financing

In terms of financing your invention, licensing usually requires much less capital than the alternative of manufacturing and marketing your invention yourself. What's usually required is money to create a prototype (or other suitable presentation to potential licensees), to market the invention, and, perhaps, to solicit and negotiate with potential licensees. On the positive side, a successful licensing deal will free up an inventor to pursue inventing while still profiting from the last great idea. On the negative side, a bad licensing deal may tie up an innovation or, worse, result in legal battles over royalties.

You will usually need far more financing if you start your own business and manufacture and market your invention. Money is required for producing a prototype, creating tooling or molds, mass producing the product, finding distribution, collecting payments, and enforcing patent rights. In addition, entrepreneurial inventors often become involved in more complex financing than an inventor-for-royalties -- for example, you made need to form a corporation and sell shares of stock (or other interests) in the business and the invention.On the positive side, the financial rewards are potentially much greater -- which is precisely why it appeals to more entrepreneurial inventors. On the negative side, manufacturing and marketing are incredibly risky and can cause tremendous anxiety and engulf your personal life.

Which Is Right for You?

If business is your real game, and creating an invention is just your means of acquiring something to sell, then marketing and manufacturing could be the right choice for you. Same goes if you live for the deal, you're not afraid of risks, you love to innovate in commerce, and you have the discipline to fight for market share. But if none of the above sound like you, licensing is probably the correct course for you.