Moving from idea to marketable product can be challenging. In order to get your invention and business off the ground, you will need to invest time and money on protecting your intellectual property, development, production and marketing.
While covering these costs can seem daunting, there are a number of funding opportunities available.
1. Using personal resources.
You can start off by self-funding using personal savings and resources. Self-funding your invention in the early stages can allow you to retain complete control of your intellectual property, decision-making, and any initial revenue. Some strategies for obtaining personal funds outside of savings could involve applying for personal credit and refinancing or selling assets.
2. Network funding.
You may also obtain funding through your personal network, including family and friends. Often this funding may be given as a gift or an interest-free loan. Investors from your personal network are also less likely to be interested in the actual happenings of your business’s development, and are thus not likely to request a degree of control in return for their investment. As such, they make great initial investors when expediency in decision-making is a priority.
Absent an agreement to maintain confidentiality, disclosing your idea to family and friends may constitute a public disclosure that disqualifies you from patent protection. Therefore, it is useful to file a patent application before speaking with potential inventors or to ask potential investors to sign a non-disclosure agreement before disclosing details of your invention to them.
3. Private investment and private loans.
Private investors are another funding source. These investors can be found through personal or industry contacts. Private investors are not affiliated with any sort of bank, corporate firm or organization that specializes in money lending. Private investors independently select which projects to support and are highly unlikely to finance your project without seeing a prototype and hearing a cogent pitch. This may be a good option before reaching out to corporate investors or government, as the process is often less formal and does not require the product to be developed in detail.
Make sure that you have protected your intellectual property and/or have the investors sign a non-disclosure agreement before revealing the specifics of your idea. You should also carefully draft or review a written contract that clearly stipulates the terms of repayment, ownership of intellectual property, business stake (if relevant) and any other expectations.
4. Government funding.
There are a number of government loans and grants available to aspiring inventors (see the following Government of Canada and U.S. websites for more details). The nature of your invention, your business’s stage of development, personal circumstances and place of residence may determine your eligibility.
Most government funding requires a detailed application and typically takes longer to be processed than applications to banks or corporate investors. Before applying, make sure that you protect your intellectual property and read the terms and conditions of any funding agreement or policy carefully to ensure that you retain all control and ownership.
5. Business financing.
Funding from businesses can include corporate bank loans or investment by venture capital firms. This is a common avenue for obtaining funding, but tends to come with more strings attached. You should evaluate the method of compensation requested by the corporate investor and how well it fits with your short and long-term plans (for example, interest versus equity-based compensation).
Corporate financing, particularly through venture capital firms or angel investors, is more often done in the middle stages of development, as many professional investors are reluctant to invest in undeveloped projects with a high degree of risk. You should ensure that your intellectual property is protected and ownership is clarified before entering into an agreement with corporate investors.
Crowdfunding has become a very popular option for inventors. Crowdfunding showcases your product and gives the public an opportunity to contribute to your fundraising efforts. This option is also excellent for gauging market interest.
To successfully crowdfund your project, it is key to have not only a prototype and a functional explanation, but also a creative marketing pitch that will make consumers feel like your product is worth not only buying, but helping develop. Video pitches are a great tool for this purpose.
No matter which avenue of funding you pursue, have faith in your project – this will help get others excited and make them want to invest in you and your business.
Christopher Heer is the owner and founder of Heer Law. He is an intellectual property lawyer, registered patent agent, registered trademark agent, and is also certified as a specialist in intellectual property law (patent) by the Law Society of Ontario. He believes that intellectual property rights add tremendous value to businesses by enabling them to raise capital, build asset value, and grow faster under the protection that these exclusive rights give them.