Once you’ve got an idea for a new product, it’s hard to think about anything else but how you can make it happen. And even if you’ve got the time and motivation to do it, you might not have the money.
Here are some top tips to help you get the funding you need to get the investment you need for your invention.
Before you start securing funding for your product idea
Being a great inventor isn’t enough. In order to get the funding to turn your product from idea to commodity you need to be researched, prepared, and have a clear plan mapped out. You need to demonstrate why you need the funding, what you will do with it, and how you are ready to use it. Without doing this no one will invest in your product.
These are the things you need to do in order to make yourself ready to seek funding.
Resolve any licensing or patenting issues
Have you created a unique invention? You need to protect both yourself and your investors by getting your product idea patented. The UK Government has clear guidance on how to patent an idea domestically and internationally.
If your new product involves you using someone else’s idea then you need to sort the licensing. Licensing obtains permission from the owner to sell their idea in a new market – you can also license out your own product idea.
Understand your potential customers through audience research
Once you’ve resolved any licensing or patenting issues, you need to do your research to ensure your product is viable and that people will buy it. So, start by seeking out your target audience and get to know everything about them.
It’s one of the most challenging steps for any business – startup or not – but putting the work in now will pay off in the long run. Begin your market research with two questions: are people interested in your product? And who are they?
Go as in-depth as you can: narrow down the demographics, education, lifestyle and location of your target market. To get the best results, use a range of sources. Look at your potential competitors; use focus groups and individual interviews; get on social media and learn how to use social listening; and analyze data using analytics platforms like Google Analytics.
Nail the elevator pitch for your product idea
Everyone talks about the merits of a well-crafted, memorable elevator pitch. When you start speaking to investors, you need to be able to rattle off your product idea in a way that leaves them wanting more – and wanting to invest in your invention.
Once you’ve written it, it’s vital to practice. Pitch it to everyone you know: your friends, family, pets, mentors – even total strangers. Once you can effortlessly talk about your product idea, the challenges it solves, and what kind of investment you need, you’re ready to pitch it to investors. The art of a brilliant elevator pitch can get you from a 30-second chat, to a full-blown business pitch.
Create a rock-solid budget and business plan for your invention
Before starting your search for investment, it’s vital to know how much money need to turn your idea into a product. Then you’ve got to show off how you plan on using it. It’s key to have a thorough business plan in place. You can learn how to write a good one here – and while it might seem intimidating at first, it really isn’t once you get started. Your business plan doesn’t have to be long either. Often, it’s better to be more succinct: your potential investors won’t have hours to spend reading it.
Ways to secure investment for your product idea
The last step in being ready to pitch for funding is to know who you are going to seek investment from. There are a variety of ways you can fund your product idea. Below I’ve listed the different channels of finance you can turn to, from government grants to crowdfunding. Review them and establish which ones are viable and which one is preferable.
Government grants and funding
If you’re planning to release your product through a small business, you should use the resources available to you through the Small Business Administration (SBA). You can use its tools, grants and funding programs and event and networking calendar to help find and secure capital.
You could also explore your local chamber of commerce. Its advisors will be able to guide you through any local funding that’s available to you.
Business and personal loans
Depending on your situation, exploring business or personal loans is a straightforward place to start. A personal loan can be an easy way to get your required initial capital, as long as you can afford the repayments over the loan duration.
The alternative is taking out a business loan. If you already have an established business, then this will be a simpler process. Firstly, put together a business plan to show that your idea can make money. The bank will use this to make their decision. If you haven’t got your own business already, you can set up a limited liability company, and then create your business plan. As it’s your first business, the bank will also use your personal credit rating when making its decision.
Depending on the scale, size and scope of your product idea, you might also want to secure funding from external investors. This is where your network will be useful. Talk about your product with anyone and everyone – and find out who’s interested. Ensure you have your elevator pitch and full business pitch prepared, as well as a business plan and budget. Investors will only put up the funding if you can prove that your product will be a financial success for them. You’ll need to get yourself in front of as many potential investors as possible – so prepare for many rejections.
Venture capitalists can give you large financial injections – think upwards of $1 million – and as a result, require more preparation. You’ll need a thorough business plan documenting your every move. Try to get introductions to venture capitalists through other investors or your contacts, as it’s much easier to pitch to a ‘warm’ contact. However, if you don’t have any suitable contacts, look at the National Venture Capitalist Association and pick out investors who have the right background and history.
Crowdfunding has hit the mainstream in a major way – just look at Oculus VR. The team secured their initial funding this way, and later sold to Facebook for over $2 million.
It’s important to choose the right site for your product idea, so start by reading through this list of the best platforms. Some are targeted at certain products, ideas and purposes, so choose carefully. Research what projects do well on each of the sites, and look at the typical users.
Once you’ve chosen a platform, start putting a package together. Here you’ll need a great understanding of your audience. What will make them more likely to invest? What special offers can you give them? You’ll also need to create a marketing campaign to get your project noticed – this could include everything from social media to account-based marketing.
When a great idea is burning away at the back of your mind, it’s easy to get overwhelmed by the excitement and rush into finding funding. However, if you take the time to find the right process, the right preparation and the right path, you’ll increase your chance of securing the funding you need, and moving your product from dream to reality.
So sort out your licensing/patenting, finalize your business plan, decide if you’re going to use crowdfunding, government support, or an external investor, and take the journey from inventor to business owner!