New inventors are not rich and need funding for invention idea development. That is...not rich yet!
I'm sure many of you reading this page know you have a great idea but you run into that seemingly impenetrable brick wall of how to make the funding for invention development appear. We've all heard it many times before: "It takes money to make money."
Is money the obstacle holding you back? Not to worry.
Let's talk about how to find the money you need. There are many different opportunities in today's open economy where inventors with good ideas can find money. You just have to decide which option is best for you.
Before I get into the details of invention funding, and give you a list of options, I feel it is my duty to make one thing absolutely clear. One of the biggest mistakes I see beginning inventors making often ends with devastating consequences. They are so sure of their product's guaranteed success that they throw caution to the wind, put on a pair of blinders, and tell themselves that they can simply fund their invention by mortgaging their home.
Don't do this!
The rest of the world may not perceive your product the same as you do. If your product does not sell, you will quickly find yourself in deep monetary debt.
I will say it one more time, so please remember. My number one rule of invention funding:
Inventor's Success Tip
"Never mortgage your house to raise money to develop an invention."
Here's some great news. If you have done the preparatory legwork to prove that your invention will be wildly successful then you should never have to mortgage your house because you will have no problem obtaining funding from the sources we discuss below.
The first source of funding for invention idea development is your own bank account. If you have savings available to invest in your idea, then by all means, you should use them. This option gives you complete control over all aspects of your invention and lets you call all the shots. Just be sure you are using money you can afford to lose.
I highly discourage my clients from going into credit card debt to fund their ideas. The interest rates will turn that credit card loan into a monkey on your back in no time. Consider other resources first.
Most inventors who have a great idea but no money will start out by seeking investments from their friends and family. It is important to understand that friends and family are investing in you more than they are investing in your product. They have to believe in you and the fact that you have what it takes to bring your invention to market and make a profit. In many cases friends and family will offer a loan that has to be paid back rather than requesting equity in the company.
It is absolutely imperative that you have an open and honest discussion with any friends and family whom you approach for funding for invention assistance and who are considering investing in your venture. You must explain to them that any product in its beginning stage is a high-risk proposition and they may lose all of the money that they invest in you.
Inventor's Success Tip
"Always have an honest discussion with potential investors about potential risks before you accept any money."
As long as you are honest and upfront with them from the very beginning, you can be relieved of a lot of pressure if things don't work out for you as planned. Also, it is important to do everything in your power to maintain these relationships because these are the same people whom you will turn to if your project doesn't work out.
Angel investors are very similar to venture capitalists except they typically work with inventors and start-up companies at an earlier stage of the process.
In general, they offer smaller amounts of money to companies who have not yet developed a track record and, like venture capitalists, seek a sizable amount of equity ownership in return for their investment.
Typically, before an inventor or start-up company can receive money from an angel investor, they initially start their funding for invention nest egg by raising funds from friends and family.
Wealthy people increase their wealth by putting their money to work to make more money. If they were to put their money into a bank, the returns are so small, often less than the cost of inflation, that they are actually losing money every day that their money remains in the bank.
Therefore, the only way for them to use their money to make money is to invest it.
Many people choose to invest their money in the stock market where they might make some level of acceptable return. Some people with a larger amount of money are willing and able to gamble some of that money in exchange for higher returns. These people are called venture capitalists.
Venture capital works as follows: a person, or group of people, who are looking to make a large return on their invested money will offer cash to inventors and start-up companies to help them launch and build their business.
These venture capitalists are different from angel investors in that they typically invest large sums of money into companies that are somewhat established and have a documented track record of growth. In exchange, they will require part ownership of the company and, in many cases, an active role in managing the company.
Venture capital is not a loan that has to be paid back. It is a purchase of a percentage of the company (equity). As the company grows and profits, the venture capitalist takes a share of the profits.
Federal, state and local governments offer a wide range of financing programs to help small businesses start and grow their operations.
These programs include low-interest loans, venture capital, and scientific and economic development grants. In my Invent And Profit System TM I show you how to access a comprehensive list of government loans and grants for which you may qualify. Please note that many small businesses do not qualify for government grants.
You may also benefit from a special Microloan program that provides loans up to $50,000 to help small businesses start up and expand. The average Microloan is about $13,000. The program is offered by the U.S. government and works through specially approved non-profit lenders. I provide detailed information and a full list of approved microloan lenders in my Invent and Profit System TM.
One more source to explore for funding for invention development is grant programs.
You pay your taxes every year to support your federal, state, and local governments. In return, your government provides services to its citizens. One of those services comes in the form of government grants to assist in the growth and development of certain industries.
Government grants are funded by your tax dollars and, therefore, require very stringent compliance an reporting measures to ensure the money is well spent.
As you can imagine, grants are not given away indiscriminately.
Grants from the federal government are authorized and appropriated through bills passed by Congress and signed by the President. The grant authority varies widely among agencies.
In my Invent and Profit System TM I show you how to find government grants that you may be eligible to receive including the specialized small business research and technology type grants the government issues to encourage certain types of research and development.