How Do I Decide to Move Forward With an Invention Company?

Pamella asks:

Thank you.

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Thanks for the questions. Here are some answers:

1. The company you asked about provides a great service at a great price. However...
2. The question of moving forward is complicated. I write about this extensively in various articles at Invention City:
- https://www.inventioncity.com/inventing101.html
- https://www.inventioncity.com/money.html
3. Bottom line: Don't move forward unless you can afford to lose the money. The odds for any one invention to succeed are far less than 50% no matter how good (more typically they range between 5% to 25% for really good inventions). Another way to say this is that the odds of making money off any single invention are far worse than playing roulette in Vegas.

How do inventors make money against the odds? They make money because they work on multiple inventions and the payoffs can be 10/1, 100/1 or even better.

Here's an example of how an economist might think about investing in an invention that could have good success:

Likely payoff if successful: $1,000,000
Odds of success: 10%
Value of invention today: 10% X $1,000,000 = $100,000

This example shows that a rational inventor might pay up to $100,000 to attempt to make the invention successful. Note that in this example, the inventor EXPECTS to lose her money because the odds are 90% that the invention will fail. But because the payoff is high the bet is worth making up to a maximum of $100,000. But this inventor is not stupid. In order to make a business out of inventing he/she will plan on trying to commericalize multiple inventions to improve the odds. One success can pay for 5-10 failures.

In your case you need to ask yourself two things:
1. Can I afford to lose $10,000? If not, can you find investors willing to buy in with you?
2. What are the odds of success? How big is the potential payoff over the years. Will the potential payoff justify the risk of the investment?

There's no solid way to calculate the odds on whether an invention will succeed. Nor is there any reliable way to figure out the potential payoff. But I can say from experience that no matter how realistic and hard nosed you think you're being, you'll probably still be too soft. In my 25 years of doing this, with nearly 100 inventions of different types, I've only UNDER-estimated market potential once.

Hope that helps,
Mike

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For more than two decades Mike Marks has been active in creating and marketing new products and forming new businesses. As founder of Invention City and co-founder/partner of WorkTools, Inc., Endeavor Products Company, and Accentra Inc., he has managed the design, manufacturing, marketing, patenting and licensing of products such as the Gator-Grip® Universal Socket the Black & Decker PowerShot® staple gun, the Staples One Touch stapler. Over the past ten years products developed by WorkTools have generated over $350 million in retail sales and over $8 million in royalties. Mike has negotiated a wide range of contracts, established manufacturing operations in Taiwan and China, managed national and international sales, run public relations/advertising campaigns and written and produced television commercials and video news releases. Prior to founding WorkTools in 1986, Mike worked as a commercial photographer and photojournalist in New York for clients such as American Express, Nikon and Newsweek Magazine. Mike graduated from UCLA in 1978 with a degree in Economics.