Raising funds
You may have guessed this is the toughest area of them all: how to convince people to part with their money for your idea. As a general rule, the earlier you are in the development process, the less money you are likely to get. Almost no-one will give you money for an idea in your head whereas, as somebody joked, a capital investor is someone who will offer you an umbrella once it has stopped raining. This is what many inventors find frustrating, the big investment seems to come from people who seem to want you to have succeeded already, so why would you need their investment you might ask.
It is perfectly understandable that an inventor is concerned about the money. He/she will be investing time and money, in the design and development, without knowing for sure if the idea will succeed. However, you will not know if your idea will succeed if you do not develop it.
What are the main requirements that people who give you money want from you, in the early stages?
1- Full commitment to your own idea. A week-end business person is not what they want.
2- Capacity to take it to a successful conclusion. If you are not highly trained and experienced, at least you should have the enthusiasm and willingness to learn and adapt.
3- A viable product idea, both functionally and marketable.
4- You invest money too.
5- You invest your time.
The more of these things you have done, the better the chances you have of getting monetary and other support. For instance, all people who give grants do it on a shared costs basis. They will ask you pay, say, 50% of the costs allowed by the grant and they pay the other half. Of course they have rules about it.
WHO PROVIDES FUNDS?
I will give here links to information sites and direct providers of funds and support. I give only the main information of what they are about. For a detailed description of the support they give and their requirements, it is easier for you to visit their website and contact them. I concentrate mainly on what is available to UK people. Of course there will be schemes where you are.
These sources of funding change all the time and I will try to keep track but I apologise in advance if the links become broken or the sources of funding have gone by the time you visit their website.
Some sources of support are biased towards business support and others are biased towards product/technology development support.
A note about this: many of the bodies that provide support do so wholly or partly in kind, that is they give advice in terms of business, manufacture, marketing, etc. This is not to be disregarded as, for a novice especially, the advice is useful. However, I also advise you not to get caught in endless seminars, courses, meetings and the like, especially where you are asked to pay for some of them. It is better to concentrate more of your time and your money on your product idea.
1- IN THE DEVELOPMENT STAGES
Needless to say that you have to consider how to disclose your idea to these schemes. However, for the most part, they are bound by confidentiality. Just check, there may be some where you have to protect your idea with a patent or sign an NDA before you disclose.
Innovate UK (formerly Technology Strategy Board)
They have a number of schemes to support projects. They prefer projects with technical content (no fancy vases). Their criteria is rigorous but they have this scheme:
An American company supporting innovation.
They give US$250,000 in awards every year for nice product ideas. I think they want them to be primarily made of moulded plastics as they are a moulding company. They have rounds of funding all year round.
A global body to support new businesses. You need to see their website.
Promote your great idea internationally
This is the ultimate search engine for grants. You enter your criteria in a form and it displays all possible grants and other funding available in the UK. For fully detailed searches, you need to pay them a fee.
2- AFTER THE DEVELOPMENT
This is the stage where you are looking for larger investment to take your idea to the market. Of course the current buzzword is:
CROWDFUNDING
If you did not know already, this is a system of getting capital investment from the public not from an investment company. The idea for this came from the existence of the Internet and the possibility to find investment without having to go on your knees to capital investors.
For this funding method, you need to have in place protection for your idea: Patent, Design Registration or at least a well thought out way to establish your copyright. You will be disclosing your idea world-wide, as far as China.
Most people who raise funds through crowdfunding want the money to pay for the manufacturing set up, first production units and other things like marketing the product. However, it does not mean that you cannot use some of the money to finish the product development. But your funding campaign has to lead to the making of the product as you need to establish a system of rewards in return for investment by the public. Depending on the value of your product, you promise to let them have a product when it is made. Of course this cannot be done if your project is a large ship. In this case the rewards are things like a trip on the ship when it is made. Many people treat crowdfunding as an advance order system for the product.
For crowdfunding, it is imperative that you have a working prototype that you can demonstrate in a video. Both the crowdfunding sites and the investors want to see your product working to be convinced. The website owners have become tough on this after a history of product ideas that did not have a chance of becoming a reality due to the fact that they did not have proper prototypes to prove them.
Furthermore, your prototype needs to look very good. This is mainly because of the competition from several other products in the website. A contraption made of pieces of steel tube is not going to convince people, even if it does the job. Have a look in the crowdfunding websites videos. The products generally look like they are production units already.
In the field of product ideas, the two main websites are:
They both have limitations as to the country where you are based, or have a bank account, for you to be able to pitch your idea. You need to check. People in the UK can use both.
Both are big but the main difference between them is: with Kickstarter you set a target funding amount. If by the end of the funding period you have reached the target, you get the money, if you do not, you do not get a penny. With Indiegogo you get to keep any amount that is offered, regardless of the funding target. The risk with the latter is that if you do not reach the funding target, you are going to have to find the rest of the money, elsewhere, to take your product to manufacture, as you may have already promised to the crowdfunding people that you will let them have one of your products.
Another one, in the UK, is
But many of the companies seeking investment here are already 'out there' in the market.
There are a number of other smaller crowd funding companies. People are jumping on the bandwagon. Just Google crowdfunding.
Dragons Den
(Shark Tank in the USA)
This is really just a TV show like The Apprentice and Strictly Come Dancing. As for Dragons Den, in my view, the investment they give is a pittance compared to the equity they want. However, they invest in people who are still in development and they offer their business contacts and mentoring. It must have worked for several investors within its limitations.
Angel Investors
These are individuals with money who want to invest. Many of them have a portfolio of investment, for instance of 10 companies. They are generally reluctant to invest in development. Google Angel investors.
Capital Investors
These are the large investment people. Generally they are not interested in small investment amounts as they do not consider that it is worth investing in 'small ideas' due to the potential small return. It is very difficult to get through to these people and they will generally not invest unless you are in the market already. They are looking for people who, for instance, have already established a market in the UK and they want to go world-wide. I do not deal with any of them, I am just mentioning them.