At a recent SBIR conference, I sat down to talk to an inventor. As we talked, I learned that he had recently received his patent. He went on to tell me that he believed he owned a $10 million Basketball (see prior my prior blog posts for further explanation). What I saw was that he owned a shiny marble worth much, much less.
I was intrigued with his patent and its commercial potential. I explained to him how MindForce could get involved to help him locate a licensee in exchange for a percentage of his future revenue. He looked at me and point blank said “why should I give you part of the revenues – why do you deserve such a large sum of money.” In his mind he was holding a bronzed Basketball as a fait accompli (see Blog Post #1).
He has it all wrong. The inventor was looking at the world at what he is giving up (a huge slice of his pie) rather than what he is receiving. The reality is that there presently is no pie for him to give up. The pie he is “giving up” is a slice of a pie that will exist in the future. Let’s do the math.
Today, an inventor has a Marble worth, say, $1 (his patent), and what he needs to do is license it in order for it to turn into a Basketball (the proverbial $10 million business). The Inventor is approached by a 3rd party (who may offer hard work and/or capital) who says, “I can turn your Marble into a Basketball and, for our example purposes, if it reaches $100 (milestone-based reward), I want a reasonable stake – say 25%”. The 3rd party is not asking for a piece of the Marble (it’s small, shiny and frankly not worth much). The 3rd party is instead offering to help the Inventor grow his $1 marble into a $100 Basketball and when it achieves that level they will split the $100 pie ($75 to the inventor and $25 to the 3rd party). Yes, the Inventor does not have as big a Basketball to himself (the $100 Basketball), but in reality, the IP, today, only has the potential to be worth $100 or more. Today, it is still just a $1 marble. Can he get their on his own – maybe or maybe not. But, with this third party’s help he certainly has a better chance of making it a reality.
Inventors and patent holders need to fundamentally understand that turning ideas and patents into valuable businesses is difficult and early stage product development very risky. When a 3rd party (whether it’s a venture capitalist with money, a firm like MindForce, or an individual who wants to join the management team) asks for a slice of the Basketball in the future and wants to be rewarded upon hitting milestones – say at tennis ball size, softball size, bowling ball size and finally basketball size – he is not asking for a piece of the Marble, today. It is earned by sweat, by action, by doing, and a great deal of time.
As I walked away from my conversation with the inventor at the SBIR conference, I wished him a great deal of luck. Perhaps he really does have a Basketball and will ultimately succeed in owning 100% of an actual Basketball (the $10M he claimed it was worth). To me, I saw a shiny Marble, a lot of work yet to be done, and an inventor with unrealistic expectations who more than likely will own 100% of nothing. Although, he will always have a Marble to fiddle around with in his spare time.
About the Author, Rob Steir
