Female entrepreneurs are getting creative with their funding efforts, but not necessarily by choice. According to a study conducted by Babson College, just 2.7% of venture capital-funded companies are female-owned. Probable influences of this statistic, include a lack of female investors, females operating lifestyle or service-based businesses not typically of interest to venture capitalists, females maintaining smaller growth goals for their businesses than males and simply fewer females asking for venture capital.
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Why do I need to do a business plan if I just want to sell or license my idea? It is a great question and we get it all the time.
The suggestion of doing a business plan is important for many reasons. If you are fortunate enough to be able to speak to someone or a company that might license your idea or product you need to be prepared. The interested party may ask you any or all of the following questions (example is for a product):
When you do a business plan, you go through all of these things because at the end of the day, if it cost too much to make them, it might not be worth it. There are other costs most inventors do not take into consideration such as Boxing, Labeling, Warehouse space, Marketing or sales reps commission
And there are many other costs involved. So the companies considering your product need to know that you know your business and how they will make money if they license your product. In doing the business plan, you will better understand the real costs involved and will be able to explain why they would want to take on your product. You will also have the data if you should decide to create the business and manufacture it yourself.
Every company we have pitched to has asked many of these questions. They want to know you understand the process. I have seen them ask inventors these questions and when the inventor did not have any answers, the comment is – “Why should I care about your product more than you do if you haven’t taking the time to find out this information?”
There is a lot to consider, after you have come up with the idea, in order for you to make money. It is possible and there is help available.
Keep Inventing Daily!
We just wrapped up our Deal Flow Summit in NYC and it got me thinking about how pitches go wrong. Here are 7 ways to bomb a pitch:
1) Dear Sir/Madam: If I read Dear Sir/Madam or similar generic greetings, it’s an instant-archive. It’s not because I think so much of myself that I need you to spell my name right but I do need you to address it to me. Dear Sir/Madam is the clearest possible signal you could send that you are blasting your pitch to anyone and everyone.
2) Buy Now! and other used-car tricks: investing in or acquiring a business is a serious, long-term investment decision. Pressure tactics and hard sells are not only inappropriate, they’re often counter-productive. Respect the process and don’t pressure the investor the way a used-car salesman would.
3) Fail to follow-up: You can make the best pitch of your life and have the investor on the edge of his/her seat, but if you don’t follow up it could all be for naught. Remember that your pitch settles in somewhere between the other 20 meetings, phone calls, and pitches that a busy executive will have any given day.
4) Cheap Out on Presentation: It is inexcusable today to have a cut-rate presentation. Whether you’re using PowerPoint or Indesign or a top-end software, make sure that you take the time to edit your presentation and make it look professional. Send it around to friends and family. An executive that we’re partnered with recently sent his presentation to his mother for review and guess what? She caught more mistakes than I or anyone else who reviewed it did. Lesson: it only costs you time to edit your presentation and it can cost you millions to skip this step.
5) Talk about everything but the main event: You’re meeting with the prospect to talk about your company or deal and you want to build rapport so you talk about your kids, what sports you both enjoy, and every other topic of conversation EXCEPT what you’re both there to discuss. I don’t know how many meetings I’ve thoroughly enjoyed but left without any idea what the company did, what they were seeking, or how I could participate. When you’re meeting with a busy executive you’re working in a set time window and if you spend 50% or more of your time building rapport, you don’t get any extra time or brownie points for knowing that he likes fishing or has a cousin who lives in your hometown.
6) Forget the financials: When I’m meeting with a potential acquisition target or a company seeking funding, I’m zeroing in on the financials. Too often, I attend what I expect to be a formal, serious meeting to discuss a potential investment but the other party is ill-prepared to discuss the numbers. Not only is this a sign that you’re unprepared, it’s a waste of everyone’s time. I and a lot of other potential investors will likely reschedule the meeting for a time when you have the necessary details to have a real discussion. Some investors, though, won’t give you a second shot.
7) Meet with the wrong person: I recently scheduled a call to introduce a company we’re invested in with what would be a huge account. The team prepared for the meeting and when I jumped on the conference call we quickly learned that my contact wasn’t the decision-maker and was unfamiliar with the company’s sector. The lesson I took away is to make sure that the person you’re meeting with is A) qualified to make the decision B) familiar enough with the sector and C) taking the meeting seriously. In my case, the person we were meeting with was a principal at the firm (meeting criteria A) but a friend and thus willing to take any meeting I set up (violating criteria C) and unfamiliar with the sector (violating criteria B).
I hope that these lessons I shared help you craft an amazing pitch.
The Private Equity Investment Group
Key Biscayne, FL
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Russ Krajec is the CEO of BlueIron, a patent finance company, and author ofInvesting In Patents, which explains the BlueIron investment model. Russ is an angel investor, registered patent attorney, the former COO of a venture-backed startup company, and an inventor with 30+ US patents/applications.
Year after year the patent laws become more complex. It seems with every decision from the Supreme Court and the Federal Circuit more detail is mandated for a patent application to be complete and for patent claims to have a fighting chance. These case law changes, as well as legislative and regulatory changes, are putting the patent system out of reach for startup companies.
The patent applications that must be filed require an enormous investment in time, money, and expertise – mostly by patent professionals who curate the inventions, write the patents, and nurture them through the examination process. To get high caliber, well researched, and well-written patents costs money – a lot of money unfortunately.
Quality is the main buzzword at the Patent Office, and increasingly so within the industry. Gone are the days that one could just get a patent and expect that it would be valuable enough to license or sell. Quality patents that cover quality technologies is the new business reality in the patent sector. But with the skyrocketing costs associated with obtaining the desired quality many startups resort to cost-saving strategies that most often only work to irreparably harm the changes of obtaining a worthwhile patent.
Filing a hastily drafted, woefully inadequate provisional patent application is a mistake, and one that can lead to a patent foundation being built on a hopelessly compromised base. The patent community was recently reminded of this fact when the Patent Trial and Appeal Board (PTAB) refused to recognize the priority of a provisional patent application filed to cover Juxtapid, a cholesterol medication. The PTAB found the provisional application defective because it did not teach the invention adequately and provided insufficient dosage information. This just proves that bad provisional applications are a very real problem even for pharmaceutical companies that should know better.
What are startups to do? There is never enough money to do everything a startup needs to do in order to succeed, so even the best, most well funded startups need to triage. As a patent attorney with over 15 years of experience, I know all too well this very real financial dilemma. Compounding this problem is the truth that most innovative startup companies are entering a marketplace where larger, well-financed corporations with giant patent portfolios dominate. Patents can be the great equalizer, but such a strategy requires high quality patents.
BlueIron’s non-dilutive financing for startups pays all of the patent costs, including filing fees and attorney’s fees, using a conventional commercial “lease-back” arrangement. This model has been gaining traction since its first release in the fall of 2014. After financing professional poker player Phil Gordon’s patent for his new software startup, Chatbox, BlueIron has made investments in startup companies in software, hardware, biotechnology, medical devices, financial services, and agriculture.
By financing the patents, we remove the cost barriers to getting strong, high-quality patents. This opens up the options to do a full due diligence workup, which most startups simply cannot afford. It also means the patents can be expedited and obtained more quickly. It also frees up critical capital for the startup to invest in business activities rather than paying for patents.
For expediting applications, when possible, we prefer the PCT-Patent Prosecution Highway, which often results in an issued patent within 12 months. With PCT-PPH, the costs of the patent are compressed into a 12 month window, rather than spreading them out over 3-5 years. If a patent application gets into the PPH the allowance rates are much higher, and in many cases over 95%. Given that an issued patent is far more valuable to a startup company than a mere pending patent application – especially one raising angel or venture capital – this strategy pays quick dividends, which benefits everyone involved.
The BlueIron model works because everyone has “skin in the game,” so to speak. We have every incentive to get high quality patents and to do so as reasonably quickly as possible. By having a patent portfolio that protects the startups technology additional investment becomes easier to attract, which makes much of the difficult work a startup will do much easier. By helping the innovative startup succeed we succeed. If the innovating startup company is not successful, the investment will only generate patents for products or services that never made it to the market, or which were not accepted once on the market. Patent assets covering technologies the market shunned have little, if any, value. On the other hand, if the startup company is successful the patents have real value – far more value than the cost of financing.
Through the BlueIron model I’ve attempted to create a new framework where both parties have the same goal: protect and grow a successful business. Our sole focus is to build investment-grade patents that have commercial value. By treating patents as “collateral,” our model rises or falls based on how strong the patents are – and how successful the innovative startup becomes.
If you are a startup company that is looking for someone to finance your patent activities please contact me. Candidly, we only invest in patents for operating companies, not for individual inventors for whom the invention is just a hobby. While we invest at a very early stage, the startup must have a financial commitment to bring a product or service to market for us to get involved.
If you are an angel investor or venture capital firm, we are actively seeking formal or information partnerships and relationships.
The Florida Venture Forum and the Angel Resource Institute are collaborating to bring you Pitching to Investors Workshop, taught by the Angel Resource Institute’s lead instructor, Troy Knauss on May 16, 2016 from 1:30 p.m.- 5:30 p.m. at the Hilton Carillon, St. Petersburg, Florida.
The standalone registration fee is $45.00 per person. In combination with the following full day event: 2016 Florida Early Stage Capital Conference the registration fee is $25.00 per person. Learning materials to be provided digitally, so be sure to bring a laptop or iPad to class.