The essential guide to securing early-stage private investment for new product innovations.
By Alexander Frakking | Innovation Advisor
January, 13, 2023
How to get investment, funding, or distribution are perhaps the most common questions that inventors ask.
This article offers an inside perspective from the side of the companies and investors that would fund a new idea, and some tips on how to increase your chances.
But first we should say that getting funding for new products is very hard, so relying on early investment should not be part of your plan. Below are some exceptions and strategies for making it easier.
You don’t want to be Tesla. He was one of the greatest inventors, but it’s a sad, sad story. He couldn’t commercialize anything, he could barely fund his own research. You’d want to be more like Edison. If you invent something, that doesn’t necessarily help anybody. You’ve got to actually get it into the world; you’ve got to produce, make money doing it so you can fund it.
Larry Page, co-founder of Google
Who would invest in an invention idea?
There are only two answers:
- People who want to see you succeed. This hopefully includes your family and friends.
- People who want to profit from your work. This includes everyone else.
Beyond investing, funding such as small grants may be available from government and various non-governmental organizations (NGOs).
How investors think about inventions
Any investor will ask themselves two main questions
- Is this a good investment? Will it make me a significant return on my investment with acceptable risk? Investing in new products is risky and somewhat expensive, so venture capital investors typically want a 5x return on investment. That means if they give you $100,000, they want to get at least $500,000 back in a short time (2-5 years).
- Is this my best investment opportunity? Any investor gets far more pitches than they can fund, so they’ll only invest in the top opportunities.