Patents, Prototypes, Manufacturing, and Marketing New Inventions
How We Raised Money For Our New Invention Product
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Raising money for developing and marketing our new product, the hot water saver.
My partner was the business expert, while I was the technical guy, so I have to give him most of the credit for our success at raising money to license and market the new invention.
We met with lawyers and decided to form a limited partnership as our vehicle. Our lawyer told us that there was something known as the "safe harbor rule". If we kept the total number of investors below 35, it would be much easier to raise the money and there would be fewer rules to follow.
We spent a couple of months researching various things like how much it would cost to produce the hot water savers, how we could distribute them, how to advertise, etc. We opted for using plastic injection molding for the new product since would could make large numbers of them quickly and inexpensively. This we knew from several earlier products we had produced using plastic injection molding to manufacture them. (more about plastic injection molding ) One of our investors was an injection molder, and an injection mold builder and tool and die maker.
We spent countless hours telephoning and or writing to all of the people who had written those letters in that cardboard box that Mr. Haws had received as a result of the magazine article.
As I recall, Mr. Haws had a design quote from an engineering firm. The quote was in the neighborhood of $10,000, and that is how much money we had allocated to the design portion of the project when we raised the money for our new product, the hot water saver.
I remember saying to my partner at one point "How hard can it be? It's only a hydraulic cylinder, nothing new about that!) Boy did I turn out to be wrong as you shall soon see!
We produced a business plan, with a marketing plan, detailed spread sheets, and financial projections for 5 years into the future.
Our limited partnership allowed for future cash calls, rights of the general partners, and rights of the limited partners. It spelled out who could sell their percentages, how and when, and who could buy. Virtually anything that could happen was covered. Even things like what would happen if a general partner was declared insane, or filed bankruptcy.
We went to our friends and relatives, managing to raise $100,000 that we figured it would take to get this new product off the ground.
We took modest salaries, I think it was $1,500 a month, or maybe it was $2,000 a month. We used a couple of rooms of an apartment rental office...in one of the apartments...for our office because the price was right.
We hired a part time secretary, and set to work.
We developed a really cool Logo, and had business cards produced in three color printing, had stationary printed up, and did all those mundane office type things. We even bought a computer. It was a Compaq portable. It only weighed about 60 pounds, but it had a handle, and when you detached the keyboard which was the bottom of the suitcase sized computer, it revealed a 6 inch monitor. We put Lotus Symphony on it, which cost about as much as the computer did.
While my partner handled the business end of things, including marketing, distribution, and all that paperwork stuff, I got to work trying to get the manufacturing end of things worked out. One of the first things I did was contact the engineering firm who had quoted Mr. Haws $10,000 to design a viable hot water saver as depicted in his patent, and his PVC hand made prototypes used in the Battelle study.
When I contacted them, they told me they had re-considered and did not want the job. I asked them to re-quote the job then. They declined. That should have set off a few alarm bells!
Designing and Building An Injection Molded Prototype (Next Page: the engineering nightmare begins)
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