Consider Inventing as a Form of Investment

Like any traditional business venture, inventing involves spending money to make money. Therefore, when contemplating the commercialization (and monetization) of an idea for an invention, think about all opportunities you have to spend your money and then consider whether it makes sense to invest.

To make a good decision, have a clear understanding of this fascinating and exciting enterprise. Often, people are extremely passionate about their ideas. Although having passion is a good thing, don’t let it cloud your judgment. I’ve seen many lives disrupted by people going all in on a “sure thing” invention, only to have it not be as successful as they had hoped.To avoid unwanted heartbreak, think about inventing as an investment.

First of all, investing in an invention is a high-risk, high-reward endeavor. Many factors can be controlled but others not as much — a scenario that can bring your invention plans to a screeching halt. Some factors are hard to detect until it’s too late.

A few years ago, I spent a full year developing a sophisticated aquarium filter for a client in a joint venture. Near the end of the project, a larger company with a similar project in the works, purchased the client’s firm. A showdown between our model and theirs was arranged to decide which one would be put into production. I had already ordered the first production samples from the factory, which had been working on the molds for four months. Then the UPS plane carrying my company’s samples burned up on the runway in Atlanta destroying everything. Rather than waiting for more samples, the client chose to cancel my project and wrecked a year’s worth of hard work.

Countless other factors can’t be controlled, such as pending patents that you may be unaware of or competitive products just about to hit the market, which can crash your big plans. So no matter how smart you play your cards, be prepared to lose everything when investing in an invention. This potential for total loss raises the risk profile.

The biggest risk factor for the novice inventor is a lack of knowledge and perspective. To mitigate this risk, form a team or advisory board of experts to help you make decisions wisely.

On the flip side, inventing can be a very high-reward investment. When done right, an invention can generate substantial passive income or result in the creation of a new company. I’ve witnessed investments of less than $10,000 turn into annual royalties of more than $100,000, potentially for more than than a decade.  

The investment is usually complete once the idea is licensed, so the total investment is fixed and yet the money can keep coming in. This can lead to incredible return on investment of as much as 50 times the initial investment over time (much better than the return from traditional stocks or real estate investments).

Plus there are numerous intangible benefits to investing in an invention. For example, the initial and imaginative stages of inventing (product designing, creative problem solving, visioneering) are inherently fun to do.

Another benefit is that your invention is an exclusive investment opportunity. It’s only available to you (assuming you have an idea worth investing in and the ability to pursue it).

This setup gives you, the inventor, unlimited opportunities, governed by your unique abilities, to realize a creation from a truly singular idea that you pursue with your own personal passion.

Even if you fail, you’ll know you took a risk and at least tried to bring your ideas to life.

Sometimes these benefits make it all to easy to ignore the telltale signs that a particular idea does not represent a good investment opportunity.

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