Excerpts of Richard’s new book were printed every Monday in City AM newspaper and can now be found here as blog posts.
Posted on June 7, 2013 | in Confessions of a Serial Entrepreneur | by Richard
Imagine in a world of only pencils you invent the pen. You are so excited – you are going to change people’s lives! Pens are easier to write with, easier to read, and don’t need sharpening. You dream of success and millions of pounds.
Mixed in with your excitement is a dose of paranoia. Of course, anyone will steal your fantastic idea. So you protect yourself by applying for a patent and registering the design.
You consider producing it yourself but decide that life would be easier with a partner. A big pencil company could introduce the pen under their brand, and just send you a royalty cheque every month. So you search the web and send out emails to pencil manufacturers. You try to whet their appetite without giving too much away, too quickly, about how your pen works. Despite the global opportunity, you don’t get many replies, but eventually you are invited to a meeting. You’re nervous as you rock up, prototype in hand. The meeting goes well and everyone seems convinced. “This could be absolutely revolutionary!” someone says. Well, you think, if they can just crack a tiny share of the potential market, I will make a fortune. Negotiations begin, but they are painfully slow. The offer the company eventually makes seems very one-sided. They want exclusivity, they are not paying much, they will not commit to any minimum sales, and if they improve on your pen design, that’s to their benefit, not to yours. You haggle about these things without really making progress, and you start to wonder if they are secretly working on their own pen invention. You read about the Apple – Samsung patent dispute and realise you could never afford to fight or wait out such a battle against a big corporation. And you begin to suspect that perhaps the pencil company doesn’t really want the pen to become successful; perhaps they think it will merely cannibalise their pencil sales; perhaps they are just hoping you will run out of money and disappear.
In frustration, you change course and decide to manufacture and sell the pen yourself. You fly off to China, which is what everyone does, and look for a manufacturer. Even there though, you realise it will be expensive to manufacture. The unit cost is very high unless you make a large order, and invest in tooling. But you re-mortgage the house, cut back on family holidays, and produce some stock. You create a website and start cold-calling stationery stores. With just a few sales you are welcomed to the world of retail: warehousing, advertising, collecting payment, distributing product, low margins, product returns and warranties. You are overwhelmed and need to hire staff, and you are continuing to burn cash. You lose a potentially significant order when there is a mishap and a pen leaks in someone’s suit, ruining it. Frustrated and nearly broke, you give up, just as you see something very similar to your pen hit the market.
As a backer of early stage businesses, these are my daily struggles, but struggles teach lessons. An idea is worth nothing. Brilliance in invention needs to be matched by brilliance in commercialisation. “Day zero” is the day a deal is signed or the product hits the shelves. Over-night successes are rare– most products take years to perfect and launch. Most new businesses fail. Sadly, not every new pen is something to write home about.
Would love to discuss patentability issues with you. Can be contacted through my email. Looking forward to a chat and guidance I have a degree in applied science from Monash and I am an electrical engineer which means I have done my due diligence on these inventions and I am wanting to harness the ideas for my own edification and somewhere I know that these inventions (using solar energy)will be dealt with appropriately
By Gerald Thomas
By Are Terjesen