In terms of financing your invention, licensing usually requires much less capital than the alternative of manufacturing and marketing your invention yourself.
Money needed for licensing. When licensing your invention, usually you need money to:
A successful licensing deal will free up an inventor to pursue inventing while still profiting from the last great idea. On the negative side, a bad licensing deal may tie up an innovation or, worse, result in legal battles over royalties.
Financing your business to market and manufacture your invention. You will usually need far more financing if you start your own business and manufacture and market your invention. Money is required for:
In addition, entrepreneurial inventors often require more complex financing. For example, you may need to form a corporation and sell shares of stock (or other interests) in the business and the invention.
Before you jump into marketing and manufacturing your own invention, take an honest look at your personality. Do you have a strong entrepreneurial drive? To find out, answer the following questions:
If business is your real game, and creating an invention is just your means of acquiring something to sell, then marketing and manufacturing could be the right choice for you. Same goes if you live for the deal, you're not afraid of risks, you love to innovate in commerce, and you have the discipline to fight for market share. But if none of the above sound like you, licensing is probably the correct course for you.
To learn more about the ins and outs of licensing or marketing and manufacturing your invention, get What Every Inventor Needs to Know About Business & Taxes, by Stephen Fishman (Nolo).
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