When arriving at a new idea for a product, everything can get a little exciting. From envisioning market success to projecting profits, it can be hard to picture anything but triumph. However, one of the most important things to consider when thinking about product development is finance. With developing a new product being a real risk, it's essential that you have some capital behind you. Being an area that many new inventors struggle with, below we have given a breakdown of the many different finance options available.
Friends and Family Financing
One of the most common first ports of call when starting any business venture is family and friends. From the oh-so-helpful Bank of Mum and Dad to loans from friends, our nearest and dearest are surprisingly giving if on board with your idea. Whilst not getting corporate or legal financial plans in place is great, family and friends usually help with series A funding, allowing you to get the wheels in motion.
Licensing Your Product Idea to a Company
If there is a ‘competitor' that works in the same field your product aims to serve, then it may be worth having a conversation with them, suggesting that you license your product to said company. However, it is important that you have trademarks and patents in place before doing so, ensuring that you are protected and your idea is not vulnerable to theft in the case a deal cannot be arrived at.
Made famous for its ability to help raise money for charitable causes, crowdfunding is commonly being used by those looking for capital to launch a new product. With so many crowdfunding sites now available, new inventors can post their idea and pitch to investors from ‘the crowd'; all taking a stake in the business that owns the idea. Popular crowdfunding sites include:
- Lending Club
- Funding circle
Seek an investor
If you have carried out your research, you will be well aware of the top thought-leaders and influencers in your space. What you may also find is that such industry ‘spearheads' may have become investors; looking for projects in which they can both add value to and make some money from. However, it is essential that you find the right investor, looking at much more than what money they can plough into the project. Things to consider are:
- Terms of investment i.e. equity split
- The investor's pool of contacts and network in which you can tap into
- How active the investor will be in the business?
If you believe that you have all you need to make the project work aside from cash, then a startup loan may be a good option. Ensuring you retain 100% of the business (and 100% of the profits), a startup loan can give you the capital you need for the development process; allowing you to repay the loan on a monthly basis.
If you are looking to develop a new product and want to know what options and support are available to you, be sure to contact ITERATE today.