I am developing an internet-related consumer product and considering founding a startup. For some reasons, I think I should not market it directly to the public, but try to reach an agreement with a large telecommunications company. An expert told me that first I must have at least one of the three: a patent, a large userbase or a product that would be difficult for someone else to develop without my help. Since I think the product may not be patentable or complex, I asked the expert what if I simply tell a company: "I haven't yet exposed this product to any of your competitors, and I can give you exclusivity in the countries in which you're doing business", and let them understand that if we don't reach an agreement then I will go to their competitors. The expert replied: "Perhaps, but that is a single-bullet gun". I understand that, but think maybe if the first attempt fails, I can still go to a second company and tell them that I believe that regardless of whether or not the first company implements my idea, they - the second company - can gain much from reaching an agreement with me. So, do you think there is a business potential here?
First, I must give some credit to your expert as I agree with most of what he said.
What you are describing is a common dilemma, and indeed your chances are much higher if you have one of the three elements the expert mentioned. Companies are reluctant to pay / purchase / invest only in an idea. Additionally, even if they do show interest, you will have to expose the idea to them, at which stage they may decide to make use of it without your involvement (an NDA/confidentiality agreement can only protect you so much, and most companies won't agree to sign one).
1. if you only want to sell the idea, your pitch email needs to be really good, and your NDA needs to be airtight.
2. I would consider offering that they develop it, and you get a commission in return.
3. You have a better chance if you validate the idea and collect some data. You don't have to develop the actual product in order to do this.
I've successfully helped over 300 entrepreneurs, and I'd be happy to help you with the email or in validating the product/service.
Answered 5 years ago
"Since I think the product may not be patenatable or complex"... I recommend you talk to an expert who helps people patent their inventions. They'll give you feedback on the reality of your situation...and they will likely be able to show you how to patent your product in a way you haven't considered. eg. utility patent.
People do invent products and then license the production and sale of them to an established company that has a distribution channel. In return they get a royalty.
Answered 5 years ago
You should pursue patents if:
A) You have the resources available to enforce it, and litigate those who infringe on your patent
B) If you want your company to be more attractive to potential acquirers who do have the resources to enforce it
It looks like you're dealing with software though, which in most recent cases is very hard to patent.
Your strategy of trying to pre-sell to telecoms businesses sounds great, however you need traction to create leverage. Ideas are worth nothing, they are cheap and if all that's preventing someone from "stealing" your idea is you telling them, then that idea is going to be very hard to start a business around.
Instead of valuing "ideas", try to shift your perspective to value "execution" instead. If your idea is truly pivotal, you should be able to gather a small user base and demonstrate value. There will be problems you face while implementing your idea, and your unique solutions to those problems create value.
Once you create and demonstrate that value, you can then sell it, license it, etc. It will be a much simpler conversation.
Happy to discuss further if you like.
Answered 4 years ago