116: How to Turn an Invention into a Product Business

The Product Startup Podcast
116: How to Turn an Invention into a Product Business
With Tom Gray, CEO of the Make48 TV Show

00:00 | Kevin Mako (KM): Hello product innovators. Today, we learn from the founder of one of the biggest product TV shows in America on how to go from being an inventor to building a product success.

00:12 | Voice-over: You’re listening to the Product Startup podcast. The show that helps bring your product idea to life, by chatting with successful inventors, product developers, manufacturers, and hardware industry professionals. Our goal here is to get to the bottom of what makes a product successful, from initial idea to getting your product on store shelves. We’re taking you step by step to build a functional product and scale your product business. Hosted by Kevin Mako, one of North America’s leading experts on hardware development for small product businesses. Now, on to the show.

00:48 | KM: Welcome back everyone. Today I’m very excited to introduce Tom Gray to the show. Tom is the founder and executive producer of the Make48 TV Show. A show where contestants have 48 hours to come up with invention idea and build a prototype to showcase it to the judges. The show is on PBS, Amazon Prime, and many other networks around the world. I will actually be one of the judges on the upcoming season. So stay tuned for the release date of that in coming months.

01:10 | KM: Today, Tom is going to share some valuable knowledge on how inventors startups and small manufacturers can grow from being an inventor, a maker, a tinkerer, a product idea into being a real product business success by either product licensing or starting a product manufacturing business. Now onto the episode. 

01:26 | KM: Hi Tom. Welcome back to the show.

01:28 | Tom Gray (TG): Kevin. Good to see you.

01:29 | KM: I’m going to see you in about four weeks from now at the finalist for the next season, really looking forward to being a judge on the show.

01:36 | TG: Yep. You’re going to be there in Wichita, Kansas. It’s actually three weeks, so make sure you mark that on the calendar. With a judging seat, we don’t want you late Kevin.

01:45 | KM: That’s right. I’ll be there. 

01:46 | TG: We’re going to be filming season five for the PBS series. And it’s the best of the best teams coming together. Wichita, Kansas at Wichita State University is our host location at the Go Create Makerspace. I think you’ll be fascinated. It’s going to be a thrill. Lots of VIPs and the best teams coming together.

02:02 | KM: That’s amazing.  Just seeing the setups at some of the prior filming I know you do everything topnotch and it’s such a cool TV show and you’re all over the place now. You’re on PBS which is in 95% of American households, Amazon Prime, and a bunch of other places around the world.

02:17 | TG: Yep. Just launched our major partnership with Roku and this old house came out two weeks ago.

02:23 | KM: Congrats.

02:24 | TG: Thank you. Brand new channel with all the influences on YouTube, on that channel as well. So never-ending, always looking to get some more exposure for the brand of the maker movement.

02:32 | KM: You’ve got an incredible background, especially for today’s conversation around going from a maker, a tinkerer, an inventor to a real business, or to monetizing that invention idea. Give everybody a bit of a back around because you’re not just the head of the big TV show in the space, but before that, and concurrently you did a lot of work with developing products and getting products out to market with The Handy Camel. So just to walk us back in history, because those two experiences really give you an incredible perspective on what it takes to truly succeed from inventor to a real product in the market.

03:06 | TG: So Kevin actually before Handy Camel here in America, I was in Australia. I’m actually New Zealand born and raised, but I was in Australia running my company and my background was working with inventors. I would license their inventions, put them under my brand. Do the manufacturing, invest in tooling, had my own distribution warehouse and did the marketing, et cetera. 

03:31 | TG: And I ended up supplying a big box retailer in Australia called Bunnings. So think of Home Depot here, down there they had the Bunnings retail stores. And I ended up selling that company in Australia with nine products on the shelf. So nine different SKU items, all within the roofing and guttering industry. So I had a section, I had my own section in the store. If you can appreciate you walking to a hardware store and one brand sort of sells a lot of different things in one spot.

03:59 | TG: And I got to learn that industry. Now when I came, married my wife, we moved to America. I started doing the same thing. My first invention was a licensed invention from a German inventor, the handy camel bag clip. And what I did is I started back at ground zero and I started doing the trade shows and we were doing 15 retail and distributor trade shows per year. 

04:23 | TG: So I got to learn the systems and I got to grow my network. Supplied places like ACE hardware, QVC, became a retailer of Walmart, which is quite a long process. But I got to learn everything, had my distribution warehouse. I got to work with inventors and that’s sort of the background and how I got involved with Make48.

04:47 | KM: That’s an amazing backstory, kudos to you for all the success to date. So let’s talk about the inventors. They’re in that period of their inventive journey, where they’ve got the idea, maybe they’ve been tinkering around in the garage. Maybe they’ve been part of a university group in the maker space there, or at some other community where they’ve kind of got something, an idea, whether it’s just a big idea that they’ve been working on or whether it’s something that’s actually physical that they’ve created. And they’re really looking to monetize this. What are the options for them, from your viewpoint, for what you’ve seen work over the past few years?

05:19 | TG: There’s definitely two options that most people look at, that’s still very common, is to license your invention to someone else, to another company or a brand in exchange for royalty. So you get paid a small percentage providing that item gets sold to a consumer. Licensing seems really easy that someone else is going to take your idea, but you must consider that big companies are looking at innovation ideas all day long. 

05:42 | TG: They also have their own internal design programs internally so they can invent their own things. So they look at a lot of outside innovation. They must look at trends. They must work with the retailers to see whether or not they can get position for it. There are just a lot of factors. Then you look at the other spectrum is taking the product to market yourself and starting a company, starting your own business, starting it in your garage, you’re in a warehouse or whatever it may be.

06:09 | TG: A lot more reward with that, but a lot more issues, a lot more financing, a lot bigger problems to face. As an entrepreneur you’re going to start a company and make decisions and hire people. So two very different ways to look at it.

06:21 | KM: I appreciate that. And it’s good to look at those two angles and understand them in depth as well, because it’s a big decision for a startup. So let’s talk about licensing first, especially with modern day licensing and how it really happens today because that’s one of those buzz words, which is misconstrued quite a bit. We certainly see it at our design house. People come in with a great idea albeit and they say, okay, how do I get rich off this? Who’s going to pay me money to take this. What kind of fees can I get upfront? What kind of royalty am I going to get? 

06:48 | KM: And I would say that’s probably one of the biggest misconceptions out there to people who are not in the product space. Is that just some idea either sketched on paper or just roughed out in your mind is worth gold. So when we look at licensing, it’s important to break it down, especially from your history working at it. What does successful licensing look like in 2022? Break that down a bit.

07:10 | TG: Yeah. Good question, Kevin. So the more skin in the game an inventor has, the higher the chances we’ll be of success of a relationship. So you mentioned it before, people have ideas. Ideas mean almost nothing. I know people including myself have ideas every day. They don’t mean anything. There are four things we look at and most companies look at the same four things. 

07:33 | TG: They want to see an inventor who has built – a looks like, feels like maybe working prototype, maybe rebuild it three or four times to make sure it physically works because your first prototype is never going to be the final one. You’re going to have to redo it over and over again to get to the point where you are happy with it. And you can prove what you say is real. 

07:51 | TG: The next thing we look at and a lot of companies will not deal directly in person with inventors, even pre-COVID. They just don’t have the time. They don’t want to sit in a room with them. You must educate the buyer or the person you’re showing it to. You must educate them with a one-minute clean video, how it works straight to the point. Your video is showcasing the invention, how it works. It can be filmed on an iPhone. 

08:14 | TG: It doesn’t have to be elaborate, nice clean voiceover of your benefits, et cetera. Then there’s a sales sheet, which is a one-page document that a buyer or potential partner can look at and take with them and write notes on. Again, it has a nice couple of photos and it has the points and benefits. It might have some manufacturing costs, whatever you think you can put on there to educate them. 

08:36 | TG: And then finally, a lot of people are not putting the right or any protection or starting the IP protection process. So you may break down a door, you may get a great meeting with a prototype, but the first thing they’re going to look at is has this been protected? And can we protect it for our own company in the future? 

08:56 TG: The other big misconception is, and there is an issue with it, is the patent industry in general. You need those four things to really impress a potential partner moving forward.

09:04 | KM: Those four things are very powerful. That’s really great words of wisdom because interestingly enough, the four things you mentioned there are generally what’s considered the product startup route. So you’ve mentioned those two categories, which is product licensing and product startup. The four things that you mentioned there are arguably also part of the journey to start a product business. 

09:25 | KM: And I think that’s the key misconception right there, is that people who are looking to license their idea need to understand that you need to do a lot of the leg work. Let’s say you’re even pretending to start up a business and get it to at least a certain point where you have those four things and they’re done well, then you’re in the position to look at either licensing or continuing on to manufacture the product yourself.

09:47 | TG: Correct? Yeah. The prototype itself, you’re going to need that to show a manufacturer. The manufacturer is then going to ask for care design drawing that can manufacture the product so they can quote tooling. You may take your four things, create a business plan and show a bank. Probably the most important thing, the banks are very particular about funding. It’s high risk. The product world is very high risk for a bank. 

10:12 TG: So that’s where you’re looking for a seed investor, family, friends, a product person, who is going to want to look at that, make sure it works. It gives them sort of the peace of mind that the inventor knows what they’re talking about. And the inventor has the skin in the game. But like you say, you need those four things, no matter which way you look at this.

10:29 | TG: The other thing we see a lot is that a lot of people want to see some success before they invest, whether it’s a licensing deal or whether it’s an investment. Think of Amazon reviews. That’s now the hottest thing to look at. Someone wants to see a hundred positive reviews before they’re willing to take that next level or a successful Kickstarter or Indiegogo. So the more skin in the game you do yourself and investment you do yourself to prove what you’re saying is true. The more chances you’ve got of getting some type of relationship on the other side.

10:58 | KM: Yeah. I’m quite interesting because if you can push to build a startup business yourself, to the point where you have even a few hundred units in the market, but you’ve got those reviews. Now you become exponentially more licensable or investible, or even just for other stakeholders or other partners that might be of value. Maybe it’s brand partners and et cetera. 

11:19 | KM: But the key is getting units into real users hands and them saying that you like them. And even potentially before you look at a licensing deal. now you can license earlier absolutely. But as you said, the further you push it down that pipeline, the better you can license. So another one of the big strategies that I like to see is leaving it to a little bit later in the game to really decide what direction you want to go. 

11:41 | KM: I find that if you choose to prematurely, that you are certainly going to go licensing or certainly going to go the business route, you may actually limit yourself from what might be possible. Because one of the big things that happens, when somebody gets to that point where they’ve got enough meat on the bones, in those four elements where they are a good license and deal pitch. 

11:59 | KM: But what they don’t realize is now they’re an extremely good pitch also for an investing partner or potentially growth financing. Venture capital finance are even getting into your series A if you’ve proven it enough. Well, at that point you may be leaving a lot on the table by giving the business up to a small royalty licensing deal, as opposed to continuing and scaling in and growing on your own, it may actually be easier to raise a funding partner than it is to get a licensing partner, not necessarily. 

12:24 | KM: But the point is. If you go into it with an open mind and you work hard at building a business, either way that gives you the option and improves your odds of that option to decide at some point, you know what, I don’t really want to grow this into a big company. That’s too much for me. And like you said too much risk. Therefore I’m going to license out or if it’s looking hot enough at that time, maybe you’ll want to continue pursuing that path. So it’s best to think that way from the get-go.

12:48 | TG: Yeah. And now you got the freedom Kevin, to launch your own company. I highly advice launching your company from your basement every time. A lot of inventors want to go straight to Home Depot or straight to Walmart and think that’s the only avenue to be mass market. When you work with the bigger brands, they require you to make a lot less money per unit, because they want to sell it for next to nothing. 

13:14 | TG: It’s a numbers game and you got TO have really deep pockets. And when you have deep pockets, you got to have large manufacturers. You’ve got to have large warehousing. You’ve got to have a large team to keep up with the demand of what happens at large retail, providing even sales. 

13:30 | TG: What you want to do is make 1000 units or 500 units or 100 units. Aluminum manufacturing and tooling is designed to be a lot less investment on the tooling, but it’s only good to make 5,000 units. But those 5,000 units are the most important ones of the lot. Most innovation fails when it gets to the point where the consumer uses it for the first time because you can do your own internal focus groups. You can have mom and dad try it out or whatever. 

13:57 | TG: When you sell 100 units, the consumer is going to decide your fate right there. When the consumer picks it up and tries it out and finds out it doesn’t work and you get your bad reviews and you get your complaints and that will tell the story. So don’t invest heavily on the front end, pay a premium for your tooling, for aluminum tooling and pay a premium for a per units. 

14:17 | TG: Instead of mass market for a dollar a unit making for two dollars a unit, but you’re only going to spend so many 1000s of dollars to make 100 units for 500 and then get them into the marketplace. And that will tell the story and you can do all of that from your basement. You do not need big overheads to start a company.

14:32 | KM: I love it. That’s all the steppingstone model and really look at small, but progressive steps forward in the product development journey. I’m a huge fan of short-run manufacturing, even if it’s additive, which is expensive per unit, but for the first run or even two runs for the first 100 to 500 units, don’t look to make money, just look to get products out into user’s hands. 

14:56 | KM: Not only is that creating a tremendous amount of equity value for you, but if you do put your first a hundred units out and inevitably this is going to happen to everybody, even if you make such an incredible product out of the gate, there’s still going to be certain things that 100 users saw that you didn’t – you meaning, you, your design team, any of those test folks, there’s going to be some improvements there.

15:15 | KM: And the beauty is if you’ve taken Tom your stepping stone model there of starting small, you can then take that feedback, even the negative feedback and then work it into those improvements. And that’s the concept of iterative design or agile design, which is very much taken out of the tech world, agile development, improving progressively over time.  

15:33 | KM: Starting to bring that into the hardware world and say, look, I’m going to start small, work my way up. But each time that I work my way up in volume, I’m going to make small tweaks and adjustments to improve the product so that when I am at that 1000 or 5,000 unit run, you’ve already gone through multiple hundreds of real users giving you feedback to make that top tier product, which now is a very good either licensing, growth scaling model or is possibly approachable to those bigger and bigger buyers, retailers, et cetera.

16:03 | TG: Yeah, exactly. I think that it’s something we struggle with back in the day, is we build a beautiful prototype and tried it out with limited amount of help and people trying it naturally. And then you go straight into tooling. Making steel tooling, injection molding, that tooling can make a million units, but guess what? It’s a huge investment upfront, $50,000 to $100,000. You go and make your first two or three runs or first run to find out that you got problems. 

16:31 | TG: And all of a sudden it’s another 10 grand to tweak the tooling and maybe 20 grand. And that could be the killer right there. So yeah, make a short run, pay a premium for it, get it right. And then you can worry about making anything bigger after that.

16:45 | KM: I like how this ties into your second comment about the video, making sure that you have a good video. I think this is something that’s underappreciated in the product development world, especially with new startups, is they don’t realize the power, not just of a video, but of a very professionally done video. 

17:04 | KM: Something that really hits home in 60 seconds. I love that timeframe too, because it really used to be three minutes was kind of the length that an explainer video be. But the attention span is reducing, society in general. And, and that’s not just your end-users. That’s also the investors. That’s your business partners. 

17:23 | KM: Everything else along the way, attention spans are shrinking. At least for their initial understanding of what your product does, people want to know quickly. But in order to do something quickly, if you only have 60 seconds to explain it, you have to do this video at a professional caliber. And that’s one of the things. I watch people spend fifty hundred plus thousand dollars in developing their product, multiple rounds of prototyping, nailing it. 

17:45 | KM: And then they go out with their cousin and shoot on an iPhone, a 60 second, 90 second video that misses the mark on so many different pieces. And essentially makes their product look a fraction of the value that it actually is. So that’s one of those things. Spend a few thousand bucks, get a professional crew on board, have them script it out and really get into the viewer’s mind with people who’ve done this for hundreds of videos that know how to truly explain a product forward. And that is the power of a short video to really highlight everything that you’ve done up until that point.

18:20 | TG: And I think the big thing there Kevin is to showcase the product working in the first five seconds. Because if you are putting this on the internet on Instagram, like if you are going to market yourself and have your basement full of products. And now you’re going to try to sell them, social media still is the only way to do this right now. 

18:38 | TG: And people are flicking through their feeds. And they have three seconds, you got three seconds or less right there to educate someone on what it does. You do not want this big 10 to 20 second intro. That means nothing. You’ve got to get someone’s attention really, really quick. And that will make them stop and then watch the rest of the video. So that’s something we see a lot too is they just don’t create that video the right way.

19:02 | KM: Yeah. First few seconds are key and it’s almost like you have to do an intro. Give it that five second really quick pitch and then go into it, if you want to storyboard it a little bit, go in there. I definitely see a lot of videos where they spend way too much time on building the plot. Somebody’s not sitting there to watch a movie, they’re sitting in there to very quickly understand what you’re doing. 

19:24 | KM: The other nice thing is when you have, let’s say you have a 60 second clip, or even you stretch it out to a three minute clip. If you’ve done it well and done it professionally, they will have designed and engineered it to the point where they could break that into micro clips, which can be used for different media formats. You should have everything from a 5, 15 30, 60, and three minute clip.

19:43 | KM: All within that one, three minute clip broken out into certain second videos and all of those different videos have different use cases. The beauty too, is if you’ve done that full explainer and done it well, you can use it for a variety of different stakeholders, whether it’s bringing employees on that you might want to first hire, getting an investor on board, getting a retail partner or a marketing partner, or even just some other brand celebrity. In addition to actually selling units themselves, you can use that one video and repurpose it in a number of different ways if it was done well from the get-go.

20:15 | TG: Yeah. Correct. The most important thing is getting the quality consumer and the one minute to three minute videos are perfect for your website, because if you’ve got someone that’s now going onto your website to review your company and your product they’re interested. And they have time, they want to purchase it. They’re going to watch every video they can find before they make the decision to buy. So yeah, you’re totally right. Everything from a 15 second commercial right through to three minutes will be utilized in different ways. 

20:44 | KM: And that’s so powerful to be able to highlight all the hard work that you put in. It takes a lot of work to get to the point where you’ve got your final prototype, which is usually when people start to spin up these videos. if they’re going to do it to sell or pre-sell for Kickstarter indie Gogo, or even just pre-selling to prospective buyers or getting letter of intents from prospective buyers. 

21:03 | KM: usually at your last final prototype where you’re very happy with it. It’s generally your sexiest prototype, most functional. That one is the one you throw a bit of movie magic on to really tell the story, generally before you’re going into production. If you do have the liberty of going into production and then shooting the video with actual production units so that you can have either a fully finalized flush one, or maybe even multiple products in the video, that’s great, but not generally necessary. 

21:28 | KM: If you have a really good prototype, it’s a great time to shoot the video. You could do a lot with videos these days. Again, if it’s shot well with a professional crew, to really highlight all the best features and paint the picture quickly. That can just simply amplify everything that you’ve done up to that point in time.

21:43 | TG: And with the technologies Kevin of 3D printing, SLAs you name it, all these latest 3D printers. There’s no excuse now that you cannot make a finished looking prototype that looks identical to the one you would find on a store shelf.

21:57 | KM: And it’s funny, you bring that up. We do a lot of that here, where we’re simultaneously doing the hardcore internal product engineering while we’re also building, we call it a looks like presentation product type and finish all that sort of stuff. It looks like it was straight off the production line, but it’s not slowing down the necessary work of doing the hardcore mechanical and electronic engineering on the inside. 

22:19 | KM: So it’s something where they want it maybe a little bit earlier than when the final prototype’s ready. Maybe they’re starting to plant the seed or get early followers or even just raise investment rounds. So they don’t necessarily want to wait until all the hardcore engineering is done. So there are ways in the industry to have your cake and eat it too. But at the end of the day, it really comes down to the value of that prototype, which of course can be amplified by video, but also needs to highlight a lot of the core elements that you’ve built into it.

22:47 | TG: Wow, a lot to take in there.

22:49 | KM: Lots of pieces. Of those four things, Tom, we’ve talked about the prototype and the importance of that. That comes down to designing for production. That’s a really important thing to highlight just before we move on for the last two pieces of that, because it’s not just about roughing a prototype together and then trying to get a licensing deal. 

23:06 | KM: Because when we look at the prototypes, one of the biggest things that somebody who’s looking to license it is looking for, is how easily can they actually spin this up and produce? So you talked about something earlier, how many reviews do they have and are the reviews good? Well that paints the picture to the market. The product is just as important because that needs to be manufacturable. It needs to be built well, it needs to be reliable. All of these things, which a company, if they’re about license your product and put their brand behind it, they want to make sure that that stuff’s short up.

23:35 | KM: And I think a lot of the big misconceptions out there also come to the fact that somebody says, well, I’ve got something rough together. And the company is a big company. They probably have lots of design resources. They’ll fix it up and get it done the way they want it and get it professionally done. That might be true. But again, the further you push it, the less resistance they’re going to have, because keep in mind, you’re not the only one coming to the table with new ideas. 

23:57 | KM: As you said earlier Tom, they’ve got their internal R&D. They also have lots of other people pitching their ideas too. So the more flushed out you are, the more manufacturable you are, or if you’re in production, the more user reviews you have, you’re simply making it easier and easier and easier for them to understand and implement it into their business model.

24:15 | TG: And don’t forget these companies, the bigger the company is, the harder it is to get their attention and to get a deal. Some of the big companies, they need a product to potentially generate a hundred million in sales before they’ll even consider it. Well, that wipes out a lot of innovation right there. So you have to go to a midsize or even a small company that’s a lot more flexible that can appreciate, wow, we could make a million dollars out of this and it’s lifecycle and then move on to the next product. So there’s a whole game to play there. 

24:43 | TG: Now, the other thing too, with a bigger company, most products inventors do not have R&D departments or like you say, they got to engineer it now, so they can manufacture it. They may have to invest maybe $100,000 to $200,000 of their own money to get it to that next level, to potentially see whether or not they can still do a deal.

25:02 | TG: So if you go to a big company and say, here’s my rough prototype, I’ve done very little with it. I want you to take it and pay me money. They might have to invest another quarter of million dollars before they can even know the answer of whether or not there’s life in that product. So they just instantly are like, if you are too hard to work with we’re going to go over here with this inventor or this design firm, who’s made a polished unit. It’s ready to go. 

25:23 | TG: We’ve got projections. We can take that one to market a lot cheaper and simpler, and don’t have to put any time behind it, then this everyday inventor who’s not realistic. So the more you do, the more chance you’ll have to impress them.

25:39 | KM: That’s amazing because it all comes down around the subject here, how do you go from that maker to that startup? And it really comes all down to pushing it forward, small baby steps, getting it more and more exciting to these prospective partners.

25:55 | TG: People love to look and touch. Everyone can understand something when they see it and touch it. And we see it every time we’ve had investors on products beforehand. If they can see it and touch it, it’s a game changer for them to make their decision.

26:08 | KM: Definitely. It’s a big deal and brings that forward to the next phase of your steps, of your four steps. We’ve talked about the first two, quite a bit. The third step here is the sell sheet. Just talk a bit about that and the importance of it. And what are some of the key elements on a sell sheet that you want, and also keeping it to be a one pager.

26:28 | TG: Yeah, it has to be a one pager. Now a sales sheet is just like watching a one minute video. They’re both informational. One you have to watch for 60 seconds. One, you should be able to read on a one page. A clean photo of your product is primarily what they’re going to look at, description of what it does, possible name and brand. People get really tied up naming a product. 

26:51 | TG: But in reality, if you’re going to license it to another company, they’re probably going to change the name. Then you look at the benefits, of what the product does. You might want to bullet point them. You might want to look at who your target market is. Potential manufacturing costs. Again, the more that they know you’ve done your research and it lines up, the more they’re going to trust and listen to you. 

27:12 | TG: Patent pending or a patent number would be vital in that situation as well. Because they’re going to do a lot of due diligence. So it just shows that you’ve done your homework and got it ready for the next level. So the sales sheet is pretty simple. They’re going to take that. They can put that on someone’s desk and say, have a look at this. They can write notes on it, put it away. It’s just a handy thing to have when you’re showing somebody.

27:34 | KM: It’s a really easy thing to put together and you make it so simple and shareable, that thing could be emailed as a PDF. It can be printed out and mailed to folks. It can be sitting there and copies as part of a meeting. It’s very, very easy to do, but it’s a nice little piece, which if you have it and someone else doesn’t, it makes it that much more top of mind for that prospective partner. 

27:56 | TG: And if you just have a website or something, people can forget the name and they’re never going to find it again. That sell sheet is just your manual thing we put in a book and put in a stack of document, you know where it’s at. If you’re a product development person looking for a company with open innovation, they may have a stack of 20 that they then work down to the top five, but it’s all right there, they can quickly point touch with their groups. 

28:18 | TG: Say, we like this product over here and they’re pointing to a sales sheet. So it’s used in a lot of different ways. Like I say, really put together, doesn’t have to be fancy whatsoever.

28:28 | KM: Let’s jump into that last point here, which is the patent, which can be part of the sale sheet as well. But the patent is one last piece, which is a bit of a formality in one way, but it’s also a large part of what can form your equity valuation, your intellectual property value of your actual company. So it is an expense and it is something that is frustrating when you’re putting your time and effort into actually building a product and prototyping it and all of that. 

28:55 | KM: But the patent even still to today is very important. And it is a piece of the puzzle and something that if done well, can be a large part of the value of your company as you push forward. You’ve mentioned that as one of these key pillars. So why don’t you just talk a bit about patenting and I’m happy to weigh in as things that I’ve seen work as well from the hardware perspective?

29:16 | TG: So I’ve seen it in all different levels. Now your patent is only as good as the person that can protect it. So let’s just say you put a lot of money on a patent, you take a product to market, you have no money and people start infringing. There’s not much you can do. There’s no one policing the infringes out there, which is really sad, but it’s true. So you’ve got to protect your own patent and take them to court if you have to. 

29:40 | TG: When you take it to a potential investor or to someone to license your innovation, they’re going to look at that first and foremost. Home Depot doesn’t want to spend 5 million launching your invention to find out that Lows has a free will to release it as well because innovation now costs millions of dollars to launch on large scale.

30:02 | TG: So if you go to a big company and you’ve got no protection. They know they’re going to have to spend at least 2 million to get to the next level, and they know that they can’t protect it if someone copies it and people will copy it, anything successful is watched by a lot of people and will get copied. So you must have the best protection you can possibly get or afford and have it in motion. 

30:21 | TG: Now, patents take a long time to be approved, but you can put patent pending stage and motion really cheap and easy. And that gets you going. That’s all you need to start conversations.

30:33 | KM: Yeah. And that’s the best part. When you look at that kind of a blended strategy of at least getting your documents and doing it well, building the foundation well with a good patent agent or a patent attorney. You don’t necessarily have to spend the big bucks upfront to do the whole patent, all the appeals that are required and this and that let alone different countries. 

30:53 | KM: But if you at least build the foundation, well, especially with what we find on the design side, when we’re working with patent attorneys, they want to know all the little details of the product. Generally they want either the final manufactured product, or at least the final engineered prototype of the product, so that they can look at all the little technologies you built into it. And it all comes down to micro technologies blended together. No one of those technologies is generally novel on its own.

31:21 | KM: So when you start putting these little things together and how they’re woven together, which is something that a good patent agent or patent attorney can look at, pick out the pieces that they can protect, because you won’t be able to protect everything on your product. You’ll be able to protect certain things and not other things. And it’s by them figuring out a good attorney to figure out exactly how broad and how narrow, to protect which different claims, which different pieces, allows them to forge the patent that they think is most powerful. 

31:46 | KM: But at least just to apply for it at the get-go, to have those materials built-in from the get-go So they understand what’s there. So giving your patent attorney enough meat on the bones that they know what to put in there, but also giving them a strong foundation that as this thing starts to take off down the road, you can put more money into it, securing it, solidify it, and then adding other countries or other resources to it to make that patent even stronger.

32:11 | TG: I think also the big key here is that when you apply for your patent stage and you’ve got one year of patent pending, meaning you’re in line, you’re in line waiting to be reviewed by the patent office. If you show a potential license partner in that bracket, you have that whole year to then improve on the patent because you as an inventor are only going to see certain things. 

32:34 | TG: If you show it to a big corporation, they’re going to go, wait a minute we can patent three or four other things here and make that patent a lot stronger. Let’s do that in that one year window. So it’s really important for them to have some say, if you wait until you’ve got your patent and you go show a company, like you patent all the wrong things. Because like you say, an invention is not patentable usually, it’s a feature of your invention. 

32:55 | TG: It may be a latch. It may be a device. It may handle. You’ve also got several different patens you can look at. Design patens are easy to get, but they’re harder to protect. Utility, you got your copyrights, your trademarks, all that good stuff as well. The thing is to get your protection done, do it right. I see a lot of people doing their own and they will never stand up in court whatsoever, because a patent attorney, when you go up against some of the best patent attorneys, they will pick you apart like you wouldn’t believe and you can’t fight those guys. So a good patent attorney that is inventor friendly, is what we always suggest you look for.

33:37 | KM: Yep, absolutely. It’s great insight, Tom. And I love looking at it from the different perspectives there because it is one of those things where you can kind of have your cake and eat it too. If you do this correctly and do it strategically, it does not cost an arm and a leg, but you can build the foundation to plan for how you’re going to scale and grow the business down the road. And the same thing on the production side, like you said, you don’t necessarily need to jump into full steel tooling out of the gate for a million part mold. 

34:01 | KM: You can look at stepping stones, starting with additive, then into aluminum tooling, then into steel tooling as you’re starting to scale. All of this comes back to those themes of stepping stones and something I want to wrap this all together with these because these are four fantastic points I think that anyone who’s looking to go from inventor to successful product startup, whether it’s on your own as your own this, or whether you’re planning to license it. 

34:23 | KM: These things are so powerful. But I think one of the big things you said that ties all this together is that you can do this out of your basement. You can do this part-time while you’re still working full-time at your job. I get asked constantly from clients, whether they should, quit their job now and start working on development. And almost all the time I say no, until you hit a certain point again, these steppingstones where you’ve either got enough investment or enough buyer interest that you have proven the model. 

34:51 | KM: And it makes sense to, with much less risk at that point in time to say, okay, I’m going to transition out of my current career, whatever it might be. And into this new career, which I’ve now really gained some snowball traction on. All this comes down to the stepping stone steps that you refer to in conjunction with the fact that you can do this from home. You don’t need to quit your day job to jump down the journey that we’ve been talking about today on the show.

35:14 | TG: Totally agree, because if you’ve got a successful career and you’re starting this side business, the side business may take two to three years to actually make profit. Because if you’re starting small, any money you make, you’re going to have to keep reinvesting to the point where you’re at a good enough size that you can sustain a paycheck for yourself. 

35:36 | TG: And that may mean starting off with just 500 units, next thing you know if it’s going good, wow I now have to buy 5,000. That’s going to take another big chunk of money. So it’s really hard to quit early in the game and start on your full-time on your product business until you know you’ve got success moving and you can take that leap.

35:54 | KM: Love it Tom, great tips of advice for everyone out there that’s looking to migrate that big step from idea to startup. So much appreciation for coming back on the show again, Tom. Looking forward to seeing you in a few weeks at film of the season finale of Make48. And thanks again for being on the show.

36:09 | TG: Thanks Kevin. Always good to be here buddy.

36:11 | Voice-over: Thanks for tuning in to this episode of the Product Startup podcast. The show that teaches you what it really takes to bring your product to market and turn it into a big success. This podcast series is brought to you by MAKO Design + Invent, the original and leading firm in North America to provide global caliber end-to-end physical consumer product development to startups, inventors, and small product business clients. If you’re looking for product development help on your invention, head over to makodesign.com. That’s M-A-K-O design.com, for a free consultation from one of MAKO Design’s, four design studios from coast to coast. Thanks for listening and see you next time.