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Raising Capital to Fund Your Invention - One of the Most Difficult and Important Things to Do!
By Jim DeBetta
After inventing a product, one of the most difficult things an inventor has to do is to come up with the money to fund the development of their invention. For most inventors, raising money is a scary proposition. Where do I get the money? What is an angel investor? Do I need a business plan? How much money will I actually need to get my invention made? Most people seem to have a very general idea of what to do but when it comes down to it they simply do not know how to raise the money they need.
There are many costs to develop your invention including packaging, engineering and design (CAD design), prototypes, patent filings, and don't forget the actual costs for a factory to make let's say 5,000 pieces of your product! The fact is more than 90% of inventors I have worked with raised this money by borrowing from friends and family. When you read articles in Forbes or Fortune about a wealthy billionaire or very successful entrepreneur, these people will tell you they did the same - they borrowed money from friends, colleagues or family to get their business off the ground. It might be tough to do this and even uncomfortable, but if you really believe in your invention it is the right step to take. When you borrow money from people you know you may also not have to give away a percentage of your company. When you borrow this money, you need to create a repayment schedule that allows you to make everyone feel comfortable - a plan that offers a 5 year repayment plan with a generous interest rate is one I see quite often. Telling people you will pay them back within a year or two is one of the biggest mistakes I see inventors make. It will take you time to get your business going no matter how enthusiastic you are and may not be in the position to start making payments in the early going!
Raising money from venture capitalists (which is an organized group of professional investors) or angels (which is often an individual with personal wealth who is willing to invest in a product or service) requires a solid business plan and a compelling product that has vast profit potential.
A lot of people email me and ask me how to raise money from angels or venture capitalists but unfortunately these seasoned investors won't usually invests in a product that has no sales revenue. In other words, you have not proven your concept so there is too much risk for them to take. They will want to see that you have some sales behind you. In addition, you would need an investment grade business plan for their review before they will invest.
Bottom Line - get the facts that you need about your product and business and then prepare as much information and research as possible. Begin to write your own business plan and then seek out the advice of professionals to polish your plan.
| Jim DeBetta
Article Source: http://EzineArticles.com/?expert=Jim_DeBetta |
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