The vast majority of new products and devices hitting the market today are designed within company structures and are funded from within the business. But for very small companies or lone inventors, funding can be a real issue.
How to Fund Your New Product Idea
Those who don’t have the cash flow to spend on product development may be able to obtain funding from somewhere outside the company. But that is the start of a financial nightmare for many small inventors; it marks the onset of meetings with people who will only part with potentially large amounts of money to help you finance your product to full production. In return for their investment, those who bankroll you hope that your device will sell sufficiently to give them a large return on their money.
The obvious place to seek funding is at a bank, but mainstream banks are now far more cautious to whom they lend money and for what reasons. Mortgages – always seen as a sure bet — are becoming harder to obtain, so asking a bank to help fund a new product with no certainty of recouping their money may be a very tough job indeed. But there are other means of obtaining the money you need, and they can be a lot less stressful than going cap-in-hand to the bank.
This concept rose to prominence a few years ago as a means of securing funds for anything from political campaigns to new product introduction as small amounts from a great number of people who all have a vested interest in the idea. The desire to invest in the scheme varies with the type of product; a political campaign may be invested in by people with similar political views, but investment in a product means offering something else for the dollar that people would be asked to pay. In these cases, it may be possible to give people a free or reduced price example of the product or even make mention of their name on your website or on promotional material. Crowdfunding has become a major means of securing assets for product development, social experiments, and charitable or political campaigns, and is growing in stature.
Kickstarter is one of the largest sites for seeking crowdfunding. The website caters to all sorts of projects from directors seeking funding for a new movie, to start-up funds for company launches. On Kickstarter, all you have to do is to convince enough people that your idea is worthwhile and hope that whatever incentive you offer is enough.
There are many people that make a living from supplying funds for products and making a profit from the resulting sales. Since this type of funding is more akin to gambling, these types of people may require as much information as a bank and tend to have a much better understanding of the new product market than a bank manager. Inventor organizations and forums may be able to put you in touch with people like this.
All governments want to help bring new products to the market — as taxes can help boost the local economy. These type of services can usually be sourced from government websites, but new product forums may also carry details about where to apply and what support you are likely to get out of it.
Not having sufficient funding behind you is no longer a relevant reason to ignore the gem of an idea that you have in the back of your mind. Funding for all stages of development and production is usually available, and once you have those initial designs completed or have a rapid prototype model to show, help with the daunting stage of full-scale production will most likely be available to you. All you need is a good idea in the first place. For more information take a look at our Funding your business eBook.
Pivot International is a product design, development, and manufacturing firm with strengths in software development, electrical engineering, mechanical engineering, and industrial design. If you are interested in engineering a new product or updating an existing product, contact us at 1-877-206-5001 or request your free consultation today.