Do You Like My Invention?

Inventors often ask for my feedback on their inventions, but the only thing I ask about is revenue.

As an investor who focuses on IP, I get asked for feedback on inventions and patents. I have written hundreds, maybe even a thousand patent applications, reviewed countless more, invested in startup businesses, co-founded one, been an inventor on 30+ patents, wrote a book “Investing in Patents,” have a podcast “PatentMyths,” written hundreds of blog posts on IP, and now provide IP-backed loans.

My focus for the last two decades has been to create value with every patent. My goal has been to reverse engineer the IP system from litigation/enforcement through prosecution with the examiner, to writing the initial application to try to create value with every patent.

After years of watching patent-related trends and hanging around the startup space, I no longer encourage inventors to get patents first.

I encourage them to start businesses. 

Patents are a secondary matter that come later in the process.

Early patents are always “prophetic” in some manner because they are always missing the voice of the customer.

The only person who decides whether your idea is good or bad is your customer.

My opinion about your idea doesn’t matter.

I am quite often very wrong. I take calls from companies that I think would be a disaster – until they tell me they had $5M in revenue and I sit up straight and take notice. There are also companies where I think “this is a winner” only to find out that they struggle to get going.

Your customer’s opinion is the only one that matters.

Most entrepreneurs, to their credit, try to get feedback from as many people as possible. They might not realize that they self-select these people to get the response they seek. It is the moral equivalent of asking your mom if she likes your artwork.

The customer’s opinion is measured only in dollars.

Entrepreneurs will often say that Big Customer “is interested” in their product. They have a huge “pipeline” of customers but have not closed any of them. While this is an essential step in launching the business, it is not enough.

The customer’s opinion is measured only in dollars.

Every person who says they are “interested” – until they give you their credit card – is not really interested – YET.

Revenue is the only meaningful metric of value of a business, and revenue is the only meaningful metric of value for patents and IP. If nobody is making money from the idea, if no customers’ lives are better for purchasing the product, the idea has no value – YET.

Before revenue, the invention and the business may have lots of potential, but no realized value – YET. It is the entrepreneur’s job to turn that potential into reality.

An ‘idea’ is worthless without execution.

Years ago I began my IP journey with the infatuation of my ideas. I basked in the glow of the potential uses of the invention, the pride of seeing my invention on the store shelves, and the trainloads of cash that the idea would bring.

I have become much more, how do you say, cynical about basking in the glow of a wonderful “idea.” I measure the competency of an entrepreneur – and the value of their idea – based on their ability to execute the business. If they are generating revenue, the idea is solid. Until they accomplish revenue, the idea only has potential.

When asked for my opinion about an idea without revenue, all I see is the rock that needs to be carried up a very big hill before there is value. The entrepreneur (and the angel investors) focus on the “total addressable market” while I am focusing on what needs to be done to sell something – anything – that addresses the supposed market need.

I want to see execution, not an idea.

Entrepreneurs who are not the inventors have a distinct advantage.

Many companies who are successful are guided by the original inventor. But many entrepreneurs who are the inventor crash and burn.

Having done IP-backed lending for nearly a decade, I am becoming more and more excited when I see a company resurface from bankruptcy with a new leader.

Entrepreneurs who are inventors have a natural love of their idea. Their ‘passion’ can be romantic, but from a practical standpoint, ‘passion’ can be disastrous.

Companies who restart after bankruptcy tend to be focused and extraordinarily dispassionate. They are focused on the bottom line: building a business, not building an idea. I see this as a distinct advantage, since management made a (hopefully) emotion-less, data-driven decision to take on the challenge.

These entrepreneurs tend to shed the parts that were not working and double down on the good parts. They also know that success is not guaranteed, as the first try for the business was a failure. These business opportunities are one of my favorites – because they focus on the business, not the idea.

Bottom line: many ideas are ‘clever’ and ‘insightful’ and even fun, amusing, or inspiring to contemplate. But that does not make them ‘good.’ In my view as a pragmatic investor, ‘good’ inventions are ones that are satisfying a customer’s need so well that the customer is willing to pay their hard-earned cash. Those are the good ones.