Slicing Pie: Fund Your Company Without Funds by Mike Moyer

Author:Mike Moyer [Moyer, Mike]
Language: eng
Format: epub
Tags: Manuscript Template
Publisher: Lake Shark Ventures, LLC
Published: 2012-09-03T22:00:00+00:00

GHRR

$100/hour

Business plan hours

500 hours

Patent research hours

200 hours

Time @ GHRR

$70,000

Legal fees

$10,000

Theoretical Value of the IP

$80,000

Royalties

In addition to calculating the theoretical value of the intellectual property, it may be appropriate to also provide a royalty payment to the inventor. Royalties reflect the fact that without the idea the business would not be possible and that the idea itself is generating buzz or recognition for the company. Additionally, royalties only reward ideas that actually help the company generate revenues.

I recently spoke to a guy, we’ll call him “Ted”, who wanted to start a Grunt Fund with another guy who we’ll call “Xerxes”, who had been working on a technology product for six months. Ted thought that Xerxes would have been better off building a more basic product to test the concept instead of the robust prototype that was actually built. Ted was concerned that the theoretical value of the idea and related work was going to be too high. If Ted and Xerxes had been working together since day one, Ted could have helped Xerxes design a more basic product for testing. In this case Ted could offer a royalty to Xerxes that would only provide pie when the product actually generates revenue. This way if the product turns out to be a dud, Ted won’t feel that Xerxes has too much pie. Likewise, if the idea turns out to be a winner, Xerxes will be properly rewarded.

Solo entrepreneurs who spend years developing their ideas often over value their time. Royalties can help address time invested before the team actually forms.

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