We have laws to protect workers, investors, directors & companies but we do not have a single law to protect our inventors WHY? Is it not inventions that create employment, manufacturing and brings wealth from oversea back into Australia making her a richer nation?….isn’t that how its suppose to work?

Lets get a law that protects our inventors so that they can get on with their jobs of bringing us a better future.

Investors are the first to point to results with a Machiavellian bent – maybe their analyses are internally consistent at a micro level, but at a macro level there’s a distinct lack of results compared to our potential (If I’m wrong here well that’s just depressing and we should stop kidding ourselves we’re an “innovation nation”). Whether it’s deep tech/eng/bio talent heading overseas, companies migrating to easier capital flows or simply not getting started at all, there’s a massive disconnect between the potential for innovation and the actual results thereof. I think the problem is manifested structurally, but caused culturally. We don’t seem willing to challenge the assumptions upon which are collective decisions are made, and those who attempt to do so are cut down with arguments at a different level of abstraction – it’s this disconnect that’s causing friction between investors and inventors and is largely unresolvable unless both sides come to the party and are willing to open up to the possibility of both sides being right simultaneously and seeking a new structure that supports that. At present inventors are too busy moonlighting and investors are too busy reading and listening to crappy business plans that nobody actually has the time, brainspace or commercial capacity to actually execute on this. But it needs to be done.

you think building the space shuttle was easy? …just time consuming & difficult?

would you consider building a prototype of a geothermal powerplant that tunnels 6 kms into the earths crust easy?

…i could go on but i wont… there isnt any point… you have demonstrated WHY i will end up leaving australia too… because the VC game is convinced it is always right… and about my “emotional response” well believe me this is very calm… i have just had enough of trying to communicate to people who arent willing to consider the possibility that they might be wrong no matter how much evidence is presented…

i wholeheartedly have to disagree with everything you say… from my point of view its the exact opposite… its the commercialisation end that is easy to me (but just hard work & time consuming)… its all the stuff before that which is hard… not because it has to be, but because i am doing it with utterly no support or encouragement whatsoever

the FACT remains that we have a problem… good ideas are going to waste or being lost overseas… and you have all convinced me that this is what i need to do too, since there is obviously no support here… only a bunch of assumptions and including the arrogant assumption that your previous assumptions are true without needing to ask a single question first to determine if this is indeed the case… i dont know how you justify this, it doesnt seem rational to me at all

I write in response only because I want you to win.

It is disingenuous to rebut a response with “how predictable” or “I knew you were going to say that”, as though the frequency or consistency of the message somehow devalues its content. I would suggest the contrary: the more consistent the response, the more likely that there is something critical to be heard. If everyone is saying something, listen.

You said:
“have worked on some of these concepts..”
“developed a significant proportion of a business plan..”
“begun the process with another…”

Great! But until you have traction in a market that can be commercialised, you have what I said, (you+paper). You and a plan, no matter how well researched, or how well developed, is still just you and a plan. To further polarise the issue (and invite scorn): Writing plans (however hard) is easy. Even building things (however hard, costly and life consuming) is easy. Commercialising them on the other hand, is hard. Getting market traction is hard.

One of those handy rules of thumb is that startups don’t die because of technology failure, or product failure; they die because of market failure. Or put another way, I’d bet 9/10 times that you’ll deliver the product. And bet again 7/10 times that the product will fail or flatline in commercial markets. It will run out of Money before “making it”.

Your position is articulated as an emotional outburst to the (seemingly) disproportionate balance of power enjoyed by a spiteful, greedy and slightly malevolent Money. My comments are in reference to this contention. I make no assumptions about your personal capacities or the merits or progress of your business interests.

Your central arguments as I can distill them and summarise a response are:

1) Money should have simple mechanisms to secure your IP in any discussions between you.

a) No-one is going to steal your idea (if it’s common practice, I’m sure you’ll find hundreds of examples to rebut me) b) Someone has already thought of something similar, or will soon. No-one who talks to entrepreneurs as Money is likely to sign an NDA because of (b). And your business plan should already have an answer for how to deal with (b).

2) Pre-seed Money needs to step up and support more good ideas.

I agree. But lets clarify a point: Writers and artists are contracted to produce _saleable_ works. Not to produce plans-to-produce-potentially-saleable-works. They’re paid to produce _product_ that another business has a finely tuned process for turning into profits. In this picutre, artists and writers are more like a farm that produces a crop than a clever man who produces great ideas, so your precedent doesn’t really apply. Business plans, no matter how incredible, do not produce profits.

3) Investors need to be more open to negotiations on the terms of investment and stop fronting unreasonable ‘demands’.

In regards to Investors you said, “You keep the percentage share in accordance with the separate components that you have earned!” But that’s exactly what a funding arc does, as a company’s valuation increases over time. And at the risk of repeating myself, Money doesn’t want your whole company. It wants as much as it can get while keeping the drivers (in this case you) wholly committed. And there are some pretty steady rules of thumb that apply (for equity stakes at various stages of a company’s commercial/market trajectory).

That said, back your own play. If you feel that your idea is truly worth more than a 40% stake for money would value you at, man back yourself and walk away. I will point out though that unless you have an exceptional, previously successful team, “pre-product” (let alone “pre-plan”) pre-money valuations are likely to be pretty low.

Money and Inventors are on the same team. If you’re genuinely concerned about Money “ripping you off”, you may be in the wrong frame of mind to raise capital.

your current assertion is based on the assumption that investors are in some way powerless in the process & taking huge risks with lots of money on lots of projects, many of which might fail (perhaps the majority in your view)… but this is not what i am proposing at all.

if you reread the article, what u will see is that there is a TINY amount of money (less than $100) invested in a stage that precedes this… which is where investors get to hear the details of the project in much greater detail than they usually would & for a greater quantity of projects than they usually would, because the purpose of this stage is to remove the barriers to that conversation taking place & taking place PROPERLY…

…so investors are not even going to GO to the stage u are talking about in the first place, if they didnt think there was a damn good reason to do so

SECONDLY… during this 2nd stage where investors are asked to put in a bit more money to do due dilligence on a business plan… well, just because i suggested that the money be repaid as a retrospectively applied loan when the business is up & running, that doesnt mean that i was suggesting that this is the ONLY possible means of returning that money… and i freely admit that as the amount of money increases, that method of return becomes less appropriate… but i was never intending to write an exhausting article on every element of the possibilities. what i was trying to do was to show that if investors want to avail themselves of MORE & BETTER opportunities for investment, then they have to start thinking more about how they can make it work for the inventor or entreprenuer, because right now, their effort level is indistinguishable from zero

if an investor had gone to stage 2 with an inventor, the fact is that in this particular model i propose, THEN they have already reduced their risk because of the projects they chose NOT to go to stage 2 with… and the recovery of literally a teenagers pocket money risked on stage 1 cannot be (in any rational argument) considered a difficulty to recover… thats just ridiculous

but yes you are right that there is more money being risked in stage two… and that might vary from at the lower end being about a few tens of thousands, to just support the living expenses of someone while they complete some stuff without the need to also do a day time job etc which is what really makes it impossible for a lot of people… through to the higher end where an investor might be risking a few million dollars to get all sorts of prototyping done etc.

the whole reason that anthill (i think) has published my article is because during VC month, there was a lot of discussion about the failings of VC & investment & government to support seed stage businesses… and the fact is that australia continues to lose its brains to overseas… the other problem being that if we have local talent who come up with something, but they cant get funding… with every day that passes there is a chance that someone overseas will think of something similar first (and then once again we have to import it)…

…so whether or not my exact proposal is the exact way things should happen is irrelevant… and it wasnt presented as the be all and end all solution, it was presented as me coming up with something on the spot that is at least roughly in the right direction, whereas the vc industry in several decades has done little more than sit on their arse with their dicks in their hands… and thats a fact because there is no evidence that they have EVER put any thought into this at all… or at least no evidence from the perspective of someone who actually has some kind of reasonable standards on the subject… but my expectations of them are not low, i expect WAY more than what they do, because i cant see that they do much other than sit back & take money & make demands

What I was calling you out on was this –

“I also don’t think it would be unreasonable to say that, if I do get the pre-seed support to develop the business plan, this money also should be paid back by the business as a retrospectively applied loan.”

I think that is completely unreasonable. It would be sweet if it happened. But think about it.

What sort of interest rate should this retrospectively applied loan pay?

How many of these seed investments would then have to pay the loan back for Angel/seed investors to make money? Do that maths.

Lots right? That’s why they don’t do it. Getting seed funding that converts to equity at the same rate as the first round does happen, but not often. Why take the extra risk if you just get first round equity rates?

And I’m glad the comments didn’t upset you, its nothing personal. Things are tough for entrepreneurs. Its economics, not lazyness.

I just thought I would point you to this very good series of posts on raising capital –

http://www.bothsidesofthetable.com/category/pitching-vcs/

I hope it helps.

thanks

dont get me wrong, i am not upset by your comments, i understand that people have different opinions on the subject… but its a fair amount of assumptions required to make those comments… in much the same way as “the big spoon” made comments based on assumptions, and neither one of you asked a single question to confirm the validity of your assumptions before commenting.

i have worked on some of these concepts for as long as 15 years… i have developed a significant proportion of a business plan on one of the major ones, and begun the process with another… i think you have made a great deal of assumptions in your response, and its not the first & not the last time i am going to hear this very predictable response i am sure