June 14, 2021

Entrepreneurs Over 40 Episode 3 with Stephen Key

Entrepreneurs Over 40  Episode 3 with Stephen Key

Episode Three features Stephen Key of inventRight talking about how you can make money doing product development!
My Key Takeaways:
You don't need a patent - If Apple cannot defend their intellectual property, what are the chances we can?
We don't need t...


Episode Three features Stephen Key of inventRight talking about how you can make money doing product development!

My Key Takeaways:

  • You don't need a patent - If Apple cannot defend their intellectual property, what are the chances we can?
  • We don't need to go out and start a company.  There is a lot of risk involved and by  the time that you get a product to market it is already being copied.
  • Regarding Opportunity in general - "You have to knock on a lot of doors, and realize that most of them will shut but eventually one will open!"
  • You can use LinkedIn.com to get in front of the right decision makers at companies.

 

Be sure to hit Subscribe in your podcast app so that you don't miss it or any other episodes.

Transcript

0:00:00.1 S1: I guess today is a lifelong entrepreneur in a 2018 2019 American Association for the Advancement of Science, Lemelson invention ambassador, his achieve repeated success as an independent product developer including licensing over 20 products and wanting 20 industry awards, is the inventor of record on 24 pensive five that selling books on Amazon, with the last one being licensing ideas using LinkedIn. You can read his articles online for forms and the entrepreneur and watch him on and then write TV without further ado, let me introduce the one and only Stephen key. Well.

0:00:39.1 S2: Thank you for that introduction. I'm always like, Who is that? Who is that person? I never cared much about resumes, but I guess... It adds up over time, doesn't it?

0:00:49.1 S1: Yes, sir. Yeah, thank you for inviting me. Thank you for being here. I was gonna ask, can you take a few moments and fill in the gaps from that intro and bring us up to speed with what's going on with you now?

0:01:01.2 S2: Yes, I do quite a bit of writing on intellectual property, but I also write a lot about the business model of licensing ideas to companies, which a lot of people don't... Haven't really heard about... I guess I'm an inventor. I think that's kind of a very lofty word or I'm a creative person, I have ideas and I don't wanna start a business, and I would like for a company to take it to market for me, and that's what licensing is all about. You're going to rent your idea to a company and they're going to take it to market for you and you're gonna collect royalties and everyone they sell. So I write quite a bit on that topic on licensing for creative people like myself that just don't wanna mortgage the house over, quit your job, or maybe you just don't wanna have employees all... I don't wanna do any of those hard things, what I wanna do is be creative and like companies... Do all the work for me.

0:02:07.3 S1: Alright, did you come from an entrepreneurial or inventors-type background, did anyone in your family while you were growing up, start a business or invent anything or...

0:02:18.0 S2: Yeah, that's really a great question. I don't think anybody's really asked me that before, my father was a company man, he got laid off after 25 years, which I'm probably looking back, I probably did have an impact on me. He loved what he did though, he worked for General Electric, loved it, and he always told me, and if you find something you truly love to do, you never work a day in your life, and I don't think my father ever did. Once he was laid off, he re-invented himself at least two or three times, he did different things, and he just always had a really good attitude about it. Never worried about it, and it worked out fine for him. So... Was he an entrepreneur? I think maybe later in life, a little bit, but no, I actually got started by accident, I think... I was studying Economics at San ICAR University, which was not a good fit for me, and I took an art class by mistake. I'm in my early 20s, I take an art class and I felt I love working with my hands. I go home, I tell my dad, I said, Hey, I wanna be an artist.

0:03:31.3 S2: And he was like, You wanna do what? And I said, I wanna be an artist. He said, Well, you must like to draw, and I said, No, you said, Well, you must like to paint that... Right. I said, No, I don't like to do that either. So he let me change majors and basically jump off the cliff. Now, what Father does that... It's interesting, looking back, he was very brave, he knew that I needed to find something that was gonna make me happy, so I just started taking our classes and realized I wasn't going to be this great artist, but there's something about being creative that I really loved, you see, every time I read about artists, they seemed to create... They never retired, they loved it so much, and I loved working with my hands, so I just combined working with my hands with a little bit of business. Okay. And that's how I got started. I knew that no one would hire me because I really didn't have any skills, my family... It's kind of funny. They never had to go out and get a job. Although I had a few jobs, they never prepared me for life, so...

0:04:57.7 S2: I don't know if that was a good thing or not, but I knew once I had to get out in the real world that I had to find a way to make a dollar. And since I had a school was not easy for me, I realized I didn't think anybody would hire me, so I created my own job. That's how I got started. Okay, let's talk about you creating your own job.

0:05:22.9 S1: Was that with the rotating label that you invented something prior to that?

0:05:29.6 S2: It was prior to that, I was watching... Now, this is many, many years ago. On Friday night, I think I was watching Dallas on Friday night, I think everybody was watching and he was... I'm sitting on this couch and someone was sitting there next to me and took a piece of nylon and took a little piece of cotton and sculpted a little face that I'm out of law, I guess it was soft sculpture, is what it was. And it was a cute little face, and I thought, Wow, that's really cute, and I thought... Let me try that. So I made a face too, and I thought it was really kind of clever, so I just started making things out of women's nylon and cotton, and I would sell Funny faces, and then I took them out to a, I guess, a little arts and crafts Festival at the local elementary school, and there was... I had a little table, I brought everything I made, and it was a country... It was up in the hills of low Catalonia, and I just tried to... I wanted to sell my little creations. You've seen people do that before.

0:06:42.1 S2: Right, and... Oh yeah, and my father showed up later that day at the very end of the day, 'cause I told him I wanted to make things and sell them, and he showed up and he said to me, How do you do... And I said, Well, I did fantastic. He was, well, how many did you sell? And I said, Well, I didn't sell any. You kinda looked at me kind of funny, but he could tell I liked it, I liked the people, and it was my first time trying to sell something, so you make mistakes and I did, but I went back out later and I changed my designs a little bit, and they started to sell. So I sold things at street fairs, county fair, state fairs, wherever I could set up a table for about five years, and I made everything myself and learned a lot about designing things quickly, and that they didn't sell kick it to the curb because in order to pay the rent, you have to come out with something someone wanted...

0:07:36.1 S1: Okay, so you learn to iterate fast at that point.

0:07:39.2 S2: You know... Yes, and I think that was really important because even today, what I've been sharing with other people of how to test an idea very, very quickly, and it was because I was supporting myself paying the rent and eating, and if it didn't work, I would have to get a job. Okay, so... Wow, that wasn't gonna work. So I figured it out, and I just had a really good time and I did it everywhere. I loved it.

0:08:10.6 S1: Were you married at that point... No.

0:08:13.8 S2: I don't think I was a marriage material at that point, I was still trying to figure out, I knew deep down, I knew if I could sell something on a street corner in downtown San Jose, there's a very good chance I could probably sell that anywhere. And I was fascinated by that. How do you duplicate that? And in my mind, even though my friends and family, I thought it was the biggest loser on the planet, I thought I was doing something really magical, I thought that was very difficult, and I still do today, and so I learned a lot about people. I learned a lot about manufacturing, I learned a lot about creating things very quickly, but the big goal was How do I duplicate it, and I met someone that started to teach me how to do that in

0:09:02.6 S1: A sense, you were almost an alchemist at that point.

0:09:05.8 S2: I thought it was pretty cool, actually. I got very good at it, and I was making it by hand, and I was really fascinated by How do I scale it, and so when I met this person, Steve ask, and he's actually a good friend today, after 40 years, we still talk... I met him and he had a factory down in Los Angeles and he started carrying all the things I made, and before you know what they were selling all around the country, and he had me teach his factory how to make them, so I learned a little bit about licensing, I learned a little bit about manufacturing and selling, and like I said, he's a good friend even today.

0:09:44.6 S1: What was your first successful mass-produced an item that you would consider successful... Well.

0:09:49.7 S2: After Steve, we kind of kinda went separate ways for a few years, and I was still making things and selling them at some of the county fairs and that's... Someone that said, Can you make teddy bears? And I said, No. And they said, Are you a pattern maker? And I said, No, I make these by hand, there's no pattern. And they said, Have you ever tried? I said No. And so this friend showed me a pattern, and before long, I taught myself how to be a pattern maker, which is really an odd thing, but I was... I studied sculpture, that's what I did. So studying art, 'cause I love to make things, and so I was able to figure out how to make stuffed animals and I... It's a very odd thing to think that someone can actually do that, so... My very first job, I guess, I was probably 27 years old at the time, and there was a very large company in San Francisco called Day on, and they made stuffed animals. And after I practiced a few times, I just went over there and found the office, knocked on the door and said, Hey, I make up the animals he likes, and just by chance, the person that was making this very realistic looking...

0:11:02.8 S2: It was called the Elgon line or something. Very realistic-looking. Stuffed animal said, the person just left. And I said, Okay. And they said, Can you make stuff animals? I said, Sure, basically, I hadn't made just a couple, and they said, Here's some fabric come back in two weeks with the life-sized Golden Retriever, and so I grabbed the fabric and came back two weeks later and they were like, Wow, you can do this, and I said, I just kind of figured it out and I said, Yeah. And they said, Well, we want 25 a year of these realistic looking stuffed animals and we'll pay you 3000, and that was like a lot of money back on... Is that... You gotta be kidding me. So they gave me a pass to go to the zoo to study animals, I made sea lions and range tanks, and the first time I saw something I had made for date, this was probably the biggest time... One of the biggest moments in my life, I

0:11:55.3 S1: Was at FAO Swartz, the toy company, and I was downtown, it was February around Valentine's, so I was in New York at Toy Fair, and I walked in FAO sorts and there was my work at one of the best toy stores in the world. And

0:12:11.4 S2: To think that I was making things on the street corner and now I was in New York, I thought, well, I made a pretty big jump, so I was pretty happy about it.

0:12:21.0 S1: Yeah, that had to be a proud moment in your life, he

0:12:23.4 S2: Had shocked me because everybody thought I was kind of out of my mind, and here I was standing there looking at my work, and then I left day and took a job at World's wonder and world's wonder was just a startup company and they launched Hedy respond laser tag, and I was employee number 20. I read an article in the Sunday paper, 'cause I was in Fremont and knocked on the door again. I like to knock on doors, if you can tell... And knocked on the door and said, You need me. And they said, I said, What do you do? I designed push for taken, the biggest company in the world, and they stand... So they hired me, it was kind of like going from living out of a very small apartment... And my life changed overnight.

0:13:05.9 S1: How involved were you with the ROC spen? Well.

0:13:09.0 S2: Yeah, pretty... Well, there's a prototype there on the first terpenes prototype, and the original Teddy report... I was employee number 20, they were just manufacturing Teddy, and I eventually became manager of Design at world wonder, and I lived over in the far east for months at a time. And when

0:13:28.5 S1: The part of my job was to make sure Teddy looked pretty good coming out the production line and...

0:13:33.1 S2: What does that really mean? Well, Teddy was just talking teddy bear with his math, and if you put too much stuff stuffing in the nose, the mouth doesn't move, so I'd be on that production line with all these women and they giggle and laugh, there's this tall guy there with all these women and then I would show them how much to put in the nose for Teddy, to make sure the mouth would move, and I would weigh it out, I have a little scale and I would weigh it out this much, and then the next day I'd come back and the scale was gone and the mouth was a movie, and I go back and put the scale there to make sure Teddy was working correctly, so I had a little bit to do with Teddy, but the outfits... Teddy has a lot of outfits, and I remember there was a Christmas party at words Wonder, and all of us was going to... The president, the CEO'S home, it was Christmas time, so I made a little Christmas outfit for Teddy, and little did I know what... What happened, because I brought it there, it was a big hit, and next thing you know, we made outfits for Teddy for all around the world.

0:14:31.9 S1: Yeah, it's crazy, it's something... You were just doing it a Alawi that you didn't really think would take off... To go off, I

0:14:39.0 S2: Thought it was just a nice gift, but a little bit, I know that what... That little outfit, of course, Teddy went on lots of adventures, so we've made outfits for basically all around the world. My office did. So

0:14:50.0 S1: Let's switch gears just a little bit. I've read it that you consider practical licensing the best business model. Why

0:14:56.3 S2: Is that? So when I was on the production line with heavy rock band, something my father had said to me, he said, Steve, in order to create great wealth, you need to find something that does not require your hands or your presence and has a multiplying effect. And I remember when he said that to me, I didn't really understand what that meant, but I sure did. When I was on that production line, I was over in Hong Kong, China for over three months, very lonely, and the inventor of Teddy remand was not there, he had licensed or rented his technology to World of Wonder, so he wasn't doing this by hand anymore, he wasn't there I wasn't present and it had a multiplying effect 'cause he had a factory making him form, so that's what I dislike on that this licensing product... Licensing business model was something I was very interested in because he was clicking a million dollars a month and royalties... Now, that's kind of crazy. Right, but I liked it because he... He was just using his creativity and everybody else was doing the work, in fact everybody was working for him, and that business model was very attractive to someone like myself that didn't wanna do some of the other things, do you have to do the runner business, but the biggest benefit about product licensing today is really speed, you see...

0:16:08.4 S2: You're watching shows on Shark Tank, of course, and you're watching people on Amazon, and you're watching all these people do these start-ups, well, the success rate of startups is very low, in fact... They don't like to talk about the failure rate of startups. But it's very, very low. It takes a lot of money, it takes a lot of time. And if you're really successful today, you will be copied and you will be copied so fast, if you do a crowdfunding campaign, you... Before the campaign Even ends, they'll be selling it somewhere on Amazon, and even Amazon now is jumping in there and maybe I might be influenced by your work, so if you really wanna be smart today, you wanna leverage what can you do to be the first self... First, sell fast, and the best way to do that is to license an idea to a company that already has shoves, See, they have everything in place, so you click a royalty on the wholesale price. They do all the heavy lifting. And that allows you to come up with more ideas. So it has that multiplying effect to give... My father talked about...

0:17:09.9 S2: So product licensing to me is an ideal business model for startups for companies, because you can license some technology, you can keep some technology if you want to, you can leverage the size of a company, they can protect your idea because of their size. So there's so many benefits to it, and there's no financial risk, you don't have to quit your day job, you don't have to do anything silly, you could just be creative. That's why I love it so much. There's

0:17:35.7 S1: A lot of financial risk, getting it manufactured

0:17:38.9 S2: The flow. Yeah, I don't think people really grasp what it takes, and I did... I have taken a few products to market myself, and really simple, I guess, I took a line to funny shaped guitar pick, they were in the shape of skulls and vampires and even Mickey Mouse, but basically it was only a three-cent piece of plastic and we have eventually sold our guitar picks and 10000 retail stores from Walmart to 7-11, we sold them around the world, but it costs so much money in the first order from Walmart, I had to come up with the Court of a million dollars just to fill that order with the three cent piece of plastic, so I don't think people really understand it, I think they're confused by it, I think they're gonna sell a few on Amazon, maybe in fact a few in their garage, so it's like, Okay, if that's your mindset, you'll always be in your garage, but if you really wanna sell product, it takes quite a bit of cash, and the other thing too, if you're gonna sell it in the big stores, the big retailers you had mentioned it's the float game, you have to pay the...

0:18:45.7 S2: That makes it for you. And then you sell it, you will sell it to a retailer and then they pay you in 90 days, 60, 90 days. So you have this area, the 60 days of no one and comes that coming in. So it's called the float. Today, you can sell on Amazon, right? And where there's no float game because you're selling straight to consumers, but still realize you need to have some inventory and you need to market it, you need to create demand in running a business, takes a lot of work, and if you wanna do that, then that's perfect if you have that personality where you wanna manage the finances and employees and health insurance and all that fun stuff, then yes, be an entrepreneur, but if you wanna be creative and you wanna leverage the power of companies, licensing might be a different business model to look into I may need to change name of the podcast, the product development over 40... Well, you know what's really crazy. I'll be 65 in June, and I'm still in the game. You can do this forever. I mean, you don't have to retire. I have a product, I work with a few inventors called fish bone, fish bone packaging, it eliminates the plastic rings on beverages, so we licensed it to a very large package company, and they do all the heavy lifting.

0:20:01.9 S2: We're still very much involved, but that's another part of the licensing business model, we leverage our designs to a very large company to really implement it for big ideas, if it's a great business model. Pretty even simple, I guess it's a great business model too, but... And we do have students that have taken my course from 1882, living in every part of the world with no financial... You don't have to file patents or build prototypes or all that crazy stuff that... It's expensive what I'm trying to teach everybody. Anybody can do it at any time, you don't have to do, you don't have to quit your job. You can do this for the rest of your life and have a blast at it and

0:20:38.2 S1: Came back to your invention about the placement for the six-pack rings. That's a noble idea.

0:20:43.9 S2: Yeah, you can see it here, I think here, right over here. Yeah, that's on a new product, but that's a big idea. Those are a little bit more complicated, but if you understand how licensing works, the ideas don't even have to be your own... That's the other thing I try to tell everybody. Fish bone is not my idea. I just understand licensing, I'm part of that team. So once you understand, it could be your friend's idea, it could be somebody else's idea, it could be something you see, but once you understand that the process of product licensing can help if you understand it

0:21:15.5 S1: Is now is a good time to get into product licensing as far as with the democratization of all of the utilities and Amazon, everything being more accessible than it was.

0:21:26.8 S2: I think it's a fascinating time to be an entrepreneur. I think if you're an entrepreneur, you should look at every method because sometimes products are maybe best, if you bring them the market yourself, if you have an idea that you don't have to sell a brick and mortar, and maybe if you don't have to manufacture over in China, there's ways to sell online to reach a large audience that you can bypass everybody now... Okay, so that's a really great business. Just think about that. I mean, you can control everything now, you still have to do a lot of work, of course, and you know, I tell everybody the hardest part is creating demand, you can have a great product, but if no one can find it... Alright, you have a problem. But what a wonderful time. I mean, there's companies that will do the fulfillment, they'll do everything for you, what a wonderful time, and you don't have to have all this inventory like you used to used to have. So yes, it's great. Some products though, maybe you're a little bit more complicated and you need some off-shore manufacturing, you need a company that's got great distribution place...

0:22:30.7 S2: It all depends on what you wanna do with your time. Depends on what your skill set is. I tell everybody, If you wanna venture an idea, you know it might be a good idea to find some partners or whatever, you do, make sure you... It's always a knowledge issue, people think it's a money issue, it's not a money issue, it's a knowledge issue, the process of retailing, to go into trade shows, to do packaging, to do finance, all those things. You're gonna need someone that can help you with all that. If not, you're gonna spend years at this, and if you're 40, that's not a great use of your time, so find some partners that do understand other parts of it, so I see a lot of entrepreneurs try to strike it out on their own and they think it's just about the idea, the idea is, is big enough people will come... No, no, no, no, no, it's not like that. You need to partner with people that do understand parts of the business... I understand it's gonna take a lot more time. Do you think it's gonna be fine? Something you're extremely passionate about and be willing to be flexible, be willing to fail, you will fail.

0:23:31.9 S2: So if you're gonna find someone to partner with, make sure you find someone that's done it multiple times, they have failed repeatedly and they're still happy, it sounds like your family did prepare you well and that you've taken a lot of risks, you obviously are not afraid of rejection, or at least it doesn't seem that way.

0:23:48.7 S1: You've obviously been successful, and because of that.

0:23:52.8 S2: It's really interesting that this failure thing is really... In an interesting word, I've been failing since the second grade... Okay, let's get that straight. I barely, I barely passed the second grade, so I've had tutors my whole life, I was tested my late 40s, and I was determined I have a severe learning disability, big surprise there. So I'm very... I wouldn't say I'm comfortable with failure. It irritates me, but it does not stop me, you see, I think what I've realized, for an example, I write a lot, I've written a thousand articles in licensing, I write lots of books, I'm not a writer, you try to tell everybody, so how do you write? So much, if you're not a writer... Well, you don't have to be a writer. If I have good content and if I can deliver it to someone that does write, well, they can write in my voice and I can... I've got my iPhone now I can dictate into it, next thing you know, I have a transcript, someone... Can I clean up my work? So I guess what I'm saying is, I don't let obstacles stop me because we all have them, and I have probably more than most, and I think obstacles are just really great opportunities for people to shine, if you just look at him that way.

0:25:10.0 S2: So getting back to the failure, yes, I'm probably the biggest failure or ever met, but I still have had a tremendous amount of success. Yeah, so I think they go hand in hand. Actually.

0:25:20.7 S1: It's candle, the baseball analogy of baseball player, that in any other industry, if you fail half the time at bat or in whatever you're trying to do, you're probably gonna be coached and may be asked to leave, but in baseball, you're hitting 500.

0:25:37.0 S2: Well, I was in college my freshman year. I was going, I was a senior, well, between my senior year in high school, first year in college, I went ahead and I took a job, summer job, and it was door-to-door sales, and that's gonna be the worst job you could ever have, but it's actually the best job you could ever have, and I remember being on this bus with all these people and they would drop us off, and we would all go out for an hour and come back and meet up, and I was pretty darn good at it, and I realized and everybody else was not happy. They would say, Well, how many people got this? And I would raise my hand, I was just happy. And everybody was looking at, Why is this guy so happy with this... I realize really, very quickly that you just have to knock on doors, and there's gonna be a lot of people behind those doors that probably are not gonna want what you have, but that's okay too, if you treat everybody as a friend, every door is okay, every door is just, Hey, I'm just Pam here, I'm doing this, I'm glad to meet you.

0:26:37.9 S2: No big deal, you go to the next door, so was never a failure, it was just more finding the door that opened, and I realized that... I think that success is like that too, you have to knock on doors and realize that most of those doors will shut, but every once in a while one would open, and I learned that when I was 18, and it was probably... I would say one of the most important lessons I learned was keep knocking on doors and don't be afraid of them to close a shot, because it's always the numbers game, and knock on 10 doors and one opens... Alright, I wanna knock on a 100 and I know 10 or gonna go open, so now it's just the numbers, Kim, that's all I use way. Look at that, I guess it's like if I can get 10 nos. Oh, I'll get a yes. That's the way I looked at it. I still look at it that way today, if you're not knocking on doors of opportunity, I can guarantee nothing's gonna happen, nothing is gonna walk by and magically find you. It's just not gonna happen that way.

0:27:30.7 S2: So if you learn to knock on doors of opportunity, anything can happen, so

0:27:35.9 S1: Switch them back to the product licensing, how are you coming up with some of your ideas, or what's a good strategy that you're using...

0:27:43.5 S2: Well, I'm not that creative, so I had to figure out something different... Most creative people, I think. They see a problem and then they come up with the solution. Well, I'm not a very handy guy, so I don't see very many problems, and so what I do, I do something a lot easier than that, I think that's too hard at work. I find an area I'm passionate about, let's say basketball, and I would go down and look at all the indoor... I love playing basketball, but I wanted to be on the play indoors while I'm just coming up with ideas, and so I bought this indoor basketball game from Ohio Art, I loved it, and the backboard was square, and I thought to myself... And this is the way I come up with ideas like, Oh, why does it have to be square? Well, why does that to be made at a plastic... I just asked my question, Why, why, why, why, why, why? And then I started playing with different things, I would change the material or change the shape, and I would play games, so I would look at a company's product line and play games, and every once in a while something would just jump out and in the case of the basketball...

0:28:46.8 S2: It was called the Michael Jordan Wall ball. I love to Michael Jordan and he... In the company. Oh, hi, Art had a little logo of Michael Jordan is really tiny. And I thought, Why is he so tiny? So I cut a poster out and slapped it on the backboard and I go, No, no, he's nice and big, he should be very... And it changed the shape from square to the shape of profile of Michael Jordan. Great graphics now. And why does that to be plastic, I can't be paper, because it's better print quality and less expensive, and sure enough, I showed it to this company, Ohio Art in three days out of contract on that simple idea, and I sold for over 10 years, and there was no patents, and it produced about 10000 in royalties the first year, and it probably took me about 10 to make... Maybe a little bit more. Wow. But I always play the games, so I know that companies, if they don't innovate, they will die, and I know that the designers at these companies probably are not happy because designers like to do their own thing and they like to have their name on it, and pats on the back and people that create don't create for a paycheck, they create because of love, so I just kinda knew that most of those designers probably weren't working, they wouldn't be working as hard as I would be, so I thought I could out-design them because I love it more than I do, and sure enough that it just kind of work...

0:30:15.9 S2: So I'm not a very creative person, but I have a process, and that process is looking at a company's product line and asking questions, being curious, and then making small changes because... I don't think you have to reinvent the wheel. I think that takes too much education, it's too hard to do, and people aren't gonna take those type of ideas, I think companies take ideas that are improvements on existing ideas, and the reason why there's no risk 'cause they're already selling. So if you can make a new and improved idea, it's really easy to license.

0:30:46.0 S1: So that's been my process. Are there any industries that you recommend targeting that are especially looking for new products in 2021, and are there any industries that you suggest avail.

0:30:58.5 S2: First of all, this topic of licence licensing, and the reason why it's so popular is that companies have embraced... Have embraced open innovation, and what that means is that they realize that, Hey, I might have 10 designers in the back and they're probably not not happy. Okay, and probably gonna go home at 5 o'clock, what happens if I open the door and have 10000 people submit ideas to me... Wow, that's called Open Innovation. They're open for people like us to submit ideas to them. Now, the toy industry has embraced open innovation probably 100 years. Other industries are fairly new to this, but most industries now in United States have... Not all of them, but a lot of them have looked at open innovation and look at what a great business model, we don't have to pay you until we take your idea, how you like that you're gonna work for us on pace, only pay you when we take it... And we only pay you when we sell it, but a great business model for them, alright, so it increases their chances of success, so open innovation is very popular in the kitchen category, it's very popular in the pet industry, hardware, it's very popular in Dr.

0:32:08.1 S2: TV, as seen on TV. In fact, all those products you see on commercials like late night, those are all from inventors, the pet... The list goes on and on and on. The companies that are not medical, automotive, colitis goes forever, the industries that are not in venture friendly would be the tech industries, I mean, try to call someone at Facebook. Try to call someone at LinkedIn or Microsoft, they don't even have a phone, I don't think so. Those companies are very hard to work with, so if you have the latest app or some other technology, I kinda stay away from that industry just because they're not user-friendly, and plus they see each other a lot, so I stay away for most guys...

0:32:48.4 S1: Is there a profile as far as how big of a company is, if it's real big or are they more or less invent or friendly...

0:32:54.4 S2: That's a wonderful question. We all have a tendency to wanna go after the biggest company 'cause they have the big brand we know, and they have the best distribution, right. But the problem is, the large companies don't need to innovate as fast, they don't need to take risk, now, maybe when they were a little bit smaller, they took a lot of risk, but when they get to be really big and market leaders, and they don't wanna take any risk at all? They don't have to, so they would rather the smaller companies create some category, then they come in, so I would highly recommend going after the mid-sized companies now, they're still big, trust me, mid-size can still be really, really big, so find the industries that have multiple players, that's a good sign. Find an industry that's got quite a few mid-sized player. Another good sign, find industries that are inventor friendly. How do you do that? You can ask them, see if they license ideas, if they work with inventors, if they embrace open innovation. I always tell everybody too, in order to determine who to work with, our license and idea, to always type in a company's name, complaints and lawsuits, and if they've got terrible customer service...

0:34:04.0 S2: Probing that a good company, right? If they're not on social media, I'd probably avoid them to... If they've changed their name, often I would avoid them as well, you wanna find the best protection, 'cause people always ask me, Steve, why don't people just steal your idea? Well, if an open innovation stole ideas, the doors close very quickly, and because of social media today, it doesn't make sense, but find the companies that do work with us is the best protection you can have people think it's about a patent. I would say 99% of all the ideas that we see get licensed, there's no patent, 97% of all patents never recoup the cost it takes to file though. So they need to do a little bit more homework. So what we're seeing today, I have a company called InVent right RHD, where we see products get licensed almost weekly in every category you can imagine, there's never a patent, and sometimes there's not even a prototype, which really is like... See, what do you mean? Not a prototype. Well, I tell everybody, sometimes it's only a 3D computer-generated rendering now sometimes they're going to want proof of concept, so if they do, then build a prototype, but be friendly, be workable, fine inventor-friendly companies and get creative and Sendai pretty simple to do.

0:35:18.2 S2: Okay.

0:35:18.9 S1: So I've come up with this great idea for a product. What are my next steps? Watch my YouTube channel. We have close to 50000 subscribers with 700 videos.

0:35:29.8 S2: Now, you don't have to watch all 700 videos, but keep on watching a few of them, you'll like it, they're short, we cover every topic you can imagine. Well, they still my idea, do I need a patent? Do I need to prod all the things. Everybody always asked, we address all those. And also, you can find the articles I've written on Forbes Inc, an entrepreneur. Like I said, I've written a 1000 articles, a million words or the last decade, but if you really are serious, please find my book, one simple idea, that book has been translated in five different languages, it's been taught, it's been used in quite a few universities now, but one simple idea from a Grail basically goes through these 10 steps and it's an easy read, I think you'll really enjoy it, but you can find it now on Amazon, it's called one simple idea, and make sure it's the most recent one expanded...

0:36:18.3 S1: Okay, the one in 2015. Yeah.

0:36:21.2 S2: I would read that because number one, it's just simple. I'm a pretty simple guy, I wrote it that way. And it gets... Everybody gets started. I see a lot of ideas where people have read the book once a blade and watch the videos and they license ideas all the time.

0:36:35.0 S1: King Solomon said that there's supposedly nothing new under the sun, and I've gone through and looked and there is something that's very similar to my product, does that mean game over? No.

0:36:45.7 S2: No, in fact... That's good news. That's actually good news, right? Because if there's something similar, that means there's a market for it, right? If you have an idea that's two new... Requires too much education. That's not a great thing. If you find an idea that, Hey, I found this, I have this idea, I cannot find it anywhere. I don't know if that's a great idea either. Most innovation starts here and there starts to be improvements, right. And it's safe, that's a safer bet for companies to take those type of projects on, so you don't have to reinvent the wheel if you find something similar, look at it very carefully and make sure you know your point of difference. That's all.

0:37:21.9 S1: Okay, so getting ready to pitch my product, I've gotten no industry connections, what should I do next, how do I get my foot in the door at a company and find out who you talk to? That's easy. The best way now is using LinkedIn, having a LinkedIn profile, we call it your digital handshake, because today, no one wants to talk on the phone, I... Even your kids don't wanna talk to you on the phone, they want you to text message of now, so reach out, make sure your profile is filled out, make sure you have a nice appropriate picture and reach out on LinkedIn, make a connection. You don't have to pay for the premium. Part might take you a little while. Connect with me, I have 15000 connections, and before you know it, you'll reach out to someone in sales or marketing, and just don't turn a pitch.

0:38:05.3 S2: Build a relationship first reach out and say, I'm a product developer, I'd like to submit and I did to your company, do you take outside submissions, go slow, don't make a link, don't tell me you have a billion dollar idea, they'll do any of those things. Do you pitch them in person, or has it gotten more online, you don't have to pitch in person, you don't have to be a sales person either, because most of us aren't... Alright, so we tell everybody, it's a one-page, it's called the cell sheet, so one page advertisement, the biggest image on that one page is your product, maybe it's a 3D computer-generated sample, maybe it's a prototype, but it's basically, Here's my product. At the very top is my one-line benefit statement, my value proposition, why would anybody care? You have that at the very top, so people grab it instantly and they go, Hey, I wanna learn more, and then you might have four bullet points, it's easier to use stored anywhere for a little bullet points, and then have your contact information down below, and if you have a prototype, do a one-minute video, show a problem and show a solution, and have a little button on your cell sheet to click here, so no, you don't have to dance on the table top and do a presentation everybody today or sending cell sheets to companies and if they do want more, it's a Zoom call or a Skype call...

0:39:20.6 S2: Yeah, very informal. They always talk about patents, most products in the market don't have patents, and I tell everybody too, if Apple, the largest company in the world cannot defend their intellectual property, what chances as anybody else have, so it's not about patents anymore, it's all about finding good companies that value us, reach out to them. Be reasonable, you educate yourself and see if your product is a good fit for him. I've talked about the company, we're going back and forth now, and we're trying to decide commissions, and I'm crazy, and I think I should get 40

0:39:58.9 S1: Percent. What is a good commission? And are there any other things that you really need to focus on? In a negotiation.

0:40:07.3 S2: Yeah, that's a tough thing. I tell everybody, you really need someone to help you a little bit, I would never do that by yourself. Okay, and I don't think you need a lawyer either, because parts of that licensing agreement will be business terms, so you can educate yourself or have someone that's done it before, royalty rates standards about 5% of their wholesale price, sometimes it can be a little higher. It depends on how much work you've done, sometimes a little lower... It depends on the volume, right? It's all a pretty standard, once you learn the language of licensing and you've read a couple of books, you'll realize it's pretty straightforward, you are going to rent your product to a company and they're gonna pay you for everyone they sell.

0:40:50.8 S1: Okay, what are some common mistakes that you see people make doing the product licensing...

0:40:55.9 S2: I think people are trying to... Like any profession, and that's why people are listening to this podcast, like any profession, you need to educate yourself, and there's a lot of people that are gonna try to do it on a YouTube or a book, what you can... But at the end of the day, every profession, you've either been educated somehow, you've had a mentor or a coach, or you've gone to school or something... This is no different. I don't know of any professional athlete that's... Watch our YouTube channel. It became a professional football player. I don't know of any plumber, that's what our YouTube channel now is, a professional plumber, so I do think education is the first thing you do need... It's not a money problem, it's not a patent problem, but there's a lot of people that wanna do it themselves, which I think is refined. But just make sure you have a lot of time on your hands. You're willing to fail. I think you're not saving yourself any money, I think you think you are... I just don't think you really are. People don't like to do it themselves. I think it's okay, and I think you can, but you need to educate yourself somehow, there's some areas that you don't wanna cut any corners, and one of them is negotiations, that's probably the biggest mistake I see people make, they get a licensing agreement, they try to do it themselves, and they just end up regretting it.

0:42:10.0 S2: Is negotiations something that invent... Right. Will help and verwoerd developers with... Yeah, we have a negotiation coach, we probably see more licensing agreements than any company in the world at this point, so we know the process... There's a sequence of events that have to happen. You don't wanna scare a company off, you don't wanna be too too... You wanna leverage maybe a little bit of market demand, you wanna make sure you're giving them all the right things they need to take some risk away... It's not as easy as people think it is. There's a certain skill to it, and part of it is just taking your time and most people get in a hurry, that's not the greatest approach, and a lot of people, you know there's... Licensing attorneys have gone to school, you think about trying to do something yourself where someone's got a law degree, it doesn't makes sense, but in a licensing agreement, there's really business terms and legal terms, so you really need to get help from someone that knows the business terms and then someone does illegal terms, it's a combination, but I would never, ever do it yourself, every time I see someone do it themselves, it's always something that's going terribly wrong and now they don't know what to do about it.

0:43:19.0 S1: What's been some of the biggest invent. Right. Success stories. I know that there's several on the YouTube channel as well...

0:43:25.3 S2: Yeah, the biggest one we cannot really talk about... I'll talk a little bit about it.

0:43:29.9 S1: Can we talk around it? Well.

0:43:31.2 S2: It's crazy, it's a technology that's on every truck that negotiations was very long and very difficult. There was a very big cash payment, probably the biggest cash payment I've ever seen, but the inventor did sign a very tough NDA, Non-Disclosure confidentiality agreement because the automobile company wanted to say they were the inventors of it. Gotcha. Yeah, so we don't... That's probably the biggest deal I've seen with the cash pay out, I usually don't see that much of a cash take because those big companies, they wanna pay a one-time and go away and it's life-changing. Yeah, that was part of the biggest... We've seen them as big as 10 million, I've seen them... They're all over the board. Okay, some of them don't do well too, you have to realize not everything is gonna be a big hit here... Right, I've had a lot of my ideas that I licensed it to him and they come to market and they don't do well, so I do have a YouTube video, an event, right, TV that shows all the money I've made in my career, so people should want... They wanna know how much money you can make.

0:44:41.9 S2: Watch that video, and it shows from simple ideas to complex ideas, I talk about what it took to license them, how much money I spent and how much time and how much did it return, people are always curious about it, and I don't mind sharing that most people don't wanna share that information. I'm at the point in my life, I statement on as expired for the RSPCA, I look at it, I am a pretty much open book on it, but I... Let me ask someone how much they made... People ask all the time, say, Why don't you show how much they made... Well, number one, I don't know. Number two, they don't share that with me, and sometimes they're under confidential NDA, that's like saying how much... That's a very personal thing for people, and I'm not involved in that part of it. I mean, I don't collect for them, so I don't know, let's talk about what invert can do for the individual product development. Well, first of all, all the information we provide, and people think this is the craziest business model, I give it all the way for free, through the articles, to the YouTube, through the books, I have a ten-step process that we teach students.

0:45:44.4 S2: Now, the only difference is when someone signs up, you get a personal coach and the coach make sure you do all 10 steps and they make sure you do it right and correct, and if you have any problems, they're there to answer any questions you're gonna have because you're gonna have a lot of... It doesn't matter how much I write about. It doesn't matter how many YouTube videos I do. Things come up, questions come up. There's obstacles, there's this or that, so your coach is there to make sure everything is answered correctly and to keep you on track, keep you accountable, so you complete the process, that's what the coaching is, and so... Some people need it, some people don't. Some people do, but we were very particular on who signs up to, if they haven't read a few of the books or watch YouTube channel, we don't sign them up, it takes too much education, we want someone when they come to us, they're really ready to go. I mean, they're like, I'm ready, I wanna learn this, I wanna be professional, I've got the time. I'm there... Those are perfect, but if someone thinks we're gonna do the...

0:46:40.2 S2: For them, we don't do that. If someone thinks this is the lottery ticket, I'm gonna be a millionaire. No, no, no, no, no. We gotta make this real... Realistic. Can you make money? Yes. Can I be a profession, yes I can. Is it gonna take time? Yes, it will. Okay, we hold your hand. Yeah, we have a very large community online, we do a lot of things online that are free, but we have a lot of private... We bring on companies looking for ideas, so all the students can get to meet those companies personally, it's called bridge the gap, so they can build their own relationships with companies, we have an online community where successful inventors pass along to other people. So it's really a community-based. We want people to join, we want them to stay with it, we want them to meet other people, any of my connections are their connections now, it's really a place that you feel safe. You have the latest tools, the latest strategies, from simple ideas to complex ideas, any questions you could possibly have... You have someone watching you. We're there... Every step along the way, is there anything that you would like to cover that we haven't covered already? No, I would like to say, if you have an idea, which everybody probably has had one, if it's a good idea, if you don't do anything about it, I can guarantee you're gonna see it, and I'm sure a lot of us have...

0:48:00.7 S2: You'll be watching TV and go, Hey, I have that idea. Or you go down to the store and goes, There is my idea. It will happen. If you learn the process of licensing, you can share your creativity with the world by leveraging that process and have another company take it to market for you, so I would tell anybody, if you're creative and you have ideas, learn about licensing, learn about product license, and you love it, and you'll be excited about it, and when your product hits the market for the first time and you get to see it on the store shelf or on TV, it's a life changer. It definitely changes your perspective.

0:48:39.1 S1: Well, we'll wrap it up with this last question, what's your number one piece of advice for potential product developers? I would say find your passion. Find the are you really love in your work will be better, your ideas will be fantastic, and also realize your first couple of ideas that you have, like mine won't be very good, but if you stay with it long enough they do get better. Well, that's a wrap. Thank you for being against on entrepreneurs over 40 key. Alright.

0:49:08.1 S2: Thank you very much.