Note: This the 2nd half of my post on why an inventor should work with EIP.
Here's how to think about it from an analytical point of view. There are two factors that we believe we can influence at EIP: (1) the likelihood of any deal, and (2) the economics of the deal.
A classic financial analysis technique is called expected value, which basically looks at a series of outcomes, values each outcome, and assigns a probability to each outcome. Those are then summed and you have your expected value. Here's a simple example: let's say the individual inventor has two outcomes: deal or no deal. And, for simplicity, assume a deal is worth $2m and the odds of a deal are 20%. In that scenario we take 20% * $2m and 80% * $0. The expected value is $400,000. Make sense?
Again, for simple illustration purposes, assume EIP can triple the chances of success due to our network and the work we put into product transformation and validation, AND, further assume we double the value of the deal (if one gets done) through our Product Capitalist model/approach. In this scenario we multiply 60% * $4m and 40% * $0. Expected value is $2.4m -- a 6x improvement in expected value!
I've oversimplified above, but realize that all the variables in the new product development process are multiplicative. For example, let's look at 5 basic "milestones" in simply getting a deal done:
* get the meeting
* make a compelling sales pitch so prospect says "yes"
* get a license deal negotiated with terms that are optimal
* get the product launched
* ensure the company is doing what it needs to maximize sales
Modesty aside, we will meaningfully improve success chances on each milestone. And with the other work we do on the patent side (building a portfolio), on the transformation side (getting designers and engineers involved), and on the validation side (consumer research optimizing the product positioning), we bump up the deal value substantively for everyone.
Here's the bottom line: as I told the inventor, we can't guarantee success. But we can guarantee that working with us will put your product in the very best position to succeed -- we'll have all the data that is reasonably attainable, we'll get the meetings, and we have the experience to get the best deal should a licensee be interested.
Given our experience and knowledge, it's hard to believe that a MORE attractive deal can be done by an inventor, so the real question given our 65/35 split with inventors is whether we are (a) 3x more likely to get a deal done, or (b) get a deal done in a way that makes the product 3x bigger in the marketplace over the life of the product.
Don't forget that (a) and (b) are multiplicative, so if we can move both needles, the odds of dramatically more money in the pocket of the inventor are much higher...
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