In the last two years I’ve been contacted by at least 15 inventors who have a great idea but need an investor. Most experienced investor would consider those inventors naïve, as it is not often an inventor gets one big investors. But there are opportunities for inventors to get investors that have opened up. Over the last 10 to 20 years investor scouts have played an increasing role in product innovation. These scouts work for or with angel investors, venture capital firms, manufactures and marketers. Often these scouts are also investors.
How they Work
What these scouts do is attend trade shows, angel investor meetings and presentations, entrepreneur club meetings and any other avenue they can to find new products that they feel has investment potential and then they help inventors present their ideas to other investors or investor groups they might know.
What technology scouts also do is make it perfectly clear what inventors have to give up to get investors. Investors want involvement with the company, like lots of updates and frequently want positions on the board. Technology scouts also help bring investors in to hear a pitch about why investors should get involved in the company.
The technology scouts profit by selling their shares, and also by receiving consulting fees and other services to the inventor or company they represent. Technology scouts tend to look at certain size investments which can vary from scout to scout. Some start at $500,000 and less, all the way up to scouts who land major deals with companies like Proctor and Gamble.
I was involved with a technology scout (thought that is not an official term, an investment scout would be just as good). We met the investor at a presentation to an entrepreneur’s club. I was working with an inventor with a new technology to improve the life of cutting tools. The technology scout approached us with the idea that he could get investors in our company, and he wanted to receive shares equal to 10% of the shares that he helped sell in the company. We agreed. Over a period of about eight months he managed to raise about $800,000 for the company, mostly in amounts of $50,000.Those investor received shares that gave them at the time about 25% ownership in the company.
How to Find Technology Scouts
You really don’t find scout, they find you. Often technology scouts are happy doing one or two deals a year, and I’ve found they don’t like to be contacted by multiple inventors. It is not unusual for a technology scout, especially for inventors, to have full-time jobs. I’ve run into technology scouts at trade shows and also making a presentation at an angel inventor club. I’ve also seen technology scouts talking to inventors at inventor club meetings. So the trick is to get out attend any relevant meeting in your area, entrepreneur clubs, angel investor clubs are ideal, but Chamber of Commerce Association meetings often have good contacts. If you can afford to take a booth at a regional or national trade show you will also have a chance to meet a technology scout.
Your investors Should be Accredited
There are few rules for investors involved in the invention or are a family member of someone involved in the invention. But there are regulation taking on an outside investors , and they involve insuring the investors are accredited investors which means they meet these requirements
Have a net worth of at least $1 million individually, or jointly with a spouse, excluding the value of their primary residence.
Earn at least $200,000 annually individually, or $300,000 jointly with a spouse, in each of the two most recent years, with a reasonable expectation of reaching this level in the current year.
There are many legal wrinkles taking on outside investors so be sure to consult an attorney with knowledge of investment law before taking on an outside investors.