Prototyping Gives Inventions a Boost

An inventor's one-stop shop could get your product into stores and on to Web sites. Next step: fame and fortune

By Jeffrey Gangemi

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Elaine Montoya, a gardening department supervisor at Home Depot (HD) in Hayward, Calif., and an inventor in her spare time, had secured a patent for her invention, The Wonderland Box—a holiday display that folds into a portable wooden chest box. For almost 10 years, she has been building the invention on her own and selling it at craft shows and to friends and acquaintances.

She had tried to get Disney (DIS) to produce it, then Mattel (MAT), and finally she went through two marketing firms, which also had trouble getting it into stores. Montoya finally decided to hire San Francisco-based Inventors' Publishing and Research (IP&R), a one-stop shop for inventors and would-be entrepreneurs.

After paying IP&R a one-time fee of $13,000, Montoya's invention is now available in a few catalogs and stores,and it has sold 1,000 units so far. IP&R projects increased distribution and sales next year of around 30,000 units. Montoya understands there are no guarantees but expects to make her investment back soon.

From Soup to Nuts

IP&R was started in 1995 by CEO Steve Barbarich, a longtime inventor and author of How to Make Big Money from Your Inventions and Patents. He grew the business from a marketing firm where inventors could bring their patented idea and get it into the marketplace, to the full-service design, marketing, packaging, and manufacturer it is today. It has been growing at 50% to 100% per year for the life of the company, says Barbarich. While he won't disclose exact figures, Barbarich does say IP&R has revenues under $20 million a year.

IP&R has several arms. goPROTO is the branch that designs and engineers products, specializing in taking a product from inventor's patent drawing to a working invention. "It's about deciphering what the idea is," says Troy Stevens, director of goPROTO. Patents, he says, are relatively easy to get, but "it's really just the technical boundaries of what your concept is. If you take a look at the patent picture and the final product, they often look totally different. The patent is an idea—an invention is something that actually works," says Stevens.

absolutelyNEW is the brand under which IP&R sells finished products. And Amazing Innovations is the branch that markets finished products to companies that may want to license them. The company has about 120 employees, including engineers, marketers, designers, licensing experts, market researchers, and packaging specialists.

Finding the Interest Level

The up-front cost for IP&R's services isn't insurmountable: The company charges an average of $4,000 to build a store-quality prototype, according to customers. Barbarich wouldn't disclose averages "for competitive reasons" and says the business keeps costs low by outsourcing most of its engineering to India, and the production to China, with an eye toward luring the inventor with its other services. Montoya, like all the company's inventor-clients, gets 5% of sales for royalties, and absolutelyNEW gets 1%.

The process works like this: An inventor comes up with an idea and secures a patent (IP&R requires customers to hold patents.) Then, he or she approaches IP&R or is solicited through direct mailing. When a customer signs on, IP&R works on the design, prototyping, and packaging of the would-be product. If IP&R thinks the product has potential, it will take it to trade shows to determine the level of interest among potential customers.

Barbarich explains that of the 2,000 would-be entrepreneurs who approach the firm each month, about 100 become clients. About 80 prototypes are produced a month, and about six of those make it to the trade shows. Of those six, IP&R generally manufactures one a month.

Not an Easy Threshold

The numbers speak for themselves. Most inventors don't make money, and signing on with IP&R certainly doesn't guarantee success. Of the 1,200 or so inventors who sign on per year, only a small percentage have turned a profit so far, and IP&R declined to give numbers.

"They told me the percentages would be small, and they were up-front about that. However, their track record was good," says Jim McDuffey, a self-employed corporate-sales pro in Farmington Hills, Mich. who invented The PC Frame, a stick-on frame with a groove to insert photos, business cards, and small notes around a computer monitor.

Still, IP&R has attracted some heavyweights to its board. Keith Halford, co-founder of QVC, joined in November because he sees the market potential for the kind of "unique products" that they're producing. "They're a manufacturing and marketing arm for entrepreneurs and inventors who normally wouldn't have access to such a stellar group of professionals," says Halford. The close relationship with QVC provides a serious venue for testing the market potential of new products.

So far, the company's costs remain low, in part because they don't yet manufacture anything too high-tech or anything particularly expensive to develop. But that's all in the future, says Barbarich, who took a private round of investment recently from wealthy individuals and companies. He hopes the infusion of capital will promote faster growth and the ability to take bigger risks and launch more significant technologies. His inventor-clients hope so, too.

Jeffrey Gangemi is member of the MBA Class of 2009 at the Johnson Graduate School of Management at Cornell University. He was previously a staff writer for BusinessWeek.com.