Valuation Issues

What is a good idea worth? In essence a good idea has no value. The idea acquires value as it moves through the new product development process and reaches full commercialization. These value stages are tied to the new product development stages and are summarized below.

Undeveloped ideas. These have the least value. Capturing the value is difficult without further development. A potential licensee will be very reluctant to even receive an undeveloped or unpatentable idea, because future development of the product may already be tainted.

The research stage. Value begins to attach to the technology. The research process gives credibility to the inventor and encourages further participation. This is specially so if the research results confirm the underlying hypothesis.

Market ready product (the prototype). Although unproven in the marketplace, the potential licensee does not have to perform the research to determine if the technology works.

Market demand. When the product is proven to work and has proven market acceptance, more value is added.

Financial strength of the company. A product with proven market acceptance coupled to company with the ability to support a credible performance guarantee in the marketplace will add further value.