Not all inventions are worth patenting, and there are alternative types of protection for inventions that may make more sense than a patent.

When deciding whether to patent your invention, don’t become the victim of a common misconception - YOU DO NOT NEED A PATENT TO MARKET YOUR INVENTION. That’s because a patent only gives the owner of the patent the right to keep others from practicing your invention. It gives you absolutely no rights to bring your invention to the marketplace (although it can make it much easier to obtain funding). For example, if you developed a new method of making bourbon during Prohibition, you could patent it, but you could not market the bourbon. Similarly, patenting a new drug for curing cancer gives you no right to market the drug in the United States – FDA approval is required.

The first issue to address before beginning the patent process is whether your invention can be sold at a profit. Just because something is new or better doesn’t mean it can be sold at a profit. If your invention will not foster a viable business, then a patent is unnecessary – chances are high that no one will copy it anyway.

So before starting a patent application you should answer the basic business questions:

- What price will the ultimate customer pay for the invention?
- What will it cost to sell the invention, including raw materials, labor, packaging, marketing, overhead, shipping, etc?
- What will be the markup of those in the distribution chain?
- What sales volume is expected?
- Is there enough left over for a profit at that volume?

A common mistake made by inventors to determine the value of their invention is asking friends and relatives. This method usually does not work because friends and relatives don’t want to hurt your feelings, so they are not always the source of an honest appraisal. A preferred method is to ask, “How many will you order at a price of $____?” To that question you might get an honest answer, particularly if you let the person know you are asking now so that when the product is available on the marketplace, you will come back with an order book in hand.

In my next post I’ll talk more about the specific alternatives to patent protection.

If you accept that Marketing is fundamentally a process of education and awareness, of leading the right people to the right products, then it’s obvious that marketing isn’t a standalone function.

The truth is that everyone who deals with anyone outside the company is doing marketing for the company, whether they want to or not. Heck, I deliberately wear competitor logos when I travel, because I know that I can be a real jerk after getting no sleep on the redeye – and I don’t want my occasional poor behavior associated with my company.

Given that basic concept, it astounds me how many companies seem to ignore customer service as an aspect of marketing. Doesn’t it seem somewhat foolish, not to say masochistic, to spend so much time and effort driving customers to your company just to insult and lose them in subsequent face-to-face interactions?

As an example of right and wrong, let me point out two particularly notable examples I recently encountered.

Right: I recently adopted a desktop videoconferencing solution, and as I tried several, I encountered Sightspeed.com – a commercial service. Now, without commenting on the service itself, I’d just like to point out that when I had trouble with an order, their team responded quickly, solved the issue, and sent me a Sightspeed T-Shirt and Hat. Now, I’m not in favor of toys… but given that I do wear those items (and they asked prior to sending), and the items featured their logo, graphic, and explanation of their business, well, they just created a walking talking billboard. Nice job, folks!

Wrong: At the other end of the spectrum, we find Target stores – where their outsourced customer service “hotline” is so bad that the Target manager I had call with me was (literally) in tears. Now remember, she’s a store manager! Following up with their online team (an entirely separate company) yielded an offer of a discount on future purchases. Not likely, given our experience. Be bold, Target – offer credit anywhere.

The moral of the story? Marketing is everywhere. Sightspeed amplified their marketing ROI by turning me into a champion – while Target just threw away the dollars they’d spent getting me and others into the store (given my big mouth and predilection for talking about poor marketing). So be careful out there, folks. Spread the word – or your customers will do it for you.

Question: I’d like to read more about your process–flaws and all.

From Andrew Warner, Mixergy Nation

Answer: Let’s assume that before applying, you’ve reviewed our website and fully understand our investment criteria (you’d be surprised at how many entrepreneurs/companies don’t do this). If so, the first step is the online application. Three years ago we went to a much simpler format that takes 10-15 minutes to complete. In return for simplifying the process, we ask that the executive summaries included with the application address all of our key points and investment criteria.

With the executive summary, you should emphasize the most important details about your idea/company (how you’ll make money, exit event and returns for founders/investors). Since we don’t always do well with deductive reasoning (i.e., looking at tons of data and drawing our own conclusions), you should be direct and to-the-point about this. Although most companies are good about explaining this, we get many applications each month that are well off the mark.

On the second to last Wednesday of each month, I get together with about 20 of my colleagues and we engage in some healthy discussion and debate about the companies that have submitted funding applications. It’s a very democratic process (and well moderated by Bill Zimmerman and Chuck Stephens), compared with other angel groups where you have to get past the ‘gatekeepers’ and/or there’s a small cadre of members that control the agenda.

The companies we review usually fall into one of three categories: 1) The top six companies that are invited to present that month; 2) Companies that are not quite ready for funding, but where we’ll help develop the business further through mentoring, and where if things go well may have a chance to present in the future, and 3) Companies that are turned down, often because they’re in sectors where we don’t invest, too early a stage, or are not likely to generate sufficient investment returns vis-à-vis risk. If you fall into Category #3, keep in mind that the ‘door’ is never completely shut and there’s sometimes an opportunity to present in the future

If you’re in the top six, you’ll be invited to do a 30-minute presentation to some of our members on the last Wednesday of the month. Assuming that goes well, you’ll then be invited to present to all of our members at our monthly breakfast on the first Wednesday of the month. If there’s sufficient interest from our members, we’ll begin the due diligence process, which is a fancy term for further vetting of your company, technology, target markets, finances, team, etc. For companies that we’ve funded, the process from initial application to money in the bank is typically 3-4 months.

Post-investment is where the real fun and heavy lifting begins. Our help to our portfolio companies has ranged from informal assistance to having a board seat to providing the CEO and VP (Erik Hovanec and Steve Reich) to LeisureLink. The bottom line here is that you’ll have access to a network of experienced executives and value-added contacts that can provide significant guidance and assistance in the growth of a company.

One other way to put the overall process into perspective is to talk about the numbers on a monthly basis:

80-100 funding applications
6 invitations to present at the screening meeting
1-2 invitations to present at the member breakfast
One company funded per month (on average)

As you can see, it’s a little like applying to Harvard—similar percentages, but without the elitism and having your father donate a library in order to get in.

In my next post, I’ll talk candidly about some of the things entrepreneurs have done during our fundraising process to increase the odds of getting funded—along with some of the most common deal killers. Since Andrew’s original question asked about ‘flaws and all’, I’ll discuss these as well.

With the Yankees early exit from the post-season (sorry…I’m from New York) and the Lakers’ pre-season prospects looking pretty dim, we had some extra time on our hands last fall and put our collective energies into creating our new blog.

These days there’s no shortage of resources available to entrepreneurs on the net. However, the vast majority are static and don’t provide the opportunity for dialogue and questions. One of our main goals in launching this site is to give entrepreneurs a forum to interact with individual Pasadena Angels members and to ask questions related to start-up companies and fundraising.

To provide the most informative experience, we’ve put together a Dream Team of bloggers that have expertise in all of the areas critical to start ups. Each week one (or more) of our team members will be writing about a topic of particular interest to entrepreneurs. And they’ll also be available to answer your specific questions on a wide array of topics. Over the next few months, you’ll see a number of noteworthy guest contributors as well.

We hope you find this site useful and it helps your business become (even more) successful. To help us achieve this, we encourage questions and points of view, along with suggestions for improving this forum.

One of the easiest ways to kill a startup is to throw away money on the wrong marketing programs. The good news is that there is a single question that will prevent disaster: “How does (fill in the blank) marketing program contribute to sales right now?”

If your head of marketing can’t answer that question and articulate a plan to measure results, don’t fund the program. If you get some hocus-pocus response about “brand marketing”, consider getting a new marketing person.

In an early stage company, the only brand marketing that matters is building a product that produces satisfied customers. THAT drives your brand—not PR, not advertising, not clever websites.

The only purpose of marketing in an early stage company is to assist the sales effort. Build the tools you need—a clear marketing message, functional website, and basic materials. Get them in the hands of your sales team, and get feedback on what works. Plan on iterating many times to get the message right, and test as many ideas as you can manage. Experimentation and refinement are the keys.

One Pasadena Angels funded company, Bluebeam, does a great job in this area with their website. They have a very practical website (www.Bluebeam.com) that is focused on driving both online and enterprise sales. Bluebeam’s CEO, Richard Lee, can tell you with great precision that X dollars spent on PPC marketing will yield Y dollars in online sales.

Their website is a great model for early stage marketing—free trials, customer testimonials, links to press articles, etc. All focused on driving sales and explaining the product line, with no extraneous text or graphics. They constantly update the look and content of the site to reflect recent achievements.

Make your marketing count. Focus on results.

While traveling on an international flight recently the seat belt light went off and drinks were on the way. I looked to my left and opened up a typical in flight conversation with my neighbor. After some brief chit chat I introduced myself and told him a little about my executive search experience and my adventures with the Pasadena Angels.

This information perked his interest. He is an engineer with a masters and bachelors working in the aerospace industry and apparently doing very well. He looked me in the eye and said that he wants to go into business for himself and he wanted me to give him a tutorial on how to do it. This request is similar to describing nanotechnology in 10 words or less. We discussed all of the basic ingredients: a unique idea or product, patent protection, a sound business plan and executive summary, capital, etc. Then I paused and said, “it is all about the people.”

In my combined experience as a search consultant and private equity investor one of the most important ingredients to ensure being able to raise money and build a business is to develop a sound, well thought our corporate culture at the very beginning stages of the business. All of your future hires will be based on this template for building effective teams.

My neighbor asked a very good question. “How do I put together a staff to help me launch the business? Very early stage companies , especially first time entrepreneurs, use the most logical approach. They open up their rolodex and ask “who do we know that may be able to do what we think we need and do it for very little or no money?” The first sound advice is to try to resist the temptation of hiring friends and neighbors who do not fit the hiring plan. There will come a time, usually early on in the ramp up that the lack of relevant experience becomes very costly. It is never easy firing your brother-in-law even though he is not making much money. The hiring plan is an essential part of the business plan. Hire the best, most experienced people that fit into the corporate culture matrix.

“How do I do that when I have very little capital? ” At the earliest stages of development, creativity is a key skill set for any entrepreneur. Network! Network! Network! Attend every event, seminar, lectures and make calls to anyone who will listen. If you have a great story there are many people who will listen and want to be a part of that story.

Once the core of the company is assembled you need to continue to network with other successful entrepreneurs who can look at your team and tell you where the holes in the staffing plan are and in many cases point you toward people who can help you fill those holes. “Why would a successful business man answer my call?” He was where you are a few years ago and remembers it and those folks who reached out and helped him. Use the Universities, there are some very bright MBA candidates that will pitch in for little money to gain some tangible experience.

Our cheery flight attendant just provided both of us another bloody mary. My neighbor got to his most important question; “How do I raise capital?” When it is time to go out and raise some money to help launch the venture have some experienced investors review your plan, team, revenue models and help you polish the plan and the pitch. The typical hiring holes in most start-ups are: lack of an experienced financial professional, no experienced marketing and/or sales staff, weak business development skills. One thing that all investors want to see is rapidly growing revenues based on quantifiable models. Early stage Angel Investors are more likely to fund a company that has a working prototype and better yet they are generating revenue. The plasma of the start-up is equity; when designing the financial structure, make sure that you build an adequate pool of stock for current and future hires into the model.

Many start-ups are created by technical people who understand the nuts and bolts of building a prototype product. In many cases they are inexperienced in how to manufacture it, market it and sell it. Get Help! There are many very good companies who can fill in the gaps in a recruiting plan and will do it for equity. This is also true of the “make/buy” decision for hardware and software companies. Investigate outsourcing parts of the development to experienced vendors that will work for equity or a combination of equity and cash. Don’t get blinded by keeping a set percentage of the company for yourself or holding out for a valuation that you think is fair. The market will show you the true answers to these questions.

Many executive search consultants will provide their skills to start-ups and take some equity for services. Early in the formation of the venture, learn everything about the market, competitors and investors in the space. Find advisors from this arena who can help with many of the needs you have and will have. Angel investors provide a great pool of qualified people who are excellent early stage advisors.

As an entrepreneur you will always need good people on your team and you will always be raising money. Hire good people who fit your corporate culture and never stop networking!