‘What we need is more high tech manufacturing and exports’, so says the politicians and the economists. So running a technology business incubator, we should be well placed to find great new ideas, link in with local manufacturers, burst onto foreign markets and save the economy. It's that easy!
So what do you need if you've got a brilliant new physical product idea?
Well protecting the idea would be good, but whilst it’s free to file a UK patent, getting strong, defensible intellectual property generally needs professional input and that can cost a few thousand. And it's all that other legal stuff around protection, NDAs; patent searches, IP insurance, trademarks, licence agreements, international PCTs - it can all cost money, before you ever actually make anything.
There are grants, indeed R&D is one of the last few areas where there are fairly generous public grants, if your idea is genuinely novel and has market potential. There are grants for: "Proof of Market"; "Proof of Concept" and "Prototype Development", all available through the Technology Strategy Board (TSB) Smart Awards, and decent amounts too - up to £100K of project costs for a proof of concept. But here's the rub, each of the grants requires a financial contribution by the applicant of between 40% and 65% of the project cost. Not easy money to find.
You could go to the banks .....
What about an investor, they take risks. Or is it all like Dragons Den:
"show us the patent",
"show us the sales figures",
"show us the order book".
Not always, but they do like to see something.
There is fantastic new technology available to produce prototypes: stereolithography, laser sintering, vacuum casting, injection moulding, CNC. But you will need a decent CAD design and again these specialist manufacturing services don't come cheap if you want high quality. And is the prototype just a look and feel, should it be able to work, do you need a short run final manufacture? What does an investor or a buyer need to see to understand the product and see the potential?
Potential. That'll be customers then. We could do with some market research, get in front of potential buyers. Need credibility, need a foot in the door, need a new suit. And then they ask, what's the price!
Need a business model, distributors, gross margins, stock control, quality control manufacturers. How much it costs always depends on how many you want. You need volume manufacturing. Should you go to China, everyone goes to China - why? By the time you've factored in searching for the right factory, shipping costs, miscommunications, minimum order size, import controls, stock control and warehousing, time delays, onsite quality control. Is it really cheaper? What about the UK then – how do I find a manufacturer?
The critical thing is often who pays the Tooling Costs? These can be substantial, but necessary to get the unit manufacturing cost down. R&D grants don't pay for tooling. Maybe an R&D tax credit – where can I find an accountant that knows?
So get the order first and then take the risk.
And then just learn how to run a business!
And then work out how to export. www.ukti.gov.uk.
There are lots of ways that potential manufacturers could be helped further. Support organisations like the Sussex Innovation Centre and the Manufacturing Advisory Service (MAS) can do a lot, in terms of links to experience, expertise, knowhow, contacts and sometimes small amounts of cash, but we can't generally fill in the gaps in critical finance that are usually necessary to produce innovative new products:
- - Co-funding R&D Grants
- - Early stage IP protection
- - Prototype production
- - Tooling costs for UK manufacturing
These are key areas of support where we believe the government, either national or regional, could be doing more to connect the inventors of brilliant new ideas with our manufacturing base.
This article was written by guest author, Mike Herd, Director of Sussex Innovation Centre.