by Real Business - Thursday, 30th August 2007

This is the page

You’ve had a great idea. You’ve tried to sell it into the big business community, but they’re not interested. So you’ve decided to go it alone. You’ve struggled to raise the finance from the bank, business angels, the venture capitalists. Now you’re thousands of pounds in debt and desperate to pay it back. Don’t worry. You’re not alone: it’s the standard rite of passage for the wannabe British inventor.

There’s lack of funding, patent protection, product marketing and unscrupulous individuals to deal with. And that’s just the start of your worries. The key problem is often not the invention itself but its commercialisation – an area where many innovators are inexperienced and ripe for exploitation.

How many small businesses are cheated? “I would say many, if not most,” says Laura Bence, of solicitors Briffa & Co. “Many of them try to run before they can walk. They make and market goods before ensuring that protection is in place.

“It happens everywhere,” she warns. “From retailers to manufacturers, designers and industry. Because it is difficult to protect an idea once you have started its promotion, most companies will look for a way of making it cheaper and cutting out the middle man.”

So how are Britain’s inventors faring? If our creative quartet is anything to go by, it’s as tough as ever to bring a product to market.

Take the story of Darren Saunders. Five years ago, at the age of 18, when his contemporaries were going off to university, Saunders chose the route of the inventor. In pursuit of his “mad idea” of the Cyberquin, a highly realistic, moving mannequin for display in shop windows and exhibitions, he spent six months in a fruitless search for development cash. “I must have spoken to 150 people,” he says. “They all thought I was trying to achieve the impossible,” Saunders says. Finally, he clinched a DTI innovation grant; his father agreed to an overdraft facility with his bank to secure the remainder.

Darren got help with the patents from William Newell, a local agent of Wynn Jones Laney & James, and took a short course in exporting at the Cardiff Chamber of Commerce.

After three long years of development, Saunders succeeded in creating a mannequin that would work 24 hours a day without a hitch, needed no maintenance, and could be easily shipped and easily set up anywhere in the world. “The product had to be right first time,” says Saunders.

It actually took another 18 months of hard graft to get the product accepted, all funded on a shoestring.

Marketing was limited to a £1,500 video produced in-house; advertising was too expensive. “Everyone advised me to stick to the UK,” says Saunders. “But I thought, ‘bollocks... the British never try anything new’.”

He was right to follow his instincts. His nascent company concentrated on visiting big shop-fittings exhibitions, including Euroshop in Dusseldorf, the biggest of them all. Here, the sight of a dynamic, lifelike mannequin attracted the crowds. The orders – despite a £5,000 price tag – came flooding in.

Today the Cyberquin has been exported by the dozen to 33 countries, including Japan, Korea, Chile, Australia and Kuwait. Surprisingly, South America is its second biggest market after the US. “Latin Americans are big on movement and entertainment,” says Saunders.

Cyberquins have been displayed at Disney World and on 5th Avenue, New York. But exhibitions are still the mainstay. “I’m spending £20,000 just on one show in Chicago,” says Saunders. His secret, he believes, was to apply the first principle of engineering – “if it isn’t right, it will break” – to perfect the performance of all parts of the business.

But the costs have been staggering. Altogether development has cost £100,000. “Domestically, £20,000 is an astronomical amount, but commercially it’s nothing,” Saunders says. Saunders has become steadily more scornful of attitudes towards innovators. “On the BBC’s Tomorrow’s World I was asked silly questions such as, ‘what keeps you going? Is it because you want to be a millionaire?’” he snorts. “In fact the bottom line is being thousands of pounds in debt to the bank... and desperate to pay it back.”

Saunders admits he’s had a degree of good fortune. Not only has he enjoyed the unstinting support of his parents but he designed a product that does not require large sums for manufacturing, and one for which there has been an almost instant and continuing demand.

“Tom Peters, the management guru, says intelligent people can think of a 1,000 reasons why not to do something,” laughs Saunders. “But I was stupid enough to think I’d do it all in six months. I’m 23 but sometimes I sound like I’m 46!”

Another inventor who has experienced the long road from drawing board to international success is Nigel Middleton, a Cornish dentist. His creation is Stomatex, a neoprene fabric studded with hollow cavities – each with a tiny hole on top. It mimics the effect of stomata on leaves – hence the name.

Unlike rivals, it can be worn in comfort 24 hours a day, making it ideal for use in military survival suits and wetsuits. Stomatex is used to make orthopaedic supports for athletes and is beloved of the bronze medal-winning UK bobsleigh team in Nagano and the elite US Olympics athletics squad alike, accelerating the healing of sprains in ligaments and tendons. Middleton’s brainchild has even found its way into hospitals as it is excellent at preventing bed sores. So versatile is the revolutionary material that it has spawned a £5m mini-industry around it.

But that’s today. It was a different story nine years ago.

“I’d think twice about doing it again,” Middleton says, referring to his struggle to get the idea airborne. “Money is never a sufficient motivation. When the going gets tough you need some other driving force – in my case it was the certainty of the therapeutic advantages.”

Frequently, it was only this belief that kept him going. Luckily, he captured a DTI Smart award for the five-year development phase – finding a company to take on his idea proved impossible. “It is rare for an established firm to accept an outside product,” Middleton warns. “We can all have wonderful ideas. The question is: can you make it at the right price and, if you can, will the market still exist for it?”

Much of the funding – including £100,000-worth of patenting in 20 countries – came from his own pocket, friends and relatives. To reduce costs even further, Middleton decided that his Cornwall-based company, Micro Thermal Systems, should only make the raw Stomatex. The fabric is then sold onto third parties which manufacture their products from it.

But the inventor’s struggle doesn’t end when his or her product hits the streets. Oh no. “For every £1 spent on product development, £5 goes on marketing,” says Middleton. He and his fellow directors have had to find a total of £750,000 since 1990, on top of the £350,000 other manufacturers have invested in production equipment.

Articles in the press – especially after the British Lions rugby team wore Stomatex suits in South Africa – were a boost. So were the Royal Navy’s tests on Stomatex wetsuits and Arctic warfare clothing. Often, though, the company didn’t see the benefits of these boosts until later. Cash flow can be a nightmare which is why so many innovative companies get picked off by crafty investors.

To stop that happening to Micro Thermal Systems, Middleton got professional help – which is expensive and absolutely vital – and tailored it to his own needs.

For example, in negotiating a major deal with a big US healthcare group, the company commissioned solicitors Barnett Alexander and Chart to look after its interests. “Innovators should go for major solicitors,” Middleton recommends. “That way the big firms will know you mean business and that your rights will be strongly enforced if needs be.”

Like the company’s solicitor, its patent agent Page Hargrave is also a “big gun” ensuring that the company gets error-free intellectual property protection. But Micro Thermal Systems’ accountant is a local man who knows the firm intimately.

This year Middleton’s careful strategy is finally bearing fruit. Micro Thermal Systems recently sold 25 per cent of its shares to an investor; has signed a $2.25m deal with US sportswear firm SafeTgard and formed an alliance with the giant Akzo-Nobel conglomerate for footwear linings. Next stop is the stockmarket, but not for another four or five years.

So what is the key to an inventor’s success? “Don’t try to do everything on your own... or from your own resources. You must seek outside advice and finance.”

“The whole idea of the garage inventor is disappearing says Darren Saunders, inventor of the Cyberquin. “The costs of development are just too great.” Yet in the wider world, expert opinion differs.

Ian Harvey, chief executive of the British Technology Group, which manages intellectual property on behalf of companies, believes prospects are good, but could also be much improved.

“American entrepreneurs can obtain an initial public offering – which helps to grow the company at a critical stage – much earlier than their British counterparts,” he says. “But while this accelerates start-ups, many US firms have disappeared five years later.”

The boost has assisted many US firms develop the Internet as an industry while all too few UK firms have leapt aboard.

“One British firm has cut the costs of buying parts worldwide by 30 to 40 per cent through sourcing via the Web,” says Harvey. Last year, Derwent World Patents launched a Web-based information service to enable innovators to search through millions of patent documents.

America also fares better due to its Small Business Administration and because, when it comes to defence, the US Procurement Initiative ensures that five per cent of research funding goes to smaller companies.

Even in the biotech sector, adds Harvey, Germany overtook the UK in the number of start-ups last year because its government decided to relax restrictions on genetic research and provide incentives. But the UK biotech sector is booming nonetheless, and successful entrepreneurs such as Chris Evans and Alan Goodman are recycling initial project profits into secondary ventures.

Harvey believes that there are still too few inventors who are also good businessmen. “We just don’t produce enough of them,” he remarks. “Unlike the US.”

“The number of business angels is increasing in the UK, but the national shortage is not one of money – it is a shortage of people who have an idea and are able to run a company,” he concludes.

“There are so few entrepreneurs who fully comprehend the commercialisation process – that’s the real difficulty,” says David Gill, innovation expert with Midland Bank.Sources of finance, he says, have increased rapidly, even in recent months. Not only has Barclays Bank established a new innovation unit, but the European Investment Bank is also trying to get closer to smaller companies, albeit with a Luxembourg-based expert Jacques Lillo.

Harvey is also confident that the recent leap in Business Angel deals – from 200 to around 500 – over the past few years, heralds a new era.

The National Lottery’s endowment fund, NESTA, will apparently have £200m to spend in the form of bursaries for smaller inventors. Commercially minded universities such as Southampton, Leeds, Loughborough and Aston are always on the look-out for new concepts.

The Patent Office paints a brighter picture, too. Its deputy marketing director Roland Whaite estimates that ten to 15 per cent of patent applications - and around five to ten per cent of patents granted - hail from individuals.

But many inventors do successfully license their ideas without being cheated, says Whaite. Painter and decorator Edward Prosser gave Ronseal the rights to manufacture his “Paint-n-Grain” invention, which provides a brush-on, “woody” effect, and John Coathupe licensed his Garden Vac to Flymo.

What’s needed is a much closer analysis of patent and innovation activity in the UK. We may pride ourselves on our inventiveness, but it is still extraordinary how little is known about its relative impact on the economy.

Contacts

Marcus Gibson is a one-time lumberjack turned technology writer. He is the author of the dictionary of The British Heritage (Cambridge University Press).

Arabella Romilly, 38, head of the company Ready Freddie Go.

What is your idea?
“It’s a bath time apron and towel which retails for £29.95.”

Where did you dream it up?
“I was bathing my baby, Freddie, and I found that it was incredibly difficult to take a baby out of the bath. For a start they are very slippery and somehow nature has decreed that you need three arms to do it properly while only supplying you with two. My invention holds the towel to you with a Velcro fastening and lets you wrap the baby safely into the towel without letting go of them. I named the company after Freddie.”

What have you done to exploit it?
“I patented it and started selling it to shops. My husband, David, left his job as a solicitor and discovered a talent for cold calling. We’ve just appointed a distributor in America to handle the product for us. We also looked hard at the manufacturing process and found out all we could about cotton. In fact we have just been able to improve the product as a result of that research.”

What are the risks involved?
“We sold our lovely house in Henley and now we rent a manor house in Shropshire. We invested the capital from the house into the business and paid off what we had borrowed. Obviously this has become the family business and it feeds us all. But we believe in the product and we’re introducing new ranges, such as baby changing bags. It’s all worth it.”

Contacts

Ready Freddie Go can be contacted on 01547-530 613.

James Dobson, managing director of TRAXDATA.

What is your idea?We took CD writable technology (CDRW), which at the time was badly sold to the consumer and misunderstood by them. (CDRW is a way that you can record data, audio or video onto a rewritable CD.) We packaged and sold it to them in a way that removed their fear.

Where did you dream it up?
Traxdata was the leader in bringing in CDR media and was the major player in the consumables market. The problem was that there was no real brand leader in the hardware sector and we found that this was inhibiting our growth. So we decided to go the Gillette route and supply the hardware with a view to supplying the consumables later. They gave away the razor to sell the blades but we didn't go quite that far.

What have you done to exploit it?
We have become very good at self-promotion in the last three years in order to get our message across. We run a number of high-profile competitions. Last year we gave away a BMW Z3 and this year we are giving away a Ferrari 355. No other company in Europe does this kind of thing so well.

What are the risks involved?
We started in glamorous Ruislip with a capital base of $160 three years ago and our turnover this year will be in the region of $500m. The only competition we have in this marketplace is the mighty Hewlett Packard. So the risks are small but they're always there.

Tags: saunders, product development, darren saunders, british, middleton, product marketing, run company, uk, laughs saunders, saunders chose, bring product, company didnt, designed product, product accepted, product hits, 20 000, british firm, great idea, middleton decided, uk firms, company ready freddie, big firms, cornwall based company, harvey, idea airborne, mad idea, stomatex, year development phase finding company, years ago, big business community, 000 reasons, 350 000, 750 000, business angels, middleton warns, smaller inventors, nascent company concentrated, wannabe british inventor, back saunders admits hes, british counterparts, family business, freddie, idea proved impossible, inventors success, micro thermal systems, middleton recommends, nigel middleton, patent protection, smaller companies, uk biotech sector, im spending 20 000, 000 price tag, cost 100 000, funding including 100 000 worth, biggest market, consumables market, innovation expert, stomatex wetsuits, company commissioned solicitors barnett alexander, micro thermal systems accountant, micro thermal systems recently sold 25, 18 months, adds harvey, altogether development, america, badly sold, big gun ensuring, british technology group, cyberquin, development cash, unscrupulous individuals, venture capitalists, british inventor, protection product, achieve the impossible, cutting out, fruitless search, shop windows, bank business, rite of passage, mannequin, commercialisation, try to run, innovators, contemporaries,