Can Edison Nation Show You How to Sell Invention Ideas?

By Markets Fool.com

So you have come up with a better mouse trap. When this thing hits the market, it will make sliced bread look outdated. If Nikola Tesla and Leonardo da Vinci were alive, they would welcome you straight to the inner circle of inventor stardom.

Continue Reading Below

The only problem is, you have no idea how to manufacture, market, distribute, and sell this slice of genius. You are an inventor, not a sales ninja or logistics expert, so you are going to need some help.

Source: Edison Nation

That is where Edison Nation comes in. The company helps inventors with product development, patent filings, licensing those patents to the giants of the consumer goods industry, and ultimately putting a product on store shelves. Edison Nation is behind a lot of the "As Seen On TV" products you find in late-night infomercials. Beyond that, founder and CEO Louis Foreman likes to point out his company's product development ties to Procter & Gambleand Colgate-Palmolive, and retail connections to Wal-Martand Home Depot. Submit an idea (along with a $25 check) and get ready to split the licensing proceeds with Edison, right down the middle.

That sounds like exactly the kind of help you need, right? Experts helping you polish that raw idea to a high sheen, and then there is a clear path to record retail sales. And besides that $25 entry fee, the company handles all other development, marketing, and patent filing costs. So let's get in line!

Continue Reading Below

What are your chances?
If this solution sounds too good to be true, it probably is.

Edison Nation does supply all the services noted above. The company actually runs product search events for Colgate and P&G. Wal-Mart really does sell Edison Nation products like the Perfect Bacon Bowl,and the Pony Tools brand you will find at Home Depot sometimes plucks new ideas from the think tank.

All of these claims are true, and you really could find the perfect partner in Edison Nation.

However, your chances of making it into Wal-Mart or P&G this way are very slim. Edison Nation very well could make your product dreams a reality, but that is kind of like banking on a career in professional basketball.

Think of it this way: 76% of the 4,500 players on collegiate Division 1 basketball rosters believe that they will end up playing hoops for a living. However, the 30 NBA teams only keep 12 players on each roster, which adds up to just 360 total slots, and most of these already belong to veterans of the game. The NBA draft is limited to just two rounds, placing no more than 60 new players into the league each year.

With thousands of college players clamoring for these rare team spots, and a rising portion of the draft picks bypassing the college system altogether in favor of fully developed professionals from Europe, the chances of turning a stellar college career into NBA gold is vanishingly small. It is kind of like betting everything on double zero in a single spin of the roulette wheel.

Bacon Bowl inventor Thom Jensen, posing at a Wal-Mart store displaying his product. Source: Edison Nation

Enough with the hoops, already!
Getting back to Edison Nation, the company has filed for "well over 600" patents. Each one of these filings represents a submitted idea that is ready for the big leagues. A handful of those 600 patents are real game-changers like Emery Cat or the Pepper Popper Grill -- big sellers that found a market and a distributor, making their inventors very rich.

But not all patents make it that far. Right now, Edison Nation highlights just 15 products on its "success stories" page, alongside another 12 items "under production" -- 144 inventors get a head shot and a name plate, because their ideas have been licensed to a manufacturer somewhere, with no further detail on the products, the manufacturing partners, or their relative success.

In other words, not all of the 600 patent filings lead to commercial success.

Also, Edison Nation boasts more than $200 million in licensed sales to date. That is over a 10-year span, or an average of roughly $20 million per year. Users of the service report royalty rates as high as 5% of sticker prices, and remember that Edison Nation pockets its own 5%, typically splitting licensing income half-and-half with the original inventor.

According to S&P Capital IQ, Edison Nation recorded $4.8 million in total revenue last year.

Louis Foreman, Edison Nation founder and CEO, had nothing to do with the Foreman Grill. Source: Louis Foreman

We can use these figures to estimate the number of idea applications submitted every year. Back out something like $1 million in royalty revenues (based on $20 million of licensed retail sales each year and a 5% royalty rate), divide the remaining $3.8 million by $25 (per idea submitted -- the other major income stream), and we are looking at roughly 150,000 idea submissions per year.

This is a ballpark estimate of course. Edison Nation is mum on these statistics, so there will have to be some guesswork here.

And the company is silent for obvious reasons. If Edison files for 60 patents a year, out of 150,000 incoming ideas, each idea has one chance in 2,500 to hit that level, and even that achievement is not an automatic ticket to Easy Street.

Edison Nation makes millions on those $25 entry fees, and most ideas never see the light of day. Edison employs an eight-stage process to separate the wheat from the chaff, and patent filings only happen at the very end of that long and winding trail.

Another way forward
Edison Nation might help you turn a new invention idea into a commercial success, but the odds are stacked against you. The same goes for rivals like Quirky, or reality show Shark Tank. Any of these avenues can make you rich, but they are moonshots at best.

If you are serious about your invention and truly believe that it can connect with the mainstream market, there is nothing stopping you from going it alone.

Do your own market research, tap a decent patent attorney for some legal guidance, and explore the patent process for yourself. Sure, you will hit a few dead ends along the way and waste some time on ideas with no future. But you will also learn a lot about the pitfalls and the opportunities, and each new attempt should get easier than the last one.

I am not saying that you are guaranteed to strike gold this way either. Colgate and Home Depot already have their own research departments, and maybe your best bet is to apply for a job there instead. Nothing comes easy for the intrepid inventor (just ask Tesla). But at the very least, finding your own way is a learning adventure you will never get from Edison Nation or Quirky.

And what if you find a way past all the rivals, red tape, and marketing madness to come up with the next Bacon Bowl home run? Not only do you get to keep the entire royalty stream, but you did it your way. That alone was good enough for Frank Sinatra, right?

The article Can Edison Nation Show You How to Sell Invention Ideas? originally appeared on Fool.com.

Anders Bylund has no position in any stocks mentioned. The Motley Fool recommends Home Depot and Procter & Gamble. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.