Lessons

What creates the difference between success and failure?  The answer is knowing your limitations and managing expectations.

Like any other company, over the last 25 years Advanced Innovators has learned many lessons and faced its share of failure.  The company had filed worldwide patents for Roton – a company designing a rotary intake and exhaust engine that offered the competitive advantage of doubling fuel economy. Advanced knew that producing a working prototype would be critical to Roton’s success. Unfortunately, after years of stalled developmental work, a prototype never materialized and the life cycle of the patents were close to expiring.  Many reasons contributed to this failure, but the two that stand out were the critical legislative barriers to entry and high cost of engine development, for which the incumbent investors had no taste.  The inventor lost out because of mis-managed expectations with investors.

The lesson here is not to make investments with grandiose ideas of returns.  Bottom-line, if you can make $10 for every $1 invested, you have done well!  For the inventor with just an idea, a rule of thumb is to keep between 10-30% equity.  With a small fledgling business requiring capital for growth, the management team could maintain 55-70% of the equity depending on the degree of risk taken by the investors.