I recently picked up Finding An Angel Investor in a Day to see what kind of advice was in there and to get additional info on term sheets.
I found the following breakdown very interesting: Three Types of EntrepreneurInventors They create a completely novel idea or invention. Such ideas or inventions are revolutionary. They're often called "disruptive technologies" because they displace whatever came before. They include products such as the copying machine, the web browser and the cell phone.
They take existing products, technology or ideas and change them or apply them to new uses. Bringing a product like Teflon, which was developed for industrial use, to the consumer market, is an example of an innovation.
They take an existing product and find a new market for it. The new market can be geographic, such as taking a product developed in Asia and introducing it in the United States of America, or demographic, such as taking a product designed for businesses and introducing it to consumers.
It is much easier and cheaper to be an Innovator or Introducer than to be an Inventor. Inventors also seem to get the short end of the stick a number of times:
- Computer mouse - Xerox (not Logitech)
- DOS - IBM (not Microsoft)
- Cellular phone - Motorola (who is hurting and wants to sell that part)
- Portable music player - Sony (now Apple runs the show)
- Commercial Word Processing software - WordPerfect (not Microsoft WORD)
- Spreadsheet program - Lotus 1-2-3 (Not Microsoft Excel)
- Personal computers - Altair (not Dell or HP)
- Web Browser - Netscape (Not Internet Explorer)
- Search Engine - ALIWEB (Not Yahoo)
- Pay-per-click Advertising - Overture (Not Google)
Even though there are plenty of examples where the inventor makes a fortune (Thomas Edison for example), the pattern is clear, especially in the latter half of the 20th century and now the 21st century