Financial Risks Associated with Investing in New Inventions

As much as there are different kinds of people who consider themselves open-minded and liberal to new ideas, as human beings we are all conservative to change. Ever since the invention of the wheel to the recent space explorations, the first step is usually the hardest when it comes to embracing the idea of strange new possibilities.

 

When it comes to finance, the balancing of the cost of investing in a project and the expected returns from such a project is usually the greatest consideration factor. No investor or business man is willing to put his money in something that might not pan out moneywise. However, just because something looks good on paper in terms of balancing the money that goes in and comes out doesn’t necessarily reflect to the real life situation. There are several factors to consider financial wise when it comes to new technology projects.

 

Investors

Wooing investors into investing into a new project is tricky, in most cases it’s difficult to tell someone to put his/her own money in something they have never seen before. We all wear clothes and understand how the retail industry works, getting a bank to loan you money to start a cloths retail shop is easier compared to telling the same bank to lend you less money to work on a teleportation device with the possibility of very high returns. In most cases the answer will always be no, or a conditional yes that requires you in both cases to end up investing your personal savings.

 

Production costs

As a financial officer, one would also have to consider the factor of production costs in that for most common products there is a standardized production process and it is easier to outsource some aspects of the process.

 

An example in the automotive industry you can purchase an engine from one company and assemble it with a body you fabricated on your own and finally purchase wheels from another company. This makes the entire process cheap, faster and convenient. On the other hand, when it comes to a new invention you have to design to your specifications and produce everything on your own at higher costs.

 

Marketing and consumer reception

This is one other area that sky rockets the risks by a far. There are several aspects affected; pricing, advertising costs, free sampling and consumer education. When introducing people to an alternative commodity to what they normally use price goes a long way to convincing them, there is no way you are going to tell me to buy something that does the same function with a spoon for a higher price irrespective of its advantages. As for advertising, intensive and extensive advertising is required to give the product a survival chance in the market. You may consider marketing luxury brands if your business involves luxury products.

 

This means more and more money is poured into the advertising part of the commodity and at times, it may prove to be counter-productive. Don’t forget the extra costs incurred in free sampling and consumer education. The consumers need to try out the product to see whether or not it lives up to the hype while they are doing this they destroy a few products that bring no return and with no guarantee that these people who sample will actually make a purchase or give positive review.

 

The financial risks associated in financing a new technology commodity is very high if you look at all the factors in comparison to other regular commodities and fields. This however doesn’t mean you shouldn’t put your money in new inventions but you should consider all factors before doing so.  And when you do decide to invest know that the returns associated in those inventions that do kick off are very attractive and in most cases new technology investments set you up for life.

Views: 65

Add a Comment

You need to be a member of neofundi to add comments!

Join neofundi


Follow us on twitter  

 

© 2024   Created by neofundi.   Powered by

Badges  |  Report an Issue  |  Terms of Service