[ExI] Engineering-to-financial leap

[Adrian Tymes]

Thinking about the question I poised to Keith, I realized I'd made a bit of
a leap that certain others on this list might benefit from copying.  I
apologize in advance that this is a chain of thought ramble.

I know there are others here, like Keith and myself, with engineering
backgrounds and good plans to produce technology that, frankly, the world
would consider wondrous...if only we could get financing to build it.  For
most of us, that's where it ends: we retreat back to whatever we are doing
because finance appears to be an unassailable problem short of some large
grant or stroke of luck.

But it's not.  Finding out how to turn such plans into reality, using only
those financial sources that are readily available, turns out to be
amenable to the same sorts of analysis by which we developed the technology.

Finance can be engineered, in the same sense of the word that we are used
to.  And we can do engineering.

Now, you'll have to study up on business.  Financial engineering is as
different from other engineering as, say, mechanical engineering is
different from software engineering.  There are a number of good quality,
free online courses out there, such as
https://www.coursera.org/course/innovativeideas - most of us can watch the
lectures and do the coursework in our spare time, so long as we make sure
to do it each week.  (You're the type who, when you got a 4-answer
multiple-choice quiz, could usually see which two answers were blatantly
false then spend a minute or two finding which of the remaining answers was
wrong, then guess the remaining answer and usually guess correctly, right?
That's about how hard this stuff is.)

You'll also need to focus on showing the benefits of your technology.  This
should not be hard: if you weren't convinced it was better, you wouldn't be
dreaming of it, but now you need to learn how to share your dream.  Start
with why the technology matters - what good does it do - who benefits and
how - what value is delivered to those who benefit - and how might a
portion of that value be delivered back to the provider?

Focus especially on those likely to benefit early and strong.  This will
often be those with more resources.  (If you have a moral need for your
tech to help everyone, remember that this is merely a stage of development
- someone has to be the first customer - and you have to pass through it
just like you have to pass through theory and testing, before you finally
get to where it's benefiting everyone.)

Many funding sources only become available after you have a solid plan for
how you will use their funds.  This is just like any major project: you
need to articulate a coherent plan of development before you can get
stakeholder approval, and those that write the checks are almost always
among the stakeholders.  In this case, you often have to show how they will
get their money back with some interest ("return on investment"/"ROI"), but
this can be seen as proof that you are delivering value: if your technology
is not one that anyone would pay for, does it actually benefit anyone?

Part of this is identifying the problem your technology solves.  If it's a
real problem, expect to find people using cobbled-together solutions that
your technology would replace, but few if any direct competitors.  When
people ask about your "competition", if you only see things you'd be
replacing, that's your competition, as in "that which people would not
spend money on so they can spend money on your solution instead".  (Even if
you wind up creating value and wealth for the entire world in the long
term, in the short term peoples' budgets are effectively zero-sum.  If your
solution would only cost the price of a pizza a month, you need to actually
prove that those who would have bought that pizza would benefit more from
buying your product or service.)

Another part is getting experimental proof ASAP - even of a relatively
inefficient, weaksauce prototype.  If someone were to demonstrate a 1-watt
desktop fusion reactor, you wouldn't seriously expect a multi-MW commercial
plant to be nothing more than millions of those 1-watt prototypes, right?
You'd expect that there would be serious engineering to efficiently scale
up to such volume.  Same thing here.  Many funding sources want
demonstration that you can in fact get customer interest; actual sales and
paying customers work best, but letters of interest (actual potential
customers signing paper that says "if you were to build X to specs Y then I
would pay $Z") may also suffice.

Also, if you can build small there often become other uses.  If you can
scale from 1-watt desktop plants to multi-MW installations, could you also
create portable multi-KW vehicular power sources?  These would be more
expensive, but you would need less money to build your first one; could
selling these help raise funds to build that multi-MW plant?  Think of it
as micro-financial engineering: the investors might not be able to fund
that multi-MW installation, but they might be able to fund a few of those
multi-KW engines until your business is profitable, at which point your
business itself can eventually fund the multi-MW installations.

This financial efficiency often comes at the cost of technical efficiency.
Economies of scale mean that larger installations cost much less per unit
output...but only if you have the funds to make that larger installation,
which you do not at first.  Remember that you're probably selling at first
to those with more resources?  This is why.  They're basically covering
your inefficiency so that you can make the thing at all, until you have
enough resources to build large and be efficient.  Granted, this means that
you have to have more benefit than just delivering a commodity for cheaper
- but if your technology is truly that impressive, it probably does have
more benefits.

Try not to depend on government financial sources.  Unless there is a
specific, short term announcement that you are planning to bid on, chances
are they can't be interested, whether or not they should be.  (I know,
"can't be" is unusual phrasing here, but it's more accurate than "aren't" -
though "aren't allowed, by their bosses and regulations, to be" would be
accurate.)  In particular, don't depend on multi-year government contracts:
few governments are able to sign and then stick to them.  (Elected
governments, such as most Western ones, have new legislators and executives
every so often that reevaluate them; other governments have their own
problems.)  That said, it doesn't hurt to look around and see what funding
opportunities are currently open or are about to be; http://www.fbo.gov/ is
one good place to start looking.

So yeah, just some thoughts.
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