Archimedes’ Offspring (AOS) is a trust(1) set up for the benefit of the Invention Investment Families.
The Invention Investment Families (IIFs) are a series of investment funds created by AOS to receive investments made by ordinary investors in one or more of the IIFs in connection with the acquisition by the IIFs of a percentage ownership in new ideas and inventions. The IIFs accomplish this by investing directly in such ideas and inventions themselves, instead of the companies in which those ideas and inventions may be housed (i.e., “direct investments in inventions, not startups”). This enables each IIF to avoid registration as an “investment company” under the Investment Company Act of 1940, as amended, and, in the process to, quite literally, “reinvent” the inventing process itself. For more information on the various IIFs, the reader is directed to the AOS PowerPoint, which you can find —> here
Because of the new way AOS will shepherd ideas and inventions through the developmental stage to commercialization, AOS is convinced that the returns on such investments will exceed those typically achieved by the average successful independent inventor (which historically has run, on average, at an 11.5% internal rate of return (IRR)), as well as those available, over the longer term, from other alternative investments, such as venture capital, private equity investing and real estate investment trusts.
AOS’s targeted goal for such returns is 20% or higher. AOS believes that by applying the new AOS process (coupled with adequate funding), the returns typically realized by successful independent inventors can be nearly doubled.
To find out more about the IFFs, and how you can become an investor, please continue reading to the bottom of this page. In the alternative, you can read the “Investor FAQs” which you can find –> here.
Archimedes at that moment of “illumination”
As we are all well aware, the world economy is changing fundamentally at a dizzying pace. Countries like Brazil, Russia, India and China (the so-called “BRIC” Block that we’ve heard so much about over the past several years) have become potent economic adversaries and, until most recently, have been growing their economies at double digit rates. At the same time, while at present the U.S. economy is excelling, this (temporary) national resurgence is not being evenly shared among the various state economies. In addition, as a mature economy, the U.S. over the past several decades has only experienced modest rates of growth.
Unfortunately, the American way of doing business has been successfully duplicated at this point in each of these accelerated economies; our traditional competitive advantages (i.e., technology superiority, educated workforce, economies of scale, manufacturing efficiency, etc.) are disappearing as foreign economic fortunes improve and educational and employment opportunities increase abroad. The U.S. economy, for the first time in its history, finds itself under siege by a tidal wave of competition that shows no signs of abating.
Consequently, as we look to our economic future here in this country, it’s essential that we uncover, or rediscover, ways in which to inject vitality and genuine competitive advantage into an economy that has seen better times. An important avenue for gaining such vitality and advantage is through innovation: the inventor is an essential part of this process.
“Inventors are visionaries with a poorly developed sense of fear and no concept of the odds against them. They make the impossible happen.”
———–Robert Jarvik (first artificial heart)
In the past, American inventors have shown that they know no limits. Inventors of any age, and all genders and races, have contributed to the creative genius that is the American inventing process. The technology envisioned by American inventors has improved our standard of living and linked us across both physical and cultural divides.
For some perspective on the magnitude of the inventing community in America, note that from 1790 (when the U.S. Patent Office was first established) up through the middle of November of 2018, the U.S. Patent and Trademark Office had granted more than 10 million patents. By some calculations, at any point in time, there are over 1 million active inventors in the United States (i.e., individuals who have gone as far as to file for a patent), with an additional 11 million who consider themselves as “innovators” but, for one reason or another (e.g., fear of failure, lack of money, lack of support among family members, etc.) have failed to take those important first steps toward realizing their inventing dreams.(2)
Innovation and the inventing process, along with the inventors themselves, have been the key ingredients in driving the growth of the American economy over the past two hundred years. They are a vital component of the U.S. competitive arsenal. And, as important is the fact that inventors don’t just innovate; they create wealth, use the services of other providers and give back to the community. They are both drivers and users of the economy; they both create and consume.
We at AOS believe it’s time to encourage and support these innovative people who are dedicated to the inventing process. We believe that supporting them and their processes holds the potential for revitalizing our economy. It’s the recognition of this inescapable fact that has served as the impetus for the creation of Archimedes’ Offspring.
Unaided, on their own, and without professional mentoring (other than, perhaps, a patent attorney whose interests in the client’s financial welfare may be a secondary consideration next to the fees available for the rendering of patent preparation and prosecution services), independent inventors have an extremely difficult row to hoe. While estimates of independent inventor success rates vary all over the lot, from less than 0.1 percent by some estimates to as high as 50% by others, independent, impartial and empirical studies have placed the number at closer to 6.5% ([+ or -] 0.7%).(3)
-- the benefit of close-monitoring of the inventor's inventing process by experienced and knowledgeable mentors who serve as "task masters",
-- involvement by reputable professionals from the specific industry being targeted as "vetters" of the idea / invention, and
-- the funds necessary to carry out the basic tasks and functions required to bring the invention and its related intellectual property to fruition,
less than 7% of independent inventors will ultimately be successful in commercializing their invention.
— Internal Rate of Return (IRR)
Consistent with the above, additional independent, impartial and empirical research has determined that without in-depth support, the average independent inventor who ultimately proves to be successful on his or her own (i.e., conditional on successful commercialization), can be expected to receive approximately a 16% internal rate of return on their investment.(4)
Although this number drops down to 11.4% when you factor in the traditional concerns about the probability of successful commercialization and the quality of the inventive efforts, what this demonstrates more than anything else is the need for (i) expert and reputable professional help, mentorship and supervision, (ii) extraordinary involvement by industry professionals in the vetting process, and (iii) sufficient monetary resources to see the project through to fruition.
Admittedly, the foregoing might not be the type of return of which venture capitalists and high-net-worth investors dream. However, once you factor in the extremely high risk profile (i.e., rate of failure of startups in general) attributable to the average venture capital investment, it is clear that, at least from the perspective of the ordinary investor, investing directly in inventions holds out the promise of producing superior returns.
Along these lines, it is a well-known fact that, on average, only 1 out of 10 companies in which venture capitalists invest will produce an out-sized return, with the performance of the balance of the venture capitalist’s portfolio proving disappointing. When you couple that with an 80% to 90% failure rate of venture capital firms themselves, the risk from investing in inventions is far lower, with the promised benefit, more often than not, clearly outweighing the risk. Lastly, it’s important to note that portfolio companies, not infrequently, absorb several millions of dollars before failing. By comparison, the maximum loss an investor in one of the AOS Invention Investment Families can experience with respect to a single invention is small, i.e., $75,000.
Unfortunately, when it comes to traditional alternatives such as the public markets, REITs, stock/bond mixed portfolios, gold, straight bonds, etc., the comparison with investing directly in inventions suffers even more. See the chart below.
One thing upon which everyone can agree is that having professionals onboard, with real expertise, who can evaluate new concepts (whether those concepts involve landing on the moon, designing and manufacturing a new fighter jet, executing the legal, business, accounting and tax strategic planning required to create, grow and sustain a complex, new business entity, or even making investments in the venture capital or private equity markets), is always a good thing and a very smart move.
And, while the mere involvement of an experienced professional in a process won’t, by itself, assure a positive outcome, when present, that professional significantly helps to increase chances for success. When you couple that expertise and professional diligence with the additional industry and financial resources needed to bring an idea to fruition, the chances for success increase exponentially and the failure rate plummets. It’s this approach that drives the business model undergirding the AOS project.
Once you apply a team of extremely experienced, reputable and honest service provider professionals (consisting of experts in patent and product searching; patent evaluation; preparation and prosecution of patent applications; prototyping and design engineering; short-run manufacturing; and trade show attendance and marketing) to the process and, then, cap it with a vetting system that ensures product industry participation in the final decision-making, the picture (and the chances for success) looks very different.
This is the central premise of the AOS business model: that honest and reputable professional expertise, coupled with committed and diligent mentorship and supervision and sufficient funds to see the project to completion, will increase the success rate by several orders of magnitude, resulting, not only in a greatly improved success rate, but a success rate with a much greater return, not only for the inventor, but for whomever invests alongside that inventor.
Thus to sum up, here’s some of the major reasons why investing with one or more of the AOS Invention Investment Families instead of existing speculative, or even traditional, investments makes eminent sense:
1. Lower Risk Investments: The money is invested in “lesser-risk” inventions (i.e., maximum investment per invention limited to $75,000) versus “higher-risk” startups (i.e., downside, potential, the loss of several million dollars per failed startup).
2. Direct Investment in Inventions, Not. Startups: Investments made in inventions is for something “concrete” i.e., partial ownership (% subject to negotiation) of title to an invention and its related intellectual property, not securities in a startup company.
3. Investment Levels Capped: Maximum capital invested in any single invention is $75,000, invested in three separate tranches – for each tranche for which investment is approved, an additional % of ownership in the invention is surrendered (projected aggregate average: 20%)
4. Inventor Commits to Exit Strategy Before Funding Occurs: Inventor must agree to exit through licensing or outright sale to a third party – but is permitted to (i) repay the amount with interest at a rate negotiated at the time the “bridge loan” is made (i.e., 15% per annum or above), or (ii) come back to AOS if the invention is “one in a million” and the inventor is seeking permission to create a company to commercialize the invention by seeking private funding (other than AOS) to grow it. In such a case, the inventor must “buy back” his invention and the related IP rights at a price to be determined at the time of “buy back” based on the valuation of the idea or invention existent at the time of such buy back, determined by a professional appraisal and reaching a mutually-satisfactory “buy-back” agreement.
5. "Well-Below Market" Management Compensation: Under the terms of the Management Contract, investment managers (which includes all senior-level staff positions) will get reasonable, but modest, compensation (payable by AOS Management, Inc., but subject to reimbursement by the IIFs acting on a joint and several basis), of up to, but no more than, $5,000 per month per individual, with such monthly compensation permanently capped at that level, subject to increase only in the event of a vote to increase that amount which is favored by at least 51% of all of the shareholders of all of the IIFs voting, collectively, as a single class. It is anticipated that, initially, there will be 6 such positions, but in any event, not more than 10 positions at any point in time.
6. Management "Carried Interest" is Modest and Below Industry Norms: Under the terms of the Management Contract AOSM will receive nineteen percent (19%) of each IIF’s outstanding capital in the form of shares of Series B Preferred Stock. Such stock will possess an anti-dilution preference, but will otherwise be subject to a liquidation preference in favor of the Series A Preferred Stock described in Item No. 10 below. AOS intends that all shares of Series A Preferred Stock will be owned by the investors in an IFF’s initial securities offering, which AOS believes will consist of members of the general investing public.
7. Administrative Overhead for the IIF Funds is Eliminated: AOSM Managers manage day-to-day operations of the IIFs' funds, subject to supervision and approval by IIF’s funds' Boards of Directors. No officers or staff required for the IIFs or their funds.
8. Early Investors are Rewarded by Preferences, Protections and Discounts: Since each of the IIFs can raise multiple rounds of capital, doing offerings, on average, every 12 months and, under extraordinary circumstances, as often as every 6 months, early investors are rewarded by both preferred terms and subsequent rounds of capital supporting their initial investment.
9. The General Public Can Invest; Investments Are Not Limited to the Very Rich: Money is raised from the general public through innovative use of new Federal Title III and Title IV “public offerings” under the JOBS Act.
10. Early Investors Get Their Capital Back First: In every initial securities offering by an IIF, the investors in such initial offering (which, in every case, will be a Series A Preferred Stock offering), will receive one hundred percent (100%) of their capital back prior to any distribution to the investment managers or the remaining shareholders.
11. No Additional or Hidden Fees: There are no additional fees. AOSM is entitled to receive reimbursement of moderate, reasonable and necessary business expenses incurred by AOSM on behalf of the IIFs (i) in the running and maintaining the IIFs’ businesses, and (ii) for capital expenditures incurred to improve the IIFs' business operations.
12. Enhanced, Above Market Returns with Lower Risk: Given the smaller, maximum amount of money invested (i.e., $75,000) per investment opportunity, AOS represents, potentially, a tremendous opportunity for a greatly enhanced rate of return at a much lower risk profile than, say, speculative securities or venture capital-funded portfolio companies).
To put it simply, in the opinion of AOS and its designee, AOSM, the invention portfolio pool is much more favorable than either traditional investments or even other speculative alternative investments since with the AOS invention portfolio pool risk is spread over many, many more investments than is possible under, say, the venture capital model, where the average venture capital fund cannot invest in more than 30 portfolio companies per fund raised.
We believe that investments in AOS-sponsored IIFs will prove to be, over the longer-term, a superior investment over both traditional and speculative alternative investments. We’re excited to bring this brand new, innovative concept to investing within the next few months. Stay tuned to learn more about AOS-sponsored IIF opportunities to be offered in the near future.
In the meantime, if you’d like to better understand the AOS business model, take a gander at the AOS PowerPoint, which you can find —> here.
In the future, we intend to work with one or more of the IIFs in one or more “testing-the-waters” campaigns in connection with potential future securities offerings under the exemption from registration afforded by Regulation A, as amended, of the Federal Securities Act of 1933, as amended. For details pertaining to such potential future securities offering, the reader is directed to subscribe to the newsletter sent out from time-to-time to regular subscribers to this website.
1 Archimedes’ Offspring is an unincorporated business organization (commonly referred to as a “Massachusetts Business Trust” or “MBT”) formed pursuant to that certain Trust Agreement dated as of the 31st day of March, 2019 (the “Trust Agreement”), by and between FLC LLC, a Colorado limited liability company doing business as “FLeCusa International,” as Grantor (the “Grantor”), Windom Peaks Capital, LLC, a Colorado limited liability company, as Trustee (the “Trustee”), and the Invention Investment Families identified elsewhere on this website (the “IIFs”), each of which has been designated a beneficiary / beneficial owner under the terms of the Trust Agreement.
Under the terms of the Trust Agreement, the Trustee (subject to approval by the Board of Directors of each of the IIFs at the time of the First Organizational Meeting of such IFF’s Board) has appointed AOS Management, Inc. (“AOSM”) as the management company designee for each of the IIFs. The compensation to be paid to AOSM for the management tasks which it will be required to perform under the management agreement to be entered into between AOS and AOSM on behalf of the Trust, for the benefit of the IIFs (the “Management Contract”), which includes the equity participation by AOSM in each of the IIFs, is detailed, in each case, in the disclosures pertaining to the Management Contract which can be found in the forms required to be filed with the Securities and Exchange Commission prior to the commencement of an offering of any securities by any of the IFFs.
2 Source: Adam Davidson “Searching for the Next Snuggie: Is this Really the Golden Age for Inventors?” The New York Times Magazine, April 17, 2012. The United States Patent and Trademark Office (the “USPTO”) issued a report in February 2016, in which, based on official records, they indicated that there were a total of 739,264 Independent Inventors in the United States as of 2015. See “Independent Inventors by State by Year All Patents, All Types Report January 1, 1977 ‐ December 31, 2015”, U.S. Patent and Trademark Office, February 2016.
3 Source: Thomas Astebro, “Basic statistics on the success rate and profits for independent inventors”, Entrepreneurship: Theory and Practice, December 22, 1998. Also, see, Andrew Spriegel, “Invention Success Rates | Odds of Inventor Success”, Andrew.Spriegel’s Blog, November 24, 2010.
4 Source: Thomas Astebro, “The Return to Independent Invention: Evidence of Unrealistic Optimism, Risk Seeking or Skewness Loving”, The Economic Journal, Volume 113, Issue 484, 1 January 2003, Pages 226–239.
United States Patent and Trademark Office (USPTO) Pro Bono Program submits first potential inventor candidate to AOS Vetting ProcessJanuary, 2020
AOS President and CEO, Rita Crompton, appointed Ambassador under United Inventor Association Ambassador ProgramJanuary, 2020