Your great idea is not worth a penny.

There was a moment when a bunch of people who I knew wanted to run some ideas by me. I was happy to listen and provide some feedback. However, sometimes it got a bit murky when people either asked me to sign NDA or asked me to not discuss this idea with anybody else.

It was quite common for people who have never been in startups to believe that their idea is actually valuable. People felt that they stumbled on a rare gem (which is already worth a lot) and all they have to do is to cut it to become even more valuable.

There is a standard spiel which I had to do with all of them. It starts with my standard phrase: “Even great ideas don’t worth a penny. Actually, most ideas have a negative value”. This always takes a lot of people aback. How (my) great idea could be worthless. It’s so obvious that it will work and can become a billion-dollar business.

There are two simple reasons/arguments to show that ideas have negative value:

Let for a second assume that idea worth something (maybe a modest amount of $1k). Ok, I can generate 10 ideas for you. BTW. I can generate ten ideas that are plausible to become a real business. Are you willing to pay me $10k for them? Is there anybody willing to pay $10k? How about $1k? How about $100? Where are the marketplaces which sell ideas? Where are the people whose only job is to sit and generate business ideas? Just following this train of thought it becomes obvious that the market doesn't value ideas and there is very little demand.

Anybody who was a startup founder knows how long is the road from “Hm… This is an interesting area.” to “We have a real business here.” to “We are profitable.” Just to give you a glimpse, you got the idea, you need to talk to potential customers, look at competitors, talk to a bunch of people to polish your idea, think through caveats of the idea, create a pith deck, figure out financing, figure out legal and dozens and dozens of other activities (before you even start).

You can imagine this process as a funnel. At the top, you have all these people with ideas and gradually, they go through refinements and move down the funnel. At each stage, you will invest some nontrivial amount of time (and money) to figure out whether you want to proceed to the next stage, drop the idea, or pivot. As an example, you got a great idea, talked to five people whom your trust and all of them told you that it’s not interesting. Do you proceed? You spend some time and found three companies that are doing exactly what you wanted to do, but they are years ahead of you, do you proceed?

If you calculate all the time (and money) which is spent at the top of the funnel (until the first dollar from a customer is received) you will be astonished how much money you need to invest to do basic validation of your idea. And you will be astonished how the ideas morph and pivot while going through this funnel (making the original idea pretty much irrelevant).

This is the reason, why ideas are not worth a penny. An unvalidated idea has a negative value because you need to invest tons and tons of time and money to validate it first.

And lastly, idea validation is not a boolean state. It’s a gradual process of starting with an idea and making it a viable business. The execution while you move down through that funnel is way-way more critical than a nugget of an idea that you stumbled upon while having a Starbucks coffee.

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Victor Ronin

Victor Ronin

Entrepreneur, manager, software engineer. Contact me at victor.ronin at gmail.com. LinkedIn profile: https://www.linkedin.com/in/victorronin/