The Myth of The Million-Dollar App
The conventional wisdom is that ideas are everything. With the right idea in mind, it’s only a matter of determining the details so as to build the next million-dollar app. According to this thinking, one should guard one’s ideas and not tell anyone about them.
Startups are different. And it’s 2017.
Keeping ideas hidden from others can work well in traditional markets such as manufacturing or commodity supply. For example, if you find a cheaper supplier of bananas than that used by your competitors then you’re in a good position to do lots of business within the local market.
The market exists, your product is cheaper than others, and, provided your product is good, your superior price is ultimately the only thing that will matter. You clearly would not want to share the name of your supplier with anybody else.
However, we shouldn’t be talking about these dynamics in 2017! Technology start-ups are different than traditional markets — very different. Start-ups are all about innovative products, novel business models, and new markets.
A start-up either launches a product that, unlike bananas, nobody has ever used before or it creates and offers a new business model that has never before been tested.
In many cases, the start-up market is entirely new, offering no guarantee of continued growth. Such was the case with AirBnB’s experience of flat sharing.
Start-ups usually have very little, if anything, to do with finding cheaper suppliers of a very popular commodity or with other traditional ways of cutting costs and increasing revenue. Rather, they are about innovative products that virtually no one is using yet as well as new and unproven business models and markets that have only very recently come into existence.
“It’s all about execution.”
If you were to build a unique and new technology, such as longer lasting batteries that can be shipped immediately, then you’d be very smart to get a patent. Otherwise, business in today’s world all comes down to execution.
Whilst many different people claim to have invented social networking platforms, none of them (except for the likes of Facebook, and Instagram) successfully built an engine of continued growth, closed deals with investors and secured billions of dollars in funding, or pitched and convinced hundreds of top people to join an unknown start-up.
Friendster, once a potential rival to Facebook, launched years ago only to then become a significant failure that is virtually unknown to most people today.
Invention is the least important part of innovation.
In fact, many of the most successful and widely known start-ups were not based upon drastically new ideas but rather upon improvements to existing technologies. To name but a few: iPhone (PDAs), Tesla (electric cars), Google (some 20+ search engines), and Apple (Altair).
Why have other seemingly destined-to-succeed start-ups, like Yahoo, Altair, Nokia and many others, failed to successfully compete with their counterparts who didn’t actually have their own unique ideas and were in fact often late to launch? It all boils down to the distinction between invention and innovation.
Many people seem to accept that innovation is synonymous with invention. However, as Ahlstrom and Furr, authors of NISI, explain, the first step to defining “innovation” is separating it from “new” and “invention” because, in reality, inventing “something new” is the least important part of innovation. According to their definition, innovation emerges when invention meets market need.
The reason why the Newton (a series of PDAs released by Apple) failed but the iPhone succeeded is that customer needs within the market (the need for internet, for portable music, etc.) evolved to the point where customers found that adopting the iPhone was easy and enjoyable whereas using PDAs felt cumbersome and limited.
The same can be said of Tesla (which successfully responded to one of the previously unmet needs of electric car users, i.e., sufficient driving range) and of Google (users, who had become quite annoyed by ads and clutter on competitive sites, adopted Google because of its clean, fast, and reliable search page).
You want to build the next million-dollar app? Your initial idea is likely to be a failure!
Creating and launching a successful start-up is really difficult. The Startup Genome project, which compiled data from 50,000 start-ups in tech/web/mobile space, found that 11 out of 12 start-ups ultimately fail.
The reason they fail is that there are simply far too many unpredictable variables associated with successfully bringing something nonexistent to the market or with doing something in a completely new way. Start-ups are simply not a matter of selling cheaper bananas to somebody who already knows about and eats bananas regularly.
In addition to the existence of vast uncertainties, start-ups typically have limited budgets and little time with which to become successful. According to Clay Christensen, who coined the term “disruptive innovation” in his classic text Innovator’s Dilemma, successful start-ups are those that have enough money to try out their second idea.
Likewise, Paul Graham from Y Combinator, reports that 70–100% of a typical YC start-up’s core idea is completely new/different by the end of the program versus at the beginning.
Instagram started as Burbn, a Foursquare knockoff. Pinterest began as Tote, an e-commerce start-up. Shopify was initially an e-shop for snowboarders, Youtube was a dating site, and Twitter a podcasting company. Even Paypal changed directions five separate times. The examples are endless.
With the stats being what they are, the vast majority of new business ideas are misguided and therefore likely to fail. However, the only way to find out if your assumptions are wrong is to test them out in the actual market and start identifying and removing destructive barriers as soon as possible so that your next idea will succeed!
Stop worrying about whether others are going to steal your idea. Get over it.
Ideas are cheap and plentiful — everyone has an idea that has business potential if executed properly. More important than this is the fact there is only a small fraction of people willing and able to set aside the time, effort, and dedication to execute on the idea and risk everything to make it work.
People with the capacity to come up with, and execute on, ideas prefer to pursue their own ideas rather than try and make others’ work, especially because the former’s ideas are usually connected with their own domain expertise, experience, and passion. These are the people with whom you should be sharing your ideas because they can be very beneficial in providing feedback! You need feedback, lots of feedback. So why not get it from those with a demonstrated ability to bring their ideas from inception to market to profit?
Sharing your ideas with others makes it possible for able, experienced people to point you in the right direction, to provide you with crucial tips, and to connect you with others willing to help and/or get you customers. This is what entrepreneurs do for each other. Ours is a sharing culture, not one based on the famine mentality.
Everyone to whom you speak is a potential customer and/or business supporter. You should want to talk to them frequently and ASAP. Most people, of course, won’t tell you what exactly to build but they may indeed help you determine whether you’re solving the right need for the right market.
If you keep your idea secret and close to your chest then you will continue to live inside your own illusions of grandeur, possessing limited options to actually execute on it properly Life is short: don’t waste your time or money worrying what will happen if your idea gets stolen.
Ideas do get stolen and yours will too if it’s any good!
Ideas do get stolen; it’s a fact of life. And when they’re stolen, it’s usually shortly after they have become a proven success. Many years ago, Wozniak offered to sell the Apple computer to HP: HP laughed, only to then go on to make a copycat computer a few years later. Nobody copied Groupon’s business model in its earliest days: it was only after it had become a massive success that Google, Amazon and countless others started to imitate it.
Nobody likes risk and therefore nobody is going to be interested in your idea before you’ve proven its potential. Most people will likely think your idea is destined to fail until you effectively prove them otherwise. However, once you do prove them otherwise, there won’t be any point in hiding your idea any longer because everyone will already know about it.
Once your idea becomes a success, everyone starts to show interest in it. Do not needlessly prolong the arrival of this interest (and the investment it brings!) by refusing to share your idea with others.
Throw away your NDA when talking to investors
Here’s a fact that might surprise you: virtually no serious professional investor will sign any kind of Non Disclosure Agreement (NDA), and asking for one to be signed is a hallmark of an amateur entrepreneur.
Ninety-Nine percent of any given idea contains no secret, revenue-damaging content. This means that the vast majority of ideas can, and should, be discussed openly and meaningfully without fear of revealing their “secret sauce”.
Remember this: if your idea is any good, someone is very likely already working on it and, insofar as investors talk endlessly to countless start-ups offering competing products, they won’t sign anything that would prevent them from potentially investing in related and profitable start-ups. So do yourself a favour and skip over the NDA discussions, unless you want to throw away your chances of securing more funding.
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Your first idea is likely to fail but getting it to market is crucial because finding the right needs of your customers will allow your next idea to become a success. Life is short: talk to everyone about your start-up idea in order to speed-up the entire launch, reform, re-launch process. Oh, and don’t embarrass yourself by asking for NDAs — they’re a sure way to say goodbye to potential investments.
