Sunday, 14 November 2010

The Value of Ideas


Every business starts with an idea. One of the most frequently asked questions by first-time startup founders is "How much is my idea worth ?"

Unfortunately most are surprised to hear the reply "nothing".

Paul Graham wrote a good article about the philosophical argument for this viewpoint but I wanted to present an alternative argument focusing on the underlying economics of the value of ideas.

It essentially comes down to the question: Does the idea give you a defendable competitive advantage ?

There are some industries such as cleantech and pharmaceuticals where ideas (new technologies, drugs, etc.) are patentable, and as such give you a competitive advantage which your competitors can't copy. In these cases the idea does have value, and you can often raise investment, etc. solely on the basis of your idea.

However in other industries such as in the web and mobile space, ideas are not patentable, and thus theres nothing to stop a competitor from copying a good idea. Hence ideas in these areas don't give you a defendable competitive advantage. It doesn't matter how good or unique the idea is. If you can't stop someone cloning it the day after you launch then the idea itself has no intrinsic monetary value.

A good idea is the foundation of a successful business, but like the foundation of a new building, it's purely the basis for the work ahead.

3 comments:

  1. This comment has been removed by the author.

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  2. Personally I believe that the real value of any creation is in the implementation, not the idea. Implementing ideas is hard because that’s where things get complicated. Turning something mental into something physical is often quite a challenge. One reason for this is the lack of finance. But if you really look forward to your idea to work for you, it is essential to finance your project. So, you can apply for loans online and be sure that your dream will come true.

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  3. Having an idea is a great but hard work is what makes that idea successful. The other problem that can arise is financing. Focus Financial Corp can definitely help with that.

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