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.