As mentioned in a previous post, the idea is the third variable that an investor will look at to evaluate a startup investment opportunity.
What is the value of an idea? In the startup world and lingo, it’s often heard that any successful venture is 1% ideation and 99% perspiration.
My experience tells me a slightly different story. Let’s look at this issue in a systematic way.
The idea is the very start of a business venture. The idea must be good, it must solve a problem for a sizeable capturable market or solve a very expensive problem for a niche market. Lacking these, even a perfect execution will not yield a successful venture.
These may sound like very banal statements however, it has been estimated that up to 50% of capable teams work on and chase bad business ideas. Falling in love with a business idea has similar biases as falling in love with a person. At the beginning, during the infatuation stage with an idea or with a person, one tends to see only the good sides, overlooks the bad and in general feels that this is the best thing in the world. If the founder happens to be a good communicator and a good salesperson, then he/she will be able to make other people see the idea as outstanding. A word of caution, in this day and age it’s possible to test your idea before bringing it to market, I strongly encourage you to do so. Furthermore, a word with angel investors, super angels and micro VCs who see hundreds of companies every year is a very good idea to get some feedback.
After testing that the idea is indeed good, we go on to the execution. You can be sure that many other people will have detected the same idea and have started moving in the same direction you are considering, therefore how you determine and test your business model and how you execute your business plan make the difference between success and failure.
As soon as you have validation of your idea, your efforts should be concentrated on a market validation of the product or service via a minimum viable product (MVP).
Many ideas sound great but are not practical or viable. Others require a large investment to be validated and brought to market. The best ideas are the ones that thanks to some bootstrapping and a lot of hard work are viable and testable.
Every single idea will have different characteristics in terms of capital requirements, potential, validity and market reachability. Success and failure will occur based on the thorough analysis and evaluation of each variable.
How much is a good idea worth? A lot, but only if it is executable by the right team, at the right time in the right market!
