The Market Price of Ideas

I have, right now, an idea that is guaranteed to generate $1 trillion in sales a year as a baseline. Thats Trillion with 12 zeros, a million million dollars, a year. I am going to give you this idea for free, because I want to demonstrate, without execution, an idea is valueless. A machine capable of moving you forward or backwards in time would easily be worth tens of trillions of dollars, even if the movement of time was restricted to mere minutes or hours. Does that seem too far-fetched? How about a machine that can transport a passenger from NYC to LA in under an hour without being felt up by the TSA, want something even more realistic? A lower cost space cargo delivery system, such as the space elevator. These ideas are all worth trillions but without execution they are valueless.

Lets bring things into reality a little more. Technology has become common place over the last 15 years, with the future tech billionaires of the 70s, 80s, and even 90s there wasn’t a whole lot of competition on the idea front. Just a very small group of innovators were able to see the future of technology and how integrated it would become into our lives. Technology has recently, in no small part thanks to mobile, become something on average consumer’s mind. Few of you haven’t had the next great app idea, how could you not, we are surrounded by stories of overnight millionaires made rich through seemingly simple ideas. How many people haven’t thought to themselves, I could have made that fart app in a weekend, Angry Birds really isn’t that complex, or even Minecraft can be written in a month. If the effort to bring these projects to the table appears minimal then why is the idea worthless?

It all about the execution, not just the development and design, but also about marketing, networking, deployment, and a good deal of luck. The App Store is full of amazing products that were swept under the rug in the rush of new racket. These apps are often not any worse than the top 100, sometimes much better, but for one reason or another they didn’t get the traction needed to propel them up the charts. Consumers are often blamed, after all most of them are only downloading off the top and featured charts. Apple is blamed for not featuring or promoting their apps. The developer is blamed for not warning them of the difficult road ahead. Everyone is blamed except the person who had the idea, after all the idea is sound. “If a fart app can make a million dollars why can’t Hostile Chickens™”, they ask themselves in bed at night staring at the ceiling worrying about the bills and where everything went wrong.

Every day I hear about people who are worried we will steal their app idea, we get calls and emails from people asking us to sign an overly restrictive NDA to just hear about their product’s abstract overview. Most of the time it is Facebook – For Cats, that is to say a very popular product such as Facebook, Twitter, OKCupid, Angry Birds, or whatever the top game is right now, slightly tweaked to make it more appealing. These people guard their ideas with the fiery intensity of a nuclear submarine commander protecting missile launch codes. Everyone thinks someone is going to steal their idea, if you think there are developers out there sitting around twiddling their thumbs unable to think of an app to write you are sorely mistaken. Developers have just as many ideas for great apps as everyone else, probably more since we are in the world 24/7.

The harsh reality is you probably aren’t the first person to come up with any given idea. Likely there is already a team out there working on building it. All too often we see projects released followed by a rush to market of 2-3 competitors within weeks who are now forced to rush their products to market, because everyone was working on the same thing unbeknownst to each other. In this all too common situation it’s not the first to market that often succeeds, but the best to market. The idea hardly wins in and of itself, it is the execution that really makes the difference, whether there are competitors or not.

I have a simple experiment to demonstrate the value of an idea. From basic economics we know that the value of an item is only what someone is willing to pay for it. Try selling your idea, if you don’t want to risk “it”, try selling an older idea you had that you no longer are going to create. Start off asking for what you think the product will be worth, lets say $10 Million for a moderately successful iPhone app. Offer it for a hell of a deal 10% of what its worth, see if you can get $1 Million, how about 1%, can you find anyone willing to shell out $100k for an app idea. What about $50k, $10k, $1000? Would you pay $1000 for the next great idea, if you are saying yes, it is probably because you think you are the one holding that idea. A super going out of business sale, $100? Probably not… under $20, you may find someone to humor you and buy it, but the amount of effort you spent searching and haggling with people quickly wipes out any value that $20 had.

When you come to the table with nothing but an idea you come to the table with nothing. Venture Capitalist and Angel Investors won’t have any interest in handing over their hard-earned cash. You may raise some money from friends and family members who believe in you, but I assure you it’s not because of the idea, it’s because they have faith in you. When you approach a developer and offer him 50% of the company to do all of the work, what you are saying is you want 50% for coming up with the idea.

Would you build a house for free in exchange for getting half of the sale value if and when the owner wants to sell it, if you would I would like to talk to you about building a new ground-breaking house for me. Anyone who trades equity for labor is highly suspect in my book, if you really believed you have a billion dollar idea you would do everything you can to not give up a single percent of ownership. You would take out a third mortgage, sell a kidney, get a high interest loan, or something much grayer.

People want to see you can execute before they believe in you, talk is cheap after all. Your idea is valueless, what else are you bringing to the table, and if the answer is more ideas you are in trouble before you start.

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Kyle Richter

Kyle Richter is the Co-Founder and CEO of MartianCraft an iOS and Mac consulting studio. He has previously founded and run Empirical Development and Dragon Forged Software. He has been developing indie Mac software since 2004. Kyle is available for speaking and birthday parties.

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2 thoughts on “The Market Price of Ideas

  1. Could not express this any better. Thanks for this blog post. This will become my “future rickrolling procedure” for these idea trolls: Linking to this post.

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