Ram Rachum's blog

21st October 2010

Text

The value of a startup idea, or “Are startup ideas worthless?”

Many people speak with me about startup ideas. People who are not startup-savvy often treat startup ideas like they were invaluable business assets. Some memorable phrases from these discussions are “I’ll tell you my idea, but promise you won’t do it yourself” or “If you’ll end up doing this idea, you’ll need to pay me a royalty.”

People with more experience in startups know that this kind of behavior is silly. Many smart people say that ideas are worthless. I think this is closer to the truth. But then again, it’s not exactly the truth: Ideas aren’t really worthless. A good idea which gets executed well by a smart and determined entrepreneur is worth something. It’s like the success of a startup is something like the equation (Quality of idea) * (Quality of execution) = (Amount of success). If one of these two terms is close to zero, the success will be close to zero, no matter how big the other term is.

I think there’s a very good reason for why savvy entrepreneurs dismiss the (Quality of idea) factor; The reason is that the (Quality of execution) term is usually so low, that success goes to zero regardless of how good the idea is.

In other words, most startups execute really badly on their idea. Most software, whether produced by startups or not, simply sucks horribly. And it’s so easy to blunder on the business side of the startup too. So it’s much more rare for a startup to die from a bad idea than from a bad execution.

The final answer for the question is: A good startup idea is worth a lot only when well-executed, and a good execution is so rare that the worth of the idea is usually irrelevant.

Analogy: A startup idea is like a woman

I think I have a good analogy for the worth of a startup idea. A startup idea is like a woman.

(For people who care about political correctness: Substitute “romantic partner” for “woman”.)

• There are many many good ideas. There are many many good women.
• When you find one that you like and get along with, you start treating it as the most special and awesome one in the world, and you forget about all the other ones.
• And even if I believed for a second that you just happened to catch the single most wonderful idea/woman in the world— You must admit that the other ideas/women can’t really be that far behind.
• Once you understand that you can let go of the idea/woman you fell in love with, and try some new ones, you have a sort of epiphany event, and you understand how much you can achieve if you keep your eyes open for new ideas/women.
• When you’ve had a long relationship with an idea (e.g. started a company that executes on it), you start to view the idea as very very valuable. But the idea is valuable only for you, because you’re the one who understands exactly how to do it. In the hands of another person the idea would be worthless. Similarly, you are valuable for the idea, because you’re the one who can make it really happen. So what is really valuable here is not the idea, but your relationship with the idea. The same, I argue, can be said for women: The valuable thing is the relationship.