An idea is not a company. It does not matter if it’s a bad idea, like a $200 battery-operated water bottle and connected phone app that feeds fuel pods to humans (in other words a glorified liquid PEZ dispenser). A bad idea is not a company just as a great idea like sliced bread is not a company.
There are several requirements to qualify as a legitimate company and those requirements include engaged constituents, team members, customers, industry partners. and a product.
The other day, I was approached by a young ideator (having an idea does not make you an entrepreneur), in search of the answer to the question, of how to turn his idea into a company.
He began his presentation by citing all the societal and health benefits of his product. They were easy to understand and yes, it might improve health outcomes. I got his point in two minutes. It was a good idea. Unfortunately for him, an Idea is not a company.
Now even though I kept assuring the lad that I understood his product may be useful, he kept piling on value props and data points until my ears were bleeding. For 15 minutes straight, he continued with his monologue without stopping for a breath, piling on benefits and data points until I said… timeout… I get it! I get it.
I said, “I fully understand how it works and why it might be useful. But you’re also telling me you need $40 thousand dollars to build a prototype, and that prototype will either prove your product works or doesn’t. So we don’t know if the idea is technically feasible. Once you proved the technical feasibility, you’d have to prove that there are enough people willing to pay you more than your costs of goods to buy your product. That there aren’t useful alternatives to this idea. That you could get through all the regulatory hurdles, and if you could do that, you might have the start of a company. But right now… all you got is an idea. I’m sorry, but an idea is not a company.”
Question: You say $40K to find out if it works? Answer: Spend your own money on that idea, it doesn’t sound like a company to me.
This young ideator was passionate about his idea; he must have thought I didn’t see the brilliance of the idea because his answer to that was to go back to all the reasons why it’s good, why it’s needed, why the world would be better if he could take it to market.
Unfortunately, this kid was about twenty ifs away from finding out if maybe his good idea could be a commercial success. He was 20 ifs from a maybe. His first problem.. why would any for-profit-minded investor place any capital on this good idea that may not work and, if it did work, may not sell? How important is this cure to the public? His idea had multiple risk hurdles to cross before probably failing.
Deep Thought: The COVID vaccine was an important innovation that helped open up the economy. That was a high-priority problem… in 2020. Still important today but now that there are multiple vaccines it is no longer a high priority.
Here’s the biggest problem with his idea, it was an elegant, high-tech, expensive method that could be accomplished much more simply. It’s like a water bottle that connects to your phone to tell you you drank 12 ounces of water after you drank 12 ounces of water from a 12-ounce water bottle. The problem with that idea is if a person didn’t have enough brain power to realize that drinking 12 ounces of water out of a 12-ounce bottle of water means you drank 12 ounces of water… how the hell would they figure out how to use a phone app? Shoot, if you don’t know drinking 12 ounces of water means you drank 12 ounces of water, you barely have the intelligence to breathe in and out, much less order a liquid PEZ dispenser online.
The biggest hurdle to this kid turning his idea into a company was that even if he could raise the money to build a prototype, the prototype would only prove that low-tech, existing methods weren’t going to be displaced by his over-engineered expensive idea. No one wanted a better mousetrap. So there was no need to design a Rube Goldberg improvement to something that is simple, affordable, and effective.
And still, he went back to the research. This ideator was in love with the idea and didn’t seem to care that it was not a company. An idea is not a company.
Great, he has passion; go follow your passion… unfortunately, passion is a lot like an idea… it’s not a company either. With the exception of bordellos, passion does not pay bills.
Got a great idea? Want to find out if it’s startup-worthy? Get out of the building. Talk to people. Find your targeted beneficiaries, end users, decision-makers, and influencers. Design interview questions that won’t bias the results. Talk to a couple of hundred people and find out how they rank the problem your innovation solves and how satisfied they are with existing solutions. If the inventor of the Segway talked to parking meter attendants and mall cops, they would have found out that nobody wants to pay $6,000 for a two-wheeled slow-moving, 12 mph pedestrian transport toy just because it had 2 wheels when there were more stable, 3 wheeled versions available at 1/3 the cost.
Segway was founded in 1999 and raised a reported $90 million by Kleiner Perkins Caufield & Byers, Amazon’s Jeff Bezos, and angel investor Jimi Heselden. In addition it recieved $13 million in governement grants. After 16 years of never turning a profit, the company was sold for an estimated $80 – 90 million.
Want to talk about your idea? I’d rather talk about your company. Try a complimentary online coaching session. You can schedule your coaching session now with that little red button down there.