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July 30, 2011

19

Investing in ideas, not just startup companies.

My last post reminded us that ideas are just a multiplier of execution, therefore the equation every entrepreneur and investor is trying to solve for is:
Business = (Idea x Execution) + Passion + Luck

AWFUL IDEA = -1
WEAK IDEA = 1
SO-SO IDEA = 5
GOOD IDEA = 10
GREAT IDEA = 15
BRILLIANT IDEA = 20

NO EXECUTION = $1
WEAK EXECUTION = $1,000
SO-SO EXECUTION = $10,000
GOOD EXECUTION = $100,000
GREAT EXECUTION = $1,000,000
BRILLIANT EXECUTION = $10,000,000

To make a business, you need to multiply the two.
The most brilliant idea, with no execution, is worth $20.
The most brilliant idea takes great execution to be worth $20,000,000.

Passion fuels you through challenges and determines how hard the company engine is working.
Luck is the wildcard you just have to accept as an entrepreneur or investor.

 

Investing in Startup Businesses via Incubators & Accelerators

There’s a trend of the so-called Y Combinator model (e.g. TechStars, LaunchBox Digital, DreamIt VenturesCapitol Factory500 Startups, Founder Institute, etc.) and it’s on the rise.  Nowadays, it seems everyone is starting up their own startup incubator/accelerator program:

These programs are great and I love them (My company, Koofers went through LaunchBox Digital ’08 as part of their first graduating class and now I’m working out of TechPad), but these investors are investing in businesses, not just ideas.  Remember the equation from above?  Businesses require both an idea AND executors.  That’s why many investors always stress that they’re not just investing in the business idea, but the founders and team behind the idea, a.k.a. the executors.

 

Investing in Ideas – VCs?

VCs who don’t want to setup an incubator type of office space fully equipped with pizza, beer, and ping pong tables are trying to get into the action via seed investments.  Sequoia Capital, a billion dollar fund tries to invest in seed rounds so they can “get in early” on great ideas that could blow up if executed on correctly.  Heck, they even claim to invest in ideas!

When I saw “Ideas” as a link on Sequoia’s main nav menu, I got super excited, thinking, “Cool!  A giant VC fund will hear my idea out?  Awesome, let’s do this.”  After I clicked the Ideas link, my excitement quickly vanished as I was greeted with a giant <h1>Writing a Business Plan</h1> followed up with “Submit a Business Plan” call to action button.  I clicked a link entitled “Ideas” yet it took me to this MBA-like business plan page filled with phrases like:

  • Sustainable business
  • Clarity of purpose
  • Large market
  • Rich customers
  • Focus
  • Pain killers
  • Team DNA
  • Agility
  • Frugality
  • Inferno
  • Business model
  • Team
  • Financials

Submit a Business Plan

Yuck!  I just wanted somewhere to submit my idea, not a 25 page business plan.  Sequoia, if you’re out there listening, I suggest changing that link from “Ideas” to “Business Plans”.

 

Good Ideas are Valuable
All the Y Combinator modeled incubator programs spend hundreds of hours sifting through ideas to find the “good ones”.  Many businesses (small and large) have brainstorming meetings to see if their employees can come up with good ideas for whatever project they’re working on.  So why isn’t there a business that is designed to take in ideas and turn those ideas into money?

 

Places to Submit Your Ideas Today

  1. HighDEAS – Sure, these are ideas people had when they were high, but there are actually some good ones in there.  For example, “Soda fountain machines should give out ice cubes with the same flavor as your soda“.  Not a bad idea!  I’d pay 5 cents more for my drink to have “Coke Cubes” instead of standard water cubes that will eventually melt and make my Coke taste all watered down.
  2. The Internet Wishlist – Ideas for apps and websites people are wishing for.
  3. My Starbucks Idea – Share, vote, and discuss ideas about Starbucks and the coffee experience
  4. Google Product Ideas – A suggestion box on ways to improve Google’s current products
  5. Pepsi Refresh Project – Pepsi is funding amazing ideas that refresh the world.  However, if your idea wins, you have to actually go out and act on your project idea.

 

Quirky – Social, Crowd-sourced Product Development
My idea is to have some kind of company that incubates ideas and finds a way to monetize off them (ideally even paying the idea makers back for their contributions).

The only company that I know that does this today is Quirky (and they’re still a young startup.  Founded in 2009).  Their process works like this:

  1. Submit your product idea to Quirky.
  2. Ideas are rated, sorted, voted, picked, and refined by the Quirky user community.  Every week the top 10 are assessed and 2 ideas are selected for the week.
  3. Expert product designers, researchers, and engineers develop working prototypes of those 2 product ideas.
  4. Quirky handles all the logistics (research, mechanical engineering, patents, manufacturing, packaging, shipping, etc.) and foots the entire bill
  5. Every unit of the product that is sold, all the community members who influenced the development of the product with their ideas are paid out accordingly


Quirky empowers average people with above average ideas to be financially paid out for those ideas.

Can the Quirky model of user generated and crowd critiqued ideas make it into other industries besides the product development world?

 

Large Companies Don’t Want Unsolicited Ideas

  1. Apple’s Unsolicited Idea Submission Policy
  2. eBay’s Unsolicited Idea Submission Policy
  3. Bank of America’s Unsolicited Idea Submission Policy
  4. Zynga’s Unsolicited Ideas Submission Policy
  5. Chick-fil-A’s Unsolicited Ideas Submission Policy

 

Nike… Just Do It Don’t Do It

A devoted and passionate customer of Nike turned to Nike’s support forums to contribute an idea he had:

http://forums.nike.com/message.jspa?messageID=191894
24 hours later, a Nike employee responded with a something along the lines of, “Hey, don’t send us any ideas.  We will only listen to any ideas that you personally own a patent to.  Thanks, but sorry.”

Nike - Don't Do It

Come on, really?  Some of the best ideas may be thought up by average consumers while taking a shower or riding the bus.  What if Nike never invented the wireless chip you put in your running shoes to track your every step?  Maybe an avid runner could have had the idea and could have submitted it to an “Idea Bank” type of company.

 

“Idea Freelancers”

What if a casual beer drinker thought he had a cold beer, started drinking it, then realized it was actually quite warm (even though the glass initially felt cold) and was disappointed because it wasn’t cold enough.  Maybe he would have come up with the label that changes colors once your beer is cold enough idea.  Sound familiar Coors Light?  Cold activated Blue Mountains label.

These are just some examples of what could have been thought up by an average person (not a full time employee of a company).  I’m sure there are thousands of genius ideas floating around in people’s minds right now, but no company wants to hear them (or won’t hear them due to legal reasons).

For starters, why isn’t there a Digg-like website (voting system) that allows people to submit cool website/startup ideas?  Programmers who just want to create something interesting and fun could check into the idea list and if they saw something that interested them, they could go program it.  I bet all kinds of cool and interesting sites would show up within days.

My buddy, Bill Boebel (successful entrepreneur and angel investor), comes up with business ideas all the time.  So, he created a separate blog exclusively for his “Startup Ideas“.

I understand many entrepreneurs are very protective about their self-proclaimed “genius” ideas and often won’t tell anyone what it is because they’re afraid someone else is going to steal their genius idea and make millions off of it.  But look, Bill Boebel’s not afraid to share his ideas.  Neither am I.  I’m sure there are many more “idea freelancers” out there willing to shoot ideas out.  I understand that the lawyers of all these companies are simply trying to protect their business with these unsolicited idea submission policies.  For example, if an Apple fanboy E-mailed Steve Jobs in 2001 detailing an amazing idea he had for a really cool MP3 player, that would be bad legal news as Apple was in the middle of developing their killer MP3 device, the iPod.

 

Let’s Think Different

Let’s embrace the wisdom of crowds.  Let’s realize as a business and tech world that the many are smarter than the few and that collective wisdom can truly shapes businesses for the better.

 

Thoughts?

This is my idea and one of my first blog posts to document it.  Maybe the idea sucks.  Maybe it’s good.
I need to hear feedback from the community.  Isn’t that the whole idea of my idea?

Comment below or jump over to the Hacker News thread at http://news.ycombinator.com/item?id=2826916

19 Comments Post a comment
  1. Jul 30 2011

    Great post Michael. Unfortunately so many people think that the gold is in their ideas. But you hit the nail on the head. An idea without a team, and without execution, is worthless. I’m all for sharing ideas and having the best entrepreneurs bring them to market!

    Reply
    • Jul 30 2011

      Thanks for giving it a read John, I appreciate your comment.

      I envision some kind of “idea bank” that seeds a brilliant idea to talented executors that then take that idea and turn it into a brilliant company.

      For now, let’s codename it iCombinator or ideaCombinator

  2. Jul 30 2011

    Mike,

    Great post!! Keep them coming! In line with the motto of openness and people sharing ideas, let me be the first one to leave one in response to this post.

    Do you know how people (including myself) buy books, read them once and then put them on the shelf, never to be looked at again?

    What if I could have a digital timeline of the books I read over my lifetime? Maybe I can even share it with other people or just see what other people are reading right now? Or even better, how cool would it be to see which books Warren Buffett read throughout his twenties and thirties, along with key takeaways from each book or even a personal note on the impact that book had on his life at the time.

    Adding a financial incentive to this, you might recommend a book you’ve read to your friends and collect a commission if they end up buying it. By buying it, I mean a digital copy for their Kindle, Nook, or similar device.

    I think it would be really neat to have something like this, and it would actually encourage me to buy the digital version of the book I read. At the end of the day, it is a nice feeling to look at your entire collection of books that you know have influenced you in some way or another.

    Just some more food for thought:

    • Integrate this system with Facebook’s “Favorite Books” section
    • Do the same for the “Favorite Movies” and even move it to Netflix.

    Hope this was entertaining 😉

    Reply
    • Jul 30 2011

      Thanks Marek. Be on the look out for more posts from me in the future!

      I like your idea. Check out http://www.goodreads.com. I don’t think they offer a “Timeline View” per se, but the service does provide a visual bookshelf, book reviews, and social elements. I can see applying a timeline view like this WordPress template: http://demo.thethemefoundry.com/shelf-theme/ to your books over time to be very visually appealing.

      Thinking to the future… what if people could borrow eBooks from each other? Once eBooks are common place, image a network of millions of book readers letting each other borrow eBooks from each other?

      It’s kind of like Bill Boebel’s idea of selling or renting MP3s:
      http://startup-ideas.posterous.com/legally-sell-copies-of-your-mp3s-to-your-frie
      …But what if you could rent or swap your eBooks, not only with your close friends/family, but with anyone on the Internet?

  3. Jul 30 2011

    Michael-

    You and I have talked about the power of crowd-sourcing for the betterment of the whole on numerous occasions. And although I knew a little bit about Quirky already, it wasn’t until I watched that video that I really started to fully buy into it all. I’ve always agreed with your belief in the power of community-based innovation, but I’ve struggled to visualize a world where individuals would be willing to share ideas freely without fear of financial opportunity lost. I like Quirky’s concept of paying the idea creator as well as the product “influencers” – as they say “down to the last fraction of a percentage point”. But isn’t the dispersion of said fractions of credit a pretty subjective thing? In the video, they were handing out larger than life checks for $20K+, which leads me to believe that a check in that amount is considered a big success story. If that’s the case, then I don’t think I’d be willing to share ANY great idea I had with Quirky if that’s the peak of success with this outlet. I understand that they absorb all costs and actually bring the idea to life with heavy duty R&D, but if my idea is really that great and I knew it could be a raging success, why would I settle for 10’s of thousands when I could be looking at 10’s of millions (if I acted on the idea myself)?

    Now that being said, just because I wouldn’t share my big ideas in fear of losing out on the big bucks, doesn’t mean that I wouldn’t consider sharing my good ideas with others – especially the ones that I don’t have the time or the passion to act on. A great example was the Coke flavored ice cubes when I order a coke. If that were my idea, I would certainly share that with Quirky and hope to cash in somehow.

    Can crowd-sourcing transcend other industries? – without a doubt. I think it’s just a matter of figuring out the proper incentive to get people to do it. Let’s keep this discussion going… it’s a good one 🙂

    Reply
    • Jul 31 2011

      The Quirky video that those guys made is awesome – I love it. Even though it’s “long” for the Internet (over 6 minutes), it keeps me excited and paying attention throughout the whole thing. It hits all the points and really explains their business and process.

      Quirky is still a small and early staged startup. Their store (http://www.quirky.com/products) only has 114 products in it. Out of those 114, 74 are in a presale state (meaning they still need more buy commitments before those product ideas actually hit the manufacturing line) and 16 are currently in production. That means they only have 24 products that they are actually selling today. Out of those 24 products, some guy has already received $20,000+… that’s pretty impressive!! Remember, none of their 24 products have been “home runs”. Imagine if the Snuggie was invented through Quirky. The largest influencer probably would have been paid out $100,000s (if not millions) by now. Basically for entering “I think there should be a blanket that has sleeves built into it so you can read a book and still be fully under the blanket. In short: cut 2 holes in blanket and sew on sleeves” into an idea website.

      Remember, the “great idea” you’re talking about is only worth $15. What is it? I’ll PayPal you $15 for it 🙂

      Crowd-sourcing can be applied to almost every industry. Look what http://TurnTable.fm is about to do to the radio and music industry. They’re going to be huge. I can’t wait to see it happen!

    • Jul 31 2011

      I’m ADDICTED to turntable.fm…. so good example. But let’s take the Snuggie example…. whoever did invent that, took the idea to some infomercial guru or Shark Tank and sold part of his “company” and presumably made great money. I guess my point is, GREAT ideas are going to be less likely to be shared, GOOD ideas have a chance. Good ideas can certainly turn into great ones via collaboration.

    • Jul 31 2011

      So are you saying the Snuggie is a GREAT idea?

      Come on, it’s absolutely terrible. Fine, I’ll rank it as WEAK or SO-SO at best.

      Somebody took a SO-SO idea and turned it into a big business with great execution + AWESOME luck:
      Snuggie = (SO-SO idea x GREAT execution) + AWESOME luck
      Snuggie = (5 x $1,000,000) + $20,000,000

      You know the “Slanket”… the knockoff Snuggie. WRONG. The Slanket was created by Gary Clegg (before the Snuggie) in Maine in 1998 using a sleeping bag. Clegg’s mother made him a blanket with a single sleeve for use in his cold dorm room. Clegg later developed that into the Slanket with two sleeves.

      Why didn’t the Slanket crush it like Snuggie is doing now? The Snuggie got catapulted into “the rolling in the money” scene by pure, awesome LUCK.

      The Snuggie became famous after a direct response commercial promoting the product was aired, leading to a mocking of the product and its commercial by comedians such as Jay Leno, Ellen DeGeneres, Bill Maher, Jon Stewart, Whoopi Goldberg, and Tim Burton, as well as website parodies and Lacie and Olivia. It was featured on television programs like Today where cast and crew donned Snuggie blankets for a segment which was described as looking like a gospel choir. The Associated Press likened it to “…a monk’s ensemble in fleece.” and proclaimed it the “ultimate kitsch gift”.

      Kitsch is a form of art that is considered an inferior, tasteless copy of an extant style of art or a worthless imitation of art of recognized value. Basically everyone in the country and world was making fun of it because it was such a terrible idea (I’m upgrading it to a SO-SO idea for example’s sake)

      You’re right though, after they got crazy lucky, they had infomercial guru and marketing genius, Scott Boilen, keep the company running strong as the CEO.

      If you can execute on an idea… sure, keep it to yourself and execute on it like it’s your job. If you can’t or don’t want to, get other people thinking about it so they can remix it and possibly execute on something big.

  4. Jul 31 2011

    Totally agree that ideas do matter and are just as crucial to success as many of the other ingredients in a startup. The reason why the popular wisdom has always been (mostly from VCs) that ideas are a dime a dozen is because to them ideas are worthless in their native form, unless launched/executed and brought to an exit or an IPO. I do think every idea and pitch deserves to be judged on its own merits and potential – and most of all deserves to be heard. Let the community judge it and give you feedback. I honestly don’t think VCs have any special ability to do this better than anyone else. Which is why we launched a website called pitchups.com – precisely to do what you mention – a Digg like site for startup ideas. The objective was to develop a site that allows anyone to submit their startup pitch and get both votes and feedback. We also included many community features etc. Our vision is to make it a funnel for ideas to come in – and let the community of investors, service proividers, marketers and experts, to come together and convert the best ideas into reality. Sort of like an online version of Launch or TC Disrupt. Check it out and let us know what you think – would love your feedback. Thanks

    Reply
    • Jul 31 2011

      Thanks for commenting and letting me know about http://www.PitchUps.com – I didn’t know about it! You’re right, it is a Digg styled voting system for pitches.

      It kind of reminds me of http://pitches.techcrunch.com/

      But instead of pitches, why not just ideas? I think they’re quite different.

      I tried submitting the idea of “Coke Cubes” after clicking the “Submit Pitch” button and it won’t take my idea unless I have a pitch URL for it. The “Coke Cubes” idea is just an idea. Not even a pitch. Let alone a company or a website.

      I guess I’m looking for http://www.highdeas.com, but without the high part. Submitting an idea to highDEAS asks for (1) Title, (2) Description, and (3) Tags.

      Then I guess the major challenge of such an idea website would be to motivate users to submit ideas then not only vote them up/down, but have discussions around the ideas. Possibly even remixing the original idea. Quora and Aardvark figured it out for Q&A… there’s gotta be someway to do it with ideas!

      Think of it as matching good ideas with great executors. Not only great executors, but great executors that match with the idea’s niche market.

      For example, If I’m a fantastic executor in the beverage industry, why am I not being connected to ideas like the Coke flavored ice cubes? That’s just one example, but I’m sure there are hundreds of other great beverage industry ideas.

      If my business forte is the sports industry, why are we not serving up those brilliant sports guys with awesome ideas?

      Instead of matching single males to single females on Match.com, let’s match good ideas to good executors for that idea… Beverage idea to expert beverage executor.

  5. Anders
    Aug 1 2011

    First of all, I agree there’s an enormous golden nugget in finding a way to channel the most important thing in business: innovation. A small fraction of good ideas get where they deserve. The rest are lost and wasted forever.

    On the other hand, there must be a reason this is a blogpost and not a new innovative site. Why is that btw?

    Reply
    • Aug 1 2011

      Thanks for the comment Anders.

      This is just a blog post because I’m currently 100% focused on my full-time job and startup company. I simply wanted to document a thought I had and saw it as an opportunity to have the community review and critique the idea. Think of this blog post as my v0.01 of ideaCombinator.

      I personally think it’s a good idea, so when I get some time on my hands, I may get around to actually executing on it. But in the meantime, if anybody wants to give it a try – go for it. Isn’t that the whole point? 🙂

  6. Ben Vivari
    Aug 2 2011

    OK, as a non-tech guy, I have to chime in on this 🙂

    I’ve heard countless times (including from the author of this blog!) that “Ideas are a dime a dozen” and “People think their ideas are gold and they’re silly for not sharing them”

    Listen, ideas are considered a dime a dozen, only because you haven’t done the work to figure out if it’s a good idea or not. Untested, undeveloped ideas are a dime a dozen. If I had an idea that I knew – KNEW – was a guaranteed “Great Idea” on your scale, a 15 multiplier, what is the value of that? If you’re confident that you can execute it “great” on your scale, you should be willing to pay upwards of a few million dollars for the rights to it, correct? So why in the world would I want to share it? The problem is, I need to prove that it is a great idea. I need to increase your confidence level in my idea.

    The trick is to test your idea, do market research, hold focus groups, and establish what’s actually a good idea, separate the wheat from the chaff BEFORE going off and starting to execute. This is what seems to be missing in the start-up world. There are two seemingly contradictory “truths” that go through the startup community.

    1. Ideas are a dime a dozen
    2. A high percentage of startups fail, and that’s ok.

    here’s what I think: A high percentage of startups fail because they aren’t based on good ideas. And if these ideas were tested – and shown to be bad, through market research etc., – then a lot of doomed startups wouldn’t pull good investment money out of the community, they would be squashed before they start. and I think that’s OK.

    Finally, Michael, how about this: Take your equation, and flip the “idea” and “execution” – make “idea” the dollar amount and “execution” the multiplier. EXECUTION IS JUST A MULTIPLIER OF IDEAS. I think it works just as well. The reality is that both are equally important, it’s just that right now the startup industry is much more confident about projecting execution success than they are at projecting idea success.

    Reply
  7. Aug 4 2011

    I think the conversation you and I had over beers at Champs last night is the most powerful, raw form of entrepreneurship. Strip out bureaucracy because it just strips ideas. 🙂 Stellar post!

    Reply
  8. Michael Carnes Jr
    Jul 29 2012

    So I have to say that I happen to really enjoy this entire topic of discussion. I am new to this whole subject and ran across this blog well looking online for a place to do exactly this, post an idea I had. Unfortunately I do not have much to say in response to the earlier comments here simply because I am just learning about how all of this works myself, but, I would like to say this: What happened? This is a subject I would love to hear more on and it looks like no one has posted here in almost a year to date.

    Lets keep this blog going. I’m hoping to be able to talk more intelligently with all of you about this in the near future. 🙂

    Reply

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