How much is an idea worth ?

Valuation Gap
In a market place of ideas, the central question is how much is an idea worth ?
When we consider the technical and market risks going from an idea to revenues as well as the time and required capital resources, we quickly realize that the $ value difference between a ‘good’ and ‘bad’ idea are small. There is an obvious gap between the idea originator who focuses on the business potential, and the buyer, who sees the risk and required time and capital.
This is the reason many people pursue the entrepreneurship route. Entrepreneurship stresses the importance of execution and adaptability. Investors in new ventures invest primarily in the the team, realizing that ideas evolve over time.
One approach to overcoming the valuation gap, is by assigning the value of the idea as a percentage of future income. This approach is best applied when the idea provides a wide enough basis for creating a revenue. It is more challenging in cases where the idea is a small ‘feature’. An alternative approach is to streamflow the path from idea to revenue. This is possible in industries with very well defined interfaces. A fascinating example is the evolution of the app market, which has lowered the barrier for software enabled ideas to reach revenue. Additional examples of industries which have streamlined the idea to revenue process are the toy industry, the Silicon IP business in the semiconductor industry, Amazon with its platform for publishing online books and even YouTube for the entertainment business. In all these cases, the execution barrier has been lowered and the requirements to enable an idea and create revenue have been lowered.
Future Extensions
An open challenge is extending this concept to additional industries. It’s clear that the key is to create a well defined interface which streamlines the ideation process. Of course such a process will also provide internal benefit helping better focus internal research goals and procedures.
One may argue that this process creates ‘many of the same’ ideas and restricts innovation. I look at this in a different light. Today people have access to computing, graphic and image capabilities which in the past were restricted to top researchers in academic or industrial labs. In the near future the same will be true of chemistry, material science, biology, etc. this will happen either as universities open up their research labs or the cost of equipment will drop as a result of technology breakthroughs such as 3D printing. This process will democratize research and create new opportunities. Most will be incremental and will benefit from the streamlined process. A few will be groundbreaking, and these, as all great ideas, will expand the boundaries of our perception and capabilities.


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