Don’t Steal My Idea!

Should you tell anyone about your startup idea?  Some people like to keep things under wraps, whereas others talk about their ideas from day one.  I know super successful entrepreneurs on both sides of this fence.  But, I believe that if you are a first time entrepreneur it’s best to get all your ideas out there.

It’s clear why some entrepreneurs don’t like to talk about their idea – it’s because of the fear that someone will come along and steal their idea.

There are two reasons why I would advise against not talking about an idea as a first time entrepreneur.

The first reason is because it’s unlikely that as a first time entrepreneur you’ll have had an idea that is really innovative and remarkable.  That’s not to say that the idea isn’t a good idea and couldn’t be a very big success.  However, it’s 99.9% impossible that you’ll have had an idea that is any where near product market fit.  Just speaking to other people will give you different perspectives and insights that you may not have had.  It will get you that little but closer to product market fit every time you speak to someone new about it and provide you with ideas you haven’t thought about yet.

I speak to knowledgeable people about my startup all the time and I actively try and talk to as many people and get as many insights as possible.  For example, a friend’s husband of mine is a technical consultant for Barclays Bank and has implemented loads of technology in all the big banks all over the world throughout his career.  I speak and meet up with him quite often and he always points out aspects that I nor my CTO had considered before.  My CTO always points out things to me as well and provides another perspective.  Other entrepreneurs I know point out where I could fail and ensure that I have the right accounting protocols and legal documents in place and give me advice on how to fine tune revenue, sales and continue to execute on the plan.

The best source of advice though are other entrepreneurs who are self made in the domain / industry you are working in.  I remember when I first spoke to one of the founders of EMIS in the UK – a one hour phone call with him gave me more insight and information than anyone else in the world could have.  He gave me enough information to execute for the following two months before I needed to seek more advice.

Be weary of getting advice from people who you aren’t trying to model or haven’t achieved much in their lives.  Their opinion shouldn’t count for much for obvious reasons – they lack insight and knowledge regarding what you’re trying to do.  Instead of getting advice from laymen, get your product to market and get feedback from real users.  They will tell you what’s really wrong with your idea.

The second reason that I think that talking about your idea is a good thing is because it proves that you are the right person to execute your idea.  If you are afraid that someone will steal your idea then you shouldn’t be the one executing on your idea.  It’s likely that there is someone else out there who will do a better job.

This isn’t to say that you can’t go out and learn everything you need to with regards to your idea and literally become the most knowledgeable person in the world about it.  But if you don’t speak to the right people, accept that you’re wrong about a whole bunch of stuff and have a willingness to learn then you’ll never be able to gather enough information to be the best.

Know-it-alls make the worst entrepreneurs for a reason.  Starting a startup isn’t a test on existing knowledge – the type of test people are used to doing because of the education system.  There are only unknowns in startups – because no one has done what you’re trying to do.  Starting a startup is about trying to change the world in a meaningful way and unless you have a crystal ball there’s no way of knowing what’s going to happen.

When Travis Kalanick said the following about why they started Uber,,,,,

“It was a lifestyle thing. Me, my cofounder, and our hundred friends could roll around San Francisco like ballers.” 

….it doesn’t sound like he knew what he was on to when he started the company.  He must have learnt a heck of a lot between now and then and I can confidently say that he must now be one of the most knowledgeable people in the world with regards to different means of transportation and autonomous driving.

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Innovation With NHS Software

There are two ways in which Enterprises assess how valuable a piece of software could be to their organisation.

The first is whether it can save money.  Save on staff costs, inefficiencies, wastage etc.

The second is whether the software can make the organisation more money.  This is an order of magnitude better than saving money and you will face a lot less resistance if you can create something which can increase revenues.

I think that this is one of the reasons Primary Care in the UK has so much more technology and innovation than secondary care.  Surgeries in the UK are ran like small businesses and the better the health outcomes and indicators that a practice can achieve, the more money they receive for their business.  Hospitals get allocated money on an as needed basis.  They don’t get rewarded with money in the same way Primary Care Businesses do.

If this is the case then where is the incentive for companies to make innovative products that make things better?  Companies are only incentivised to make things cheaper in Secondary Care.  The way to make things cheaper is usually to keep doing what you’re doing at a cheaper price point.  Doing something new means large implementation costs.

Unless increasing efficiency is baked into your product / service then I would say that the best course of action may not be to go for a market where innovation and making things better is not rewarded.

Is there a market where there is money and an opportunity for your startup?  Then that’s the market you should go for.

Y% Of X

In a previous post I wrote about how all businesses do is create X amount of value and then capture Y% of X.  As long as Y% is greater than the companies expenditures you will have a profitable company.

A common misconception about capturing Y% of X, is that Y% is always a large proportion of X.  In actual fact, the opposite is often true, which is something that catches a lot of entrepreneurs / sole traders / freelancers / employees out.

I was recently speaking with a software engineer I know and explaining this concept to her.  What was interesting to me was that she thought that she would be able to capture a very large of the proportion of the value that she is creating for one of her clients.  Looking at the client she is working for, it is likely that she is creating tens of thousands of pounds of value every time she sits down to code.  She is being paid a very small proportion of the value she is creating.  However, her contention was that as the project scales she would be able to capture a larger amount of the value.  This is incorrect as market forces are in play and if she demands too much then she’ll simply get replaced with another engineer.  She has no leverage in the situation and when engineers aren’t hired for more than their coding skills they can be replaced.  This is what happened to my original engineers in my own startup – they got replaced by better engineers at a fairer price.

Sometimes it’s not just the means of employment which limit how much value you can capture.  Sometimes you can have all the leverage in the world and create a lot of value and still not capture a large fraction.  A good example of a an industry where it is difficult to capture value is the airline industry.  The worldwide airline market is worth trillions of dollars, however the majority of airlines have either lost money over time or not made any money at all.

Now compare the airline industry with internet search.  It may be that internet search is only worth a few hundred billion dollars, but Google is able to capture a massive proportion of the value they are creating and is much more profitable than any airline company ever has been.

This is an important consideration for entrepreneurs.  How much measurable value can you create?  Has anyone else managed to capture as much of the value as you think you will be able to capture?

A difficult question to answer is: Do you really have leverage or are you easily replaceable?  Don’t underestimate the market, if someone can really do what you are doing for cheaper, then you will be replaced.  You can’t trick the market!