Ask YC: Can you point to someone that has made money off an idea?

[mixmax]

There has been quite a lot of debate here about what an idea is worth. Some users think that an idea is worth a non-trivial amount of money, and some think that the value is in the execution.

So the question is: Can you point to anyone that has made a substantial amount of money off an idea. It has live up to the following criteria:

1) The person selling the idea must have made a non-trivial amount of money.

2) The sale must not include prototypes, large businessplans, etc. Basically what was sold must be the idea - not the marketing plans, tools, etc. to implement the idea.

3) It must be verifiable. There are a lot of urban myths about "a guy that made millions from selling a simple idea" but I haven't yet found any that stand up to scrutiny.

So can you point to anyone that has successfully sold an idea?

[GavinB]

If you simply have an idea, there's no way to tell it to anyone without losing control of it, unless you patent it, in which case you have more than an idea.

However, there are people who are paid for their ideas. Often they come in the form of consultants. They're paid to come up with ideas to improve products and processes. In the ideal world, if they have a track record of coming up with good ideas, they'll get hired to look at problems and come up with more.

However, if you're just a dude with one good idea, there's not much you can do with it. Anyone you tell it to can take it for free, hence, no market.

[mixmax → GavinB]

I concur - that's a pretty good example.

[smoody]

Let me add another example. In the film industry, studios sometimes pay large sums of money to buy the option for an unwritten script based solely on a pitch. Granted, the pitch usually has to come from writers that have experience and have written blockbusters, but not always.

The first example I came across during a search: "NEW YORK — Mostow/Lieberman and Village Roadshow have picked up an untitled pitch from tyro scribe and Columbia U. student Simon Kinberg for mid-six figures."

Is mid-six figures substantial for an idea?

[mixmax → smoody]

Since there were three agents involved, and Simon Kinberg that sold the script already has done the sequel to XXX, mr. and Mrs. Smith, X-men, won screenwriter of the year etc. I think that the mid-six figures are based on an established track record of being able to produce successful scripts.

And note that he didn't sell an idea - he sold a script that he has to write. Which is around a years work.

[ks → mixmax]

"And note that he didn't sell an idea - he sold a script that he has to write. Which is around a years work."

I don't think it's so different. He sold the idea of a movie. The script is just part of the "implementation".

[mixmax → ks]

Exactly - he didn't sell the idea, he sold the implementation.

[smoody]

Not include prototypes? Why place that restriction on it? I read the other day about a woman who invented and prototyped a bra for use with backless dresses. She sold the idea (all rights to the idea) to one of the bigger bra manufacturers and stands to make a lot of money. Does the fact that she put together a prototype from spare bra parts matter? They didn't give her money for the prototype.

What about people who patent ideas and then either sell the patent to an IP holding company or collect money from violators? That, to me, is an example of generating wealth from the idea and not the execution (unless you consider the act of filing for a patent a form of execution). If you allow patent holders, then you can easily find documented examples if you look for them.

[mixmax → smoody]

This is exactly what I'm talking about. I know quite a lot of idea guys, and some that have been successful. And your bra-story is a good example.

The reason that I didn't want to include prototypes is that if you have one you're not selling the idea, but a lot of work. Often years of it.

I had an office at an incubator once, and every now and then there would be a story in the paper about someone from the incubator selling an idea and a prototype for a substantial amount. But knowing the people behind it I knew that they were selling years of work, not merely an idea. The bra-lady sounds like she is in the same category.

[tyohn → mixmax]

So are you saying that someone thinks of and idea - like a car powered by toenail clippings. They never do any research, they don't build a prototype, they don't even know if it will work but they want to sell the idea?

[mixmax → tyohn]

partially - what I mean is a feasible idea that is obviously good, and can be monetized. Google's pagerank algorithm would be a good example.

The reason I don't want to include prototypes (one-day mock-ups are fine) is that doing a prototype for your car powered by toe-nail clippings is a lot of work, and half the product. And then you're not selling an idea, but a partial product.

[tyohn → mixmax]

I guess the question is how do investors know an idea is "obviously good"? Did anyone/everyone know that the pagerank algorithm was "obviously good" before they tested it? And if it was - did they build it/think of it in one day?

[mixmax → tyohn]

Exactly my point - nobody buys an idea before it's actually tested and has been found to work. And once you've done that you're not selling an idea. Which is probably why there are no examples of it. To my knowledge at least.

Famously Yahoo turned down Larry and Sergey when they approached them with the idea - they didn't want it before it had proved it's worth. In other words: they wouldn't invest in an idea.

[tyohn → mixmax]

I know of an example from the book "How to license your million dollar idea" by Harvey Reese. He thought of an idea, drew it on paper, faxed it to a company and got a deal - all in one day. Although: He did quite a bit of business with the company previous to his fax and he does talk about needing to evaluate the originality and market need of your idea.

[mixmax → tyohn]

Do you have a source other than himself?

His business model is that you can put your idea on his website (for a nominal fee of $175) and he will then try to sell or license it to someone, and you split the proceeds. Obviously it is in his interest to tell you that he has had tremendous success himself. Besides, I think the $175 will make him a good amount of money from naive hopeful inventors.

[tyohn → mixmax]

Nope, I don't know the guy or the company just the book. He does seem to have a good reputation but like I said I don't know...

[chaostheory → tyohn]

Reese didn't just sell an idea on its own. He's a master networker (he's always on the phone) and typically he does provisional patents, copyrights, and so on...

like mix max says he's "worked in the basement for years": his reputation and relationships took many years to build, and typically he sells legal licensing to use his ideas...; this is beyond "just an idea"

[_5y6p]

This is the guy I was referring to in that "other" thread. His name is Stephen Key. I would've linked to this before, but couldn't remember where I'd read about him or what his name was.

http://www.fourhourworkweek.com/blog/2007/11/26/a-beginners-...

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"Stephen is somewhat famous in inventing circles for two reasons. First, he consistently earns millions of dollars licensing his ideas to companies like Disney, Nestle, and Coca-Cola. Second, he is fast. It seldom takes him more than three weeks to go from idea to a signed deal.

"He is not high-tech. There are no multi-year product development cycles. He specializes is creating simple products or improving upon existing products, often using nothing more than a single-sided drawing or photograph. Coupled with refined cold-calling skills, Stephen meets with some of the most influential marketing executives in the world. In this interview, we’ll explore how this advisor to American Inventor rents his ideas to Fortune 500 companies."

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In the "other" thread, of course, I wasn't talking about ideas having value insofar as one could simply sell them. Good startup ideas are sort of like treasure maps. A really, really good idea is like a map that shows you where an incredible fortune is and has a high probability of not being a fake, but you obviously will get none of that treasure if you have no means of getting there and procuring it (execution).

Lots of other good ideas are treasure maps that have a higher probability of being a fake, or have significantly less treasure waiting where X marks the spot. Such maps may be so abundant that no one will be particularly interested in following yours over their own, which is why it usually doesn't make sense to worry about someone running off with your idea.

But if you give someone a copy of a treasure map that they know to be highly reliable and leads to a much bigger treasure than the one they're chasing after now, and they can mobilize the means to get there faster than you, well, therein lies the temptation for someone to run off with your idea.

[hollerith]

The Million Dollar Web Page (there is a wikipedia entry on it) made its owner about a million dollars (and started a fad called pixel advertising or some such) and although it entailed execution, the effort required to execute seems to have been very low relative to the payoff: the guy probably made thousands of dollars an hour on his time investment.

I am aware that this example does not meet the 3 criteria in the original question. I am answering a related question, namely, Can a good idea act as a large "effort multiplier"? The Million Dollar Web Page suggests that the answer is yes.

[mixmax → hollerith]

No it doesn't meet the criteria, but I think it's a good example nevertheless. That is obviously an example of someone getting an idea, and making money off the idea and not the implementation.

[tyohn]

Nikola Tesla

[mixmax → tyohn]

What idea did Tesla sell?

I'm aware of him working as a scientist for most of his life, but not selling an idea according to the criteria stated above.

[tyohn → mixmax]

I believe that Tesla sold several of his patents.

[thwarted → tyohn]

Doesn't a (non-software) patent require something resembling a semi-working prototype (at least back when Tesla was getting patents)? I say "semi-working" because there are a lot of patents for things like free-energy devices that never worked, but were built.