

What is an idea worth? - mrtron

Here is a common situation for starting projects.  One person comes to the table with an idea, and one or more people join them.<p>What is the idea worth?  If there are 3 people, how could you split up things from the beginning?  Is the idea worth anything?<p>On the same note, if someone has some domain knowledge and contacts in the field, how should that play into the first split?<p>I have discussed this with several people, and their opinions have been wildly varied, so let me know your thoughts!
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jsjenkins168
Ideas by themselves are not worth very much. Its really about how the idea is
executed that matters. Apparently ideas are not worth much very much in the
legal sense either, unless backed by a patent.

If you are just starting out you might want to consider an equal 1/3 split
between everyone. For our startup, I've been doing most of the work up until
now, but I still insist that we each have equal share. I want everyone to be
accountable and feel responsible for the companies success. Basically, no one
should ever feel less obligated due to a lower ownership percentages; we all
have to work our asses off 100% in order to win. Even small changes to the
initial split could alter this balance. At least that is my opinion.

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mrtron
I also put the most emphasis on execution when it comes to starting off. I
think ideas really are a dime a dozen.

I guess the trickier question comes when someone has a lot more domain
knowledge and some contacts in the field. This knowledge can translate into a
"good idea" that is solving a problem in the industry. How much does this
factor in?

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jsjenkins168
I guess ideally each person would contribute something valuable to the team
(maybe something the others dont have), making the even 1/3 split justified.
The person you talk about would be contributing their domain knowledge.

If one persons contribution is low to point that an even split couldn't be
justified, then I would just make sure that you really need them as a co-
founder, as apposed to an early employee. If things are close though I would
try to justify the even split so everyone is on the same plane.

In my opinion its just not worth getting greedy over small percentages, if it
could compromise the success of the team or cause internal strife. The
following quote comes to mind: "I'd rather have a slice of the watermelon than
a whole grape."

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jamesbritt
> I think ideas really are a dime a dozen.

But really _good_ ideas are rare.

I understand that an idea not backed by an implementation is near useless, but
the current mantra about the value of ideas is sort of like saying that cars
are a dime a dozen, and it's the driver that matters.

All other things being equal, though, your raw materials (cars or ideas or
what have you) _do_ matter.

Current patent nonsense aside, there are often good reasons why people do not
want others to know exactly what they are planning or doing, or want a means
to restrict others from attempting their own implementation.

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rms
I don't think most people with good ideas are capable of recognizing whether
they are good or really good ideas, the market gets to decide.

Except for me, I know I have really good ideas. ;)

~~~
jamesbritt
> I don't think most people with good ideas are capable of recognizing whether
> they are good or really good ideas,

Alan Kay said (more or less) that point of view is worth 80 IQ points. A good
team needs people who can see the different angles to other's ideas, and help
prod or reshape or prune them.

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Tichy
I wouldn't claim more equity for being the idea giver. It is hard enough to
find co-founders as it is, so I figure giving away my idea for free is the
price I have to pay to convince other people to join me. Hopefully we will
still all get rich, so who cares.

It would annoy me if the co-founders were less dedicated to the idea than I
am. In that case I would try to negotiate more equity from the beginning.

~~~
jeffumich
I totally agree with this. A good co-founder is way more important than a few
more equity points because it was your idea. It might be different if you've
spent 6 months on your own building it, though.

I disagree about the dedication--I wouldn't even bother working with a
cofounder who wasn't as dedicated.

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neilk
Unless we're talking about a patented technology, IMO you shouldn't even
consider the initial idea when discussing equity.

If I were in a startup, I'd want it to be a total free-for-all where new ideas
are valued. Not one where the older ideas are considered to be worth more.
That's totally backwards -- your ideas about the business are likely to change
and become _more_ valuable as you gain experience and talk with customers. And
unless you prefer co-founders who treat it as a 9 to 5 job where they are mere
implementors, they will be coming up with many of the important ideas too.

The worth of the initial idea is measured in the fact that you got other
people to even commit to the project. Call that a victory and move on.

~~~
rms
Exactly. For what I consider to be the best idea I ever had, I was able to
attract three very talented people to apply to Y Combinator with me, with a
25/25/25/25 split. The value of my idea was that it made people excited in its
potential and my 25% was only valuable with the contributions of my partners.

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Hexayurt
If I might suggest a simpler question?

"How do I value this idea maximize my odds of getting genuinely rich from this
venture?"

The question isn't "how much is this worth?" at all. It's "how do I price this
to maximize the odds of success and the dollar worth of my share."

If you do very well and sell for $10m, the _practical_ difference between 33%
and 50% in terms of your quality of life is quite small.

On the other hand, a feeling of uneven split between founders, particularly as
the start up moves further and further from the basic concept you started
with, is a potential contributor to a "50% of nothing is nothing" situation.

Once the game starts, it doesn't matter who put what on the table: if you're
not actively getting screwed get your head down and focus on making what you
"own" worth something, rather than worrying about how the loot is divided.

~~~
davidw
Smart way of thinking about it, that gets to the heart of the question, rather
than repeating the trite 'worth nothing', which is obviously going to piss off
the idea guy, and create problems.

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ardit33
"What is the idea worth?" -- Not much really. People have ideas all the damn
time, but it is execution that counts. Maybe %2-%5 of the company, MAX.

That 2-5% is worth only if you come with something novel + a plan and strategy
how to make it happen, and some contacts-help.

If all you say let's "do a music application for kids under 12", that is worth
nada.

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DaniFong
I don't understand what all these people are talking about. A good idea is
extremely valuable. A bad idea is a vicious liability.

The problem is the marketplace. Most people aren't very good at telling if an
idea is good or not. They're likely to value such an idea low. You don't
really want to cofound with these people.

However, brilliant people are likely to have ideas of their own. Ideas that
they'd like to work on. One can rationalize an even split, then, by
considering an even split as payment for working on _your_ idea, and not
their's. Brilliant people would probably rather do their own thing -- you need
to give them creative and strategic input, and you need them to feel like
partners.

They just have to be good. I'm not going to give someone I'm feeling shaky on
an equal stake in my company -- I wouldn't advise this for anyone.

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wmeredith
Ideas are worth (almost) nothing. In the information age there are as many
ideas as there were rocks in the stone age. It's having the ingenuity and work
ethic to make something out of the (rock) idea that will separate you from
everyone else who has a worthless idea.

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c4rider
A mentor once told me "talk is cheap until you hire a lawyer", that said ideas
alone without a definitive plan on how to tackle it followed by actual
execution is nothing but hot air.

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anamax
> What is the idea worth?

"The idea"? How about an example of an intrinsically valuable idea that, by
itself, is enough to build a biz?

Take google. "Use citations to rank web pages" is not all that valuable an
idea. Figuring out how to do so is more valuable (albeit dependent), but still
not enough to build a biz.

If "the idea" is trivially executed AND "enough", then it's a big
contribution. More likely, it's a signpost.

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mynameishere
If the work is of a commodity nature (ie something a quick visit to rentacoder
could accomplish) then the idea is worth a lot, relatively. But most ideas
aren't worth much. It depends. Ask yourself: Does my idea fit one of these
molds:

Social networking for X.

A combination of google maps and Y.

An online app to let you keep a personal list of Z.

...then your idea isn't worth much.

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jeffumich
I think the idea itself isn't worth much intrinsicially--there are indeed
infinitely decent ones out there. But the idea directly fuels passion, which
is extremely valuable.

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kul
consider equity as a reward for risk taken. if people want more equity, they
should take more risk (drop out of school etc)

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daniel-cussen
It is one of many necessary but insufficient conditions. Like having a clean
criminal record when applying to college.

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samwise
I believe an idea is the most important part of a startup. However the idea is
useless in the wrong hands, A paint brush in most peoples hands does not mean
much,but in an artists hands it's very powerful. Never the less the artists is
nothing with out the brush.

please visit www paintbrush com for all your brushing needs

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rob
The person with the idea should get at least 50% of the company.

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gnaritas
You don't really believe this do you? Everyone has ideas, very few have the
skills to execute those ideas, execution has the value, not the idea.

