Small Ideas

Finding the next big idea by exploring small ones – by Rishi Khaitan

Archive for the ‘startups’ tag

Great Ideas

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I firmly believe that a person will have at most one truly great idea in a year.  People who expose themselves to a wide range of information and experiences will probably be closer to 1 and people that don’t.. well, they’ll be closer to 0.  But how much are these “great” ideas really worth?

I argue that ideas, even the best of them (assuming the greatness of an idea is actually measurable), are worth essentially nothing.  Ideas may in fact lead to invention or innovation, but the idea in and of itself is simply a starting point.  The value is in the execution that comes after that starting point.  And the reality is that startups — whether a high-tech venture or a restaurant — fail because they fail to execute in one way or another.  Furthermore, startups that are successful are very often, at best, tangentially related to the original t=0 idea.  All this is not to say that there aren’t ideas that are better than others, but smart execution is easily an order of magnitude more important.

What is interesting is that empirical research shows that there is definitely an idea premium when startup founders allocate founder equity amongst themselves.  In other words, the person with the idea often receives a bit more equity than the other founding team members.  Moreover, that idea person is the CEO of the startup 56% of the time, but CTO only 12% of the time.  One might quickly conclude from this that the market does value ideas.  My hunch, however, is that because the idea person was, by definition, the first to start developing the idea and building the team, he has often put in the most sweat equity and the extra equity is not compensation for the idea itself.

So am I arguing then that that one great idea you have each year should just be quickly dismissed as having no value?  No, absolutely not!  The ideas that I have actually pursued are those that keep nagging me.  But the thing to remember is that even if you vet the idea and it still has you excited, remember again though that it is the execution that will actually make your idea worth even $1.  If execution is all that matters, the important question then is: what does the right team look like to execute on the idea and would you belong on that team?

Written by Rishi Khaitan

March 8th, 2010 at 2:58 am

Posted in Uncategorized

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