I constantly have entrepreneurs clamoring for me to give them opinions on their new businesses. However, this request is always followed by asking me to sign a non-disclosure agreement for fear of their precious new idea getting out.
And every time I am asked to sign an NDA, I decline.
This is met with the protest follow-up question, “Well, then, how do I protect my idea?”
My answer is always the same. “You don’t. And it doesn’t matter, because your idea is basically worthless.”
You heard me right; ideas have little to no value. It’s the execution of the ideas that holds all the value. It’s why Facebook is worth billions of dollars and why myriad other social networks aren’t. It’s why the very same company can be worth nothing or millions at different points of its lifecycle – or under different management.
Let me explain further.
First, with rare exception, your idea already exists in some form. Most ideas are an improvement on or a different spin on an existing idea. Also, regardless of which components of your idea you believe to be “new,” there are probably others that have thought of it, as well. This is a main reason why neither venture capitalists nor I will not sign nondisclosure agreements; very frequently, the same ideas come to light independently at the same time or near the same time.
Moreover, the components of your idea that differentiate it, including you, your experience, your network, your intellectual property and other unique things you and your team bring to the table, can’t be replicated. You and your team are what differentiate how you frame a problem and its solution, the technology and other resources you bring to the table and your willingness (or lack thereof) to do anything it takes to make it happen.
A standout example of this is Google. When Google started as a mere search engine, the idea to create a search engine was not new. In fact, there were many search engines that preceded Google, including OpenText, Magellan, Infoseek and Snap. What was different was the way that the founders envisioned search, their competencies and ultimately, their code. The idea for Google wasn’t valuable, but the execution of Google was, and remains so today.
That’s why the execution of a business is all that matters in determining value. It’s why investors bet on the founders behind a business more than anything. Most business plans pivot – some in a small way, some entirely – but investors back people they believe will execute well, regardless of the pivots required along the way.
When Starbucks was created, the idea of a coffee shop on every block that charged significantly more for coffee when coffee was widely available wasn’t a great idea. But Howard Schultz’s management and execution of that idea is what made Starbucks change the landscape and our consumer habits.
Another way to illustrate the non-value of ideas are the companies that have had different fates under different management.
RELATED ARTICLE: 5 STEPS TO FINDING A BUSINESS MENTOR
If you know anything about mixed martial arts, you are probably familiar with the Ultimate Fighting Championship or “UFC” league. It was created by Semaphore Entertainment Group in 1993. As I explain in my book, The Entrepreneur Equation, it almost went bankrupt. Years later, two casino moguls, Frank and Lorenzo Fertitta, along with Dana White, bought out the struggling business. Less than a decade later, the UFC was valued at approximately $1 billion. In July of 2016, the business was sold to WME-IMG for approximately $4 billion.
So, one company based on a single idea was once worth nothing and later worth $1 billion and then $4 billion. This variability is because the idea for a mixed martial arts league was worth nothing. It was the execution that created the value.
Since I brought up my book, you may ask why I decided to copyright it if ideas have no value. The answer is straightforward: I didn't protect the idea of the book; I protected the final work product.
Here’s the differentiation. My idea was to write a book around the framework of evaluating the risks and rewards of entrepreneurship. Had I done nothing with it, it would have no value. Only after writing the 80,000-plus words and then revising, editing and packaging it into a final product did I seek protection.
So, get over holding onto your ideas and get out there and do something with them. When you have put the time, effort and money into generating something of value, you can protect that, but don’t let your fear of sharing ideas hold you back.
About Carol Roth
Carol Roth is the creator of the Future File™ legacy planning system, “recovering” investment banker, billion-dollar dealmaker, investor, entrepreneur, national media personality and author of the New York Times bestselling book, The Entrepreneur Equation. She is a judge on the Mark Burnett-produced technology competition show, America’s Greatest Makers and TV host and contributor, including host of Microsoft’s Office Small Business Academy. She is also an advisor to companies ranging from startups to major multi-national corporations and has an action figure made in her own likeness.
Bank of America, N.A. engages with Carol Roth to provide informational materials for your discussion or review purposes only. Carol Roth is a registered trademark, used pursuant to license. The third parties within articles are used under license from Carol Roth. Consult your financial, legal and accounting advisors, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.
Bank of America, N.A. Member FDIC. ©2017 Bank of America Corporation