“I have been impressed with the urgency of doing. Knowing is not enough; we must apply. Being willing is not enough; we must do.”
— Leonardo da Vinci
How much is an idea worth? You might think that a bright idea, a spark that could change the world, is extremely valuable. But in the world of investing, this isn’t necessarily true.
A lot of startup founders worry about the worth of their idea. I usually tell them that an idea by itself is worth nothing. Zero. Zilch. Nada. But, if you can turn that idea into a product or a service that people need or want, it could be worth billions.
Founders need to understand that the key isn’t the idea itself, but how they make it real. Investors don’t put their money into ideas; they invest in teams that can turn those ideas into reality. This might seem like an overstatement, and maybe it is a bit, but it highlights an important point.
Many people think that an entrepreneur’s main asset is their idea or a scientific discovery that could solve a problem. But, as we’ll explore in this article, investors might not value a bare-bones idea as much as the entrepreneur does. This could be surprising, but understanding the relationship between ideas and execution can shed light on what truly brings value to a startup.
Let’s Dig Deeper
When we think of a startup, we usually picture a fresh idea that’s going to shake up the industry and change how we do things. It’s exciting to imagine a simple idea turning into a business worth billions of dollars. That’s why a lot of people think that the value of a startup comes from how new and unique its idea is. This way of thinking can cause confusion, however, because it implies that an idea, by itself, has value. But what we’ve learned from real-world experience is that an idea alone isn’t worth anything.
You see, an idea is just the beginning, a sketch of what might be. It doesn’t take into account real-world things like the market, what customers want, competitors, rules and regulations, and other important factors. It’s only when an idea faces these realities that it starts to become something substantial. The real worth of an idea comes from making it happen, not just thinking about it. This is why investors care so much about how you plan to make your idea a reality.
It’s also essential to remember that your idea needs to evolve over time. The startup ecosystem is dynamic and fast-paced, and the market and customer needs can change rapidly. Being able to adapt your idea and strategy based on feedback, changes in the market, or technological advancements is vital to maintaining relevance and achieving long-term success.
The journey from an idea to a successful business involves risk-taking. All startups encounter obstacles, be it technical difficulties, financial challenges, or market competition. A resilient team that can navigate these hurdles while staying focused on their vision is likely to succeed.
And the idea probably will need to be scalable. Investors are particularly interested in how an idea can grow and expand over time to create a significant return on investment. If your idea has the potential to scale, it can attract more investors and increase your chances of success.
Finally, the skills and strategy you bring to the table are critical. The different skills, experiences, and viewpoints of your team can make a big difference. You also need a strong and flexible plan that can handle the ups and downs of making your idea a reality. This is why investors like startups that can show they know how to execute. This could be through previous successes, early versions of their product, pilot projects, or any other proof that they can make their ideas happen. It gives investors confidence that the team has the skills, the grit, and the problem-solving ability to deal with the challenges that are sure to come up along the way.
In the end, it’s a blend of a unique idea, robust execution plan, resilient team, adaptability, scalability, early validation, and a compelling pitch that make a startup successful. These elements together give investors the confidence they need to back your venture. Investors don’t just throw their money at cool concepts. They invest in the chance of those concepts actually working out. That’s why how you make your idea happen is so important.
The Counterargument: Does Idea Value Really Equal Zero?
While the prior section proposed that an idea in isolation might be considered valueless, it’s important to examine the other side of the coin. Ideas do play a critical role in the innovation process and can be instrumental in capturing initial interest.
An idea sets the direction for a startup. It provides the initial blueprint that influences strategic planning, operational structures, and the allocation of resources. It’s the first point of reference, the starting point from which everything else flows. Therefore, one could argue that an idea holds intrinsic value as the compass guiding a startup’s journey.
Moreover, an idea can serve as a unique selling proposition (USP). In a world inundated with products and services, a fresh, unique idea can capture attention and differentiate a startup from its competitors. It can attract early adopters and even create a new customer base that wasn’t present before.
Also, it’s worth considering that certain ideas are so incredibly transformative and disruptive that they can significantly change existing markets or even create entirely new ones. These are pivotal ideas, indeed. These ideas, coupled with exceptional execution, have led to the creation of billion-dollar businesses. Hence, such ideas could be argued to have inherent value.
The Value of Scientific Results as Ideas
Many startups in the biotech and deep-tech sectors are built on scientific results, not just abstract ideas. Think of these results as seeds, crucial starting points for a potential therapy or product. The question, then, becomes, what is the intrinsic value of these scientific results? To answer this, let’s consider again the two sides of the coin.
From one perspective, the value of scientific results is extraordinary. They are specific, often obtained after years of dedicated research and rigorous testing, and may indeed be enabling. Take, for instance, a groundbreaking scientific result that showcases the potential of a new gene therapy. The value of this result may be perceived as high because it signifies a significant leap forward in the scientific understanding of a particular disease. It paves the way for the development of an effective treatment, showing potential to dramatically improve patient outcomes.
Moreover, such scientific results can offer a competitive advantage in the crowded startup landscape, meaning they can be better than the results offered by other biotech companies. They can be protected via patents, ensuring a unique market position. This uniqueness, combined with the tangible progress toward a viable product, can make startups built on scientific results especially attractive to investors. We could claim the result has intrinsic value in itself.
As we discussed with ideas, however, scientific results are not the endgame but a starting point. A groundbreaking laboratory discovery is not a market-ready product. It must endure a winding road from the lab bench to the bedside, passing numerous hurdles along the way. It has to be translated into a practical application, which often requires further development and extensive testing. This process is time-consuming, resource-intensive, and fraught with uncertainty.
Some scientific results may look promising initially but fail to hold up under further scrutiny or larger scale testing. Furthermore, even the most promising scientific results need to navigate complex regulatory pathways before they can become commercially viable products.
Meeting regulatory requirements is a long, expensive, and uncertain process. And, of course, scientific results don’t operate in a vacuum. They must be considered in the context of the current market, existing competition, and the evolving needs of patients and healthcare systems. If other companies are pursuing similar results, or if new technologies emerge, the value of the original results could be undermined.
So, as we discussed about raw ideas, the value of scientific results is also significantly influenced by the team’s ability to create a startup and execute. They must not only understand the science but also have the business acumen to navigate the tricky terrain of product development and commercialization.
While scientific results provide a substantial starting point, their ultimate value is not inherent but heavily contingent upon their successful translation into a product or therapy. This process requires a stellar team, a robust strategy, and often, a healthy dose of patience and persistence. The key lesson for startups and investors alike is to not overestimate the value of raw scientific results without considering the challenges and requirements of the execution process.
Excerpted from Fast Forward Thinking: 40 Rules for Entrepreneurs and Investors in Medical, Science, and Biotech by Luis Pareras, MD, PhD.
Figure 1. Research Versus Innovation. When asked about the distinction between research, innovation, and entrepreneurship, I typically respond that research is the process of converting money into ideas, while innovation and entrepreneurship involve translating these ideas back into money and creating a meaningful societal impact.
Research and Innovation: Research, therefore, involves the transformation of financial resources into knowledge. In contrast, innovation and entrepreneurship focus on converting this newfound knowledge into financial gains — signifying return on investment — and substantial societal benefits, symbolizing social return on investment. Both elements are significant and often intertwined. In the realm of science-driven entrepreneurship, it is common to witness high social return on investment. This is particularly evident, for example, in the biotech sector. Each new therapy brought to market has the potential to address diseases that affect millions of people, creating a profound impact on the lives of these individuals.
It’s crucial to note, however, that while the primary goal may not be to create social impact, such impact often emerges as a byproduct of the mission to solve significant health problems.
A subtle distinction between innovation and entrepreneurship lies in their objectives and focus. Innovation is centered around the development of a proof of concept, identifying issues, and establishing a framework to resolve them.
Entrepreneurship, on the other hand, is more resource-oriented. It involves securing the necessary resources to build the solution, introducing it to the market, and converting that solution into a thriving startup. Innovation is the bridge between research and entrepreneurship. It involves taking the insights gleaned from research, developing a proof of concept, identifying the gaps and challenges, and crafting a potential framework for solutions.
This process is inherently creative, requiring lateral thinking and the ability to see connections that others might miss. Entrepreneurship, then, is the vehicle that propels the journey forward. It takes the proof of concept provided by innovation, marshals the necessary resources, and focuses on introducing the solution into the market. Entrepreneurs transform these innovative ideas into practical, marketable products, and in the process, potentially build a thriving startup. They are the risk-takers who embrace uncertainty, viewing each challenge as an opportunity for growth and learning.
Return on Investment: In the world of business and finance, return on investment (ROI) is a key metric used to measure the probability of gaining a return from an investment. It is a ratio that compares the gain or loss from an investment relative to its cost. A positive ROI indicates a profitable investment, whereas a negative ROI signifies a loss. While this metric is crucial in financial decision-making, it only paints a part of the picture in the context of science-driven entrepreneurship.
Social Return on Investment: In contrast to ROI, social return on investment (SROI) quantifies the broader impact of an investment on society. Unlike traditional ROI, which primarily focuses on financial returns, SROI incorporates social, environmental, and economic costs and benefits into its analysis. It is a principle-based method for measuring extra-financial value, and it can play a vital role in strategic planning, performance management, and outcome reporting. In science-driven entrepreneurship, especially in biotech, SROI becomes profoundly significant as new therapies and innovations can potentially ameliorate the lives of millions of people.
High ROI and SROI: But achieving a high ROI and SROI is a complex journey. It demands a harmonious blend of research, innovation, and entrepreneurship. Each plays a unique role in this expedition. Research fuels the voyage by providing the base of knowledge. It delves into the unknown, driven by curiosity and the pursuit of understanding.
The interplay of research, innovation, and entrepreneurship in the world of biotech forms a powerful triangle that can not only generate lucrative returns but also create transformative social impact. The primary goal may be to resolve significant health issues, but the ripple effect often results in broader societal benefits, enhancing the quality of life for many. This, in essence, is the magic and allure of science-driven entrepreneurship.
—Luis Pareras