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INVENTING

Why You're Not Entitled to Your Idea
 

These tips will help you convince an investor that you're the one unique individual or team to turn your idea into a full-fledged business.
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Our recent post on why entrepreneurs need to think about business models and not just "ideas" featured one question that any investor is going to ask :

If I believe in the business you are proposing, why should I believe that you are the ideal person/team to build it for me? Would I be better off investing in the business model with someone else?

This question almost always hits an entrepreneur in the gut. Entrepreneurs put a lot of emotional energy and sweat equity into "the idea." This often causes them to believe they are entitled to the idea because they thought of it first. But they don't think about it from the investors' perspective. The investor just wants to make money on the idea and wants to put in place the best team to do that.

In response to the article, reader Joseph Simbar posed a few questions:

What if you don't have any credentials? Because I know saying "I'm passionate" is not enough. What if you graduated pretty high from the class, but not from an Ivy? Or what if you have work experience but it's not in Google, IBM, or Forbes 500 companies? What can you "show off" in this instance?

If you don't have the "credentials," then consider bringing other assets to the table:

  • Have you done significant work to push the business forward, potentially even building relationships with potential customers or securing a customer? If so, an investor should be willing to pay for that.
  • Do you have a key asset such as a patent, a desirable location, access to critical equipment? This is worth something to an investor.
  • Do you possess a knowledge base or expertise that allows you to develop the business quicker, at a lower cost, with fewer errors, or less risk than someone else? If so, then you have something valuable to an investor.
  • Do you have experience or expertise in a related field that would bring you quicker, easier, or better access to customers, talent, distribution partners, or better insight into customer needs? If so, you've got something that an investor is willing to pay for.

In our view, it's more helpful to flip the question around. In building your business concept, what do you need to do to enhance the value of the business model to the investor and how can you contribute to that?  The investor still may have control over your ability to build the business, but you should be able to position yourself as their valuable partner in making the business a reality.

Send us your comments and questions at karlandbill@avondalestrategicpartners.com.

Last updated: Sep 11, 2012

KARL STARK AND BILL STEWART are managing directors and co-founders of Avondale, a strategic advisory firm focused on growing companies. Avondale, based in Chicago, is a high-growth company itself and is a two-time Inc. 500 honoree.
@karlstark




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