Your Idea is a Liability, Not an Asset

Having spent some time mentoring in the startup scene, I often run across individuals who:

• Had an idea
• Talked to some angels about it

And believe that those two things represent progress in their startup.

I love the thrill of sharing my ideas with people and having them buy in as well. I think that’s part of our DNA as entrepreneurs, to excite people about our ideas.

But a friend of mine at the coin loft, Zach Phillips from The Kitchen, pointed out that an idea isn’t an asset, its a liability. Check out the definition of financial liability courtesy of Wikipedia:

a liability is defined as an obligation of an entity arising from past transactions or events, the settlement of which may result in the transfer or use of assets, provision of services or other yielding of economic benefits in the future.

An idea requires you to spend money, time, etc. to create value. It is not, in itself, a creator of value.

That is a brilliant insight, and possible the savior of the coming startup bubble.

At the last LSM Startup bootcamp I went to in NYC, Charlie O’Donnell shared that sometimes he wishes they hadn’t built the startup community around investment. His frustration is that he spends most of his time being asked to talk with groups about “how to get funded” when he’d rather talk about how to successfully solve problems. His quote:

“Starting a company isn’t fun. Solving a problem is fun. Focus on solving the problem, and build a company if you have to.”

Here in Delaware we’ve made a conscious decision not to build our startup community around investment, even though it’s becoming easier to raise that capital every day. Our reason?

It sends the wrong message. It tells startup founders that all they have to do is make the “right” pitch, and investors will give them money to solve all their challenges in building a company.

Were it so easy. Not only does this version of startup rarely happen in the real world, its been proven time and again that it is a disastrous way to build a company. With a bank account full of cash, startups run out solving the problems money can solve, only to run into a brick wall when the problems it can’t solve finally catch up to them.

This bring us full circle. Whatever your idea is, however brilliant, it is a consumer of resources, not a creator. The creation of value comes from the execution of the idea, not the idea itself.

Your idea is a liability. You, as the entrepreneur, are paying the expense of creating an entity that converts that idea into a valuable executor, a valuable business. The valuation of that business through investment is the indicator that your turned that liability into an asset.

Want to learn how to do that? Go to the Lean Startup Machine DC where I will be mentoring next week and signup.

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