Why the hardest capital to get is ideas
Posted 2 April 2008 at 8:10AM by Ian Betteridge in Doing business online
The barriers to starting a company used to hinge around money. Everyone needed capital to start with, to hire an office, buy equipment, rent a new phone line and so on.
As my friend Andrew Smith points out, though, many of these elements are now either free, or so cheap you barely need to worry about them. You already have at least one computer to work on, plus a broadband connection into your home. Software like Google Docs mean you don't need to shell out for an office suite. Products like BT Workspace mean you have collaboration tools at your fingertips. Buy a BlackBerry and you have email everywhere. And so on.
The existence of all these tools, plus sites like BT Tradespace, eBay and Etsy, mean that more and more micro-businesses are starting up, usually in the home, without any of the major capital investment which would have been required a few years ago. Starting a business is no longer something that you need to save for a decade to do: you can simply start now, in your spare time, and give up the day job when you're making enough money to justify it.
But when the cost of entry to doing something drops there is one thing that remains rare and thus expensive: ideas. In this kind of economy, having a good idea for a business and having the talent to create whatever you're selling are priceless. That's why the biggest barrier to starting a company now isn't capital, but ideas. And it's why having a good idea is worth more money than ever before.
Tags: blackberry, bt tradespace, bt workspace, business start-up, google docs, saas, start-up
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Comments
2. At April 2, 2008 12:15 PM, boon wrote:
Spot on ill have to save for 10 years for an idea startups are almost free.
3. At April 2, 2008 1:16 PM, J G Dawson wrote:
I agree good ideas may well be in short supply, but for a certain class of idea, there are many reasons why this should be so; not least of all the world tax on ideas commonly known as a Patent. The price of which in the UK alone can be extremely expensive and highly inefficient. And then there are the circa 84 countries in the world and the price per full patent per country (depending upon complexity) presently stands at around £130,000. Every stage of this procedure including R&D and the granted patent itself is taxed at full whack. And then (as all too often) the inventor meets the copiests, the pirates and the Chinese keen for new ideas but reluctant to pay for them. Soon the strength of the patent is tested and found wanting. The people who took your money won't protect you now, your on your own, and soon realise that a patent isn't worth the paper its printed on until tested in court; a costly battle you may lose regardless of the quality of the patent recital. Shortage of ideas? I'm not surprised...
4. At April 2, 2008 2:40 PM, andy brown wrote:
Rubbish, you clearly dont know what your talking about, the UK accounts for around 1% of the Worlds population and yet account for around 40% of the Worlds inventions, 40% of those come from within 40 miles of this address, many of these bright ideas end up going overseas to foreign companies.
With a World leading idea, International Patent filed through UK and World leading Patent Agents and Attorneys, Distributors most regions World-wide, we were unable to raise £25,000 from any of the UK Banks for start of manufacturing here in the UK, see www.willgowheelchairs.com, even when backed under the DTI SFLG to 50%.
After some 18 months searching we turned to our Distributors and now have start of manufacturing Canada and China.
Break-even on establishing manufacturing here in the UK would have been around 40 units, Banks had to conclude we could not sell 40 units, rubbish.
Right now we are sitting on a World leading Manual Powered Transmission system incorporating to Bicycles, more compact, more ergonomic, more energy efficient, we need around £10,000 for build of the advanced prototype, yet while backed by matching funding from Development Agencies we can not get one UK Bank to come in with the other half.
But its not only that, dont think we only approach Banks, we also approach companies, who either attempt to rip us off, we have 3 ongoing cases against UK companies who saw our project and sought to manufacture UK, Hongkong, America, or totally ignore us.
In recent weeks we have had a Grant scheme tell us the Bicycle would not have sufficient Social impact, rubbish, Bicycles have had as great a social impact World-wide as you are ever going to get, and a second who can not even be bothered to reply to us.
There are plenty of bright ideas in the UK, the problem in lack of support is UK dominance in short term investment markets, development of bright ideas does not fit this criteria.
Banks, Investors, are looking for established companies, with established products, and established management teams, and Oh ! BMWs and Audis in the car park.
5. At April 2, 2008 2:50 PM, Ian Jenkins wrote:
Ref: Ian Betteridge in doing Business online
Its a sad inditement when BT vent out even the slightest critiscism of their contributors. I note my earlier comments were not featured yet no one else bothered to comment at all. Just like anyone else in the small business world - its not easy to find the time to contribute to the debate; such a pity you don't have the commitment to to do it comprehensively; after all there was nothing in my comment that was slanderous or Legally suspect
Ian Jenkins
iand2@btconnect.com
6. At April 2, 2008 3:13 PM, John Reston wrote:
How true. Ideas are like gold dust. If you are looking to generate ideas for your business then there are tools to help you think more creatively. Take a look at www.creativethinkersoftware.com for instance.
7. At April 3, 2008 10:06 AM, Ian Betteridge wrote:
Ian J: "Its a sad inditement when BT vent out even the slightest critiscism of their contributors."
Unless there are other comments missing, I think you may be confusing the delay in posting your comment with censorship. All comments (including mine!) are pre-moderated, so there is always a delay before they appear. Unfortunately, the low-paid elves we use for comment moderation don't work 24/7 - so if your comment is posted after working hours, it might not appear till the next morning...
But to answer your original point, I don't think you're actually disagreeing with me. As I said, having good ideas *and the talent to create them* is what's valuable. As you point out, bigger companies will copy your idea - and that's why things like patents, which are methods of protecting ideas, have never been more valuable.
8. At April 3, 2008 10:13 AM, Ian Betteridge wrote:
Andy B: Again, I don't think you're actually arguing against my point. What is valuable is the idea you have. The thing that's being debated by you, the banks, and everyone else is actually the value of that idea.
Fifty years ago, you would have had to get not £25,000 to kick-start your business - complex manufacturing overseas in relatively small runs wasn't the option it is today. You would have needed large amounts of money for print advertising - whereas now you can set a limited budget and let Google make the most of it. Your idea would have had a lot less chance of seeing the light of day then than it does now.
9. At April 3, 2008 5:09 PM, J G Dawson wrote:
With 25 years IP experience under my belt a check at the UK Patent Office will reveal that few ideas are really new and even fewer strike it rich - On average, confirmed by my patent agent, only 5 in 1000 patents ever see the light of day...
10. At April 3, 2008 9:46 PM, James Lyon wrote:
Ref: Ian Betteridge in doing Business online
Its a sad inditement when BT vent out even the slightest critiscism of their contributors. I AGREE with 5. Ian Jenkins - James.BT should not be knocking contributors comments. Continue to do this and NOBODY will CONTRIBUTE.
I also agree with Andy Brown - This Country develops the best new inventions in the world and always has done - British Banks will never back good ideas but other countries will.
Come on Ian B - Write your blog and then read the Business Comments - Every business is different so what you think does not go for every business type out there.
11. At April 4, 2008 10:27 AM, Andy Brown wrote:
Patenting is the only procedure we have till a better system is operating, cost varies, we filed comprehensively here in the UK with a PCT and followed this through with International Patent filings in the more significant or effective markets, Canada, America, Mexico, Brazil, Europe, India, China, Japan, South Africa, Australia.
This should give good effective cover and at an acceptable and manageable cost, though shop around, costings varied, £58,000, £31,000, £29,000, we went for the middle with a World leading Patent Agent & Attorney company operating World-wide.
The reality is that the UK is abundant with good ideas, the problem is they either end up backed by overseas companies who do not have the abundance, or buried and never seeing the light of day, all through lack of funding.
Dragons Den illustrates the problem where multi millionaires too often get it wrong deciding what is a good idea and what is not.
The deciding criteria should be Break-even point, what does it cost and at what point do I get my money back, all too often that point is overlooked, it could be just a few tens of units, from there on anything over is a bonus.
Patenting gives a legally accepted document acceptable World-wide which when presented at Court by the owner gives a priority on the idea. The process can be expensive. It relies on the owner or representative policing, however, if we equate what £31,000 might be in Break-even it could be just tens or hundreds of units, so the expense is borne out, but we do desperately need a better system which gives free registration.
Think of Dyson, lack of investment and funding, some 18 years in progressing that idea to manufacture, now with some 40% of the World market, 0 to 0.75B. in 7 years. Think of another classic instance of our time, the Bayliss Clockwork Radio, 8 years, and now some 25,000 units p.m. The Jet Engine, 10 years, only gaining serious attention when War threatened, the list is endless.
Look at your desktop Calculator or Computer, the Chip - too complex, the LCD Screen - too dark, the Printed Circuit Board - we will never use that, we will always use wiring.
If you want to source ideas locate and contact your local Business Link, they will help, they will tell you what companies and what projects there are, look them over, look for Break-even point, anything over will be a bonus.
12. At April 4, 2008 11:11 AM, Ian Betteridge wrote:
James: I'm not sure where anyone's "knocking contributor's comments". Far from it - the comments are arguably more important than the original post. But a blog where the original poster never ventured into the comments other than to nod wisely and agree with selected commentors would be a rather dull place, don't you think? :)
13. At April 8, 2008 9:25 AM, Penny Haywood wrote:
It's not only good ideas and funding, but the know-how and tenacity to near perfectly execute the idea with all the associated support skills and ongoing creativity. Especially in marketing and PR.
It's not just the one light bulb moment above your head: it's constant creativity: from finding a great name (without bad history or unfortunate associations in other cultures) to register as a company and a domain, to creating a trademark and marketing with brilliant twists for different markets. Then constantly innovating and developing to stay several steps ahead of the competition.
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1. At April 2, 2008 12:01 PM, Ian Jenkins wrote: