How to turn an idea into a business?

September 6, 2005 5:24 PM

I have an idea for a product/service. I've drawn out a rough business model and shown it to a few people who all think its a great idea but I'm having a few problems getting things rolling... more inside about funding the project, pitching it to major 'players' in certain industries, investors, etc

Ideally I want to start up my own company and offer this service and these products to the public through my company, however, certain aspects of this idea would require several large companies/investors to get onboard. My other option is to sell this idea to a Google or Microsoft who already have the funds and industry connections needed to get this idea off the ground.

I don't want to share too many details about my idea so I was trying to think of a company w/ a good product/service plan that was similar to mine... I came up with Tivo. They sell their hardware and offer the subscription based service to those people who own the hardware. Something along those lines incase that info is needed...

So my questions:

Who should I contact? (just call their front desk, a certian department, etc?)
Do I need to file for patents?
How do I protect my idea from being 'ripped off' by these companies once I approach them with it?
What steps would I need to take in order to present this idea to companies and investors? (How would I go about pitching this idea)

TIA.


.//chris

posted by hummercash to work & money (6 comments total)

I'd get in touch with a lawyer or trade group that could help push your product or idea forward. We have a local law group, Idea Advocates, that specializes in helping get startups off the ground -- doing the initial incorporation work, hooking you up with CPAs and the other things that go along, and if they know someone, potentially some angel capital.

We also have a great thing here called the Oregon Entrepreneurs Forum, which is a group that focuses on helping startups and venture capitalists network.

See if there are local analouges for you.
posted by SpecialK at 5:43 PM on September 6, 2005

SpecialK's advice to seek out something like OEF is a good one. Most have a couple of open meetings a month where one or two businesses will present and ask for help, which is often funding, excutive talent, and business development contacts, and there is ample time for networking. So, go and listen and ask questions, without even mentioning your idea. It will help you learn the jargon and get you thinking about things. It will also give you a chance to see how others pitch their companies.

On the subject of pitching, you might take a look at this advice from The Alliance of Angels. You should also devour the websites of lots of VCs. I'll leave it to you to find them. Many have info about pitching to them, note the similarities and differences the advice given by different firms.

Getting big companies interested in something can be incredibly difficult. Most are incredibly cautious about being sued. Often they won't talk to people who don't already have a product in the market lest they be accused of stealing the idea if they eventually come out with something remotely similar.

Even if you can get their ear, they aren't going to be to receptive to a pitch from someone with no track record and nothing concrete to show. Ideas are a dime a dozen and big companies have lots of dimes. Execution is what matters to them. If you've got something in the market (or at least most of the way through development) already, or you've done a successful product in the past, then its easier for them to guage your execution ability.

Now, even if you do have something to show them, the chances of them actually pursuing a deal are slim. Most likely they'll look at you and think Not Invented Here. Even if they like the general thrust of the product, they'd rather do it themselves. If they don't have an issue with its outside origin, they'll still be weighing whether it'd be cheaper to build it themselves than to cash out the founders/investors. Often they'll decide its cheaper to build it themselves, unless...

Part of their calcuation will be time vs money. If you have something they need that will cut critical time in their ability to enter the market, they are going to be thinking more seriously about buying over building. Competitive threats are a big motivator. Sometimes they will buya startup just to keep a product or technology out of the hands of a competitor or to jump start their entry into a market that's heating up, or to address a serious deficiency in their product offering.

Your best bet of doing some sort of deal with an established company is to start doing your homework. Learn about existing initiatives in the companies. Look at the past 5 years of acquistions in those divisions and the company as a whole to try to understand their acquisitions strategy. Figure out who your most likely "customers" are within the company. Comb press releases and press covereage to get the names of key people. See if you can get a copy of an org chart (Directions on Microsoft publishes one of Microsoft). Figure out their business strategy and identify where your idea could help them plug holes.

Your chances of talking to any of them directly right off the bat are slim, and you'll do best if you get referred to them by someone they know and trust. This could take a lot of work.

This is actually one of the things that venture capitalists should be good for. Besides arranging funding, they know people, and the people they know, know people, which can open a lot of doors.

Of course, first you have to get to the VCs, and to get to them, if often helps to get to the people they know, the lawyers, the accountants, the consultants, the execs looking for their next startup gig, which is where the venture/entrepreneur forums can come in handy. The whole little cottage industry operates on a web of trust, which doesn't mean people won't screw you, but it does mean that they are going to be weighing the risk that doing so will hurt their ability to do business in the future. They'll find it easier to screw you if they view you as an outsider who won't be back from a second round. They'll think twice if they think you have a lot of friends in the industry and generally think they might cross paths with you and/or your friends again. So, spend some times making friends and helping other people out before you really start shopping your idea.

Now, a few comments about what little you've said about your idea:

certain aspects of this idea would require several large companies/investors to get onboard

If I were a potential investor, I wouldn't want to hear this because chances are, you aren't going to get several large companies or investors on board for quite a while, and even if you do, they are going to give the money in stages, so map out major milestones. How much money will you need for each phase? When does revenue start coming on line, how does it build? Anything you come up with will probalby be wrong, and a seasoned investor will know that, but demonstrating that you've thought things through is important.

Other things you should demonstrate your awareness of:
Your intended customers.
Sales cycle. How long do customers mull things over before buying products like yours?
Channels: How will your product be sold to customers? Who are the intermediaries, etc.
Competition. Don't say you don't have competition because you do. People have limited amounts of time and attention and a resistance to change. At the very least you are competing against the other things spend their time and attention on.

I'm not sure I'd use your tivo example, given the fact that they've been loosing money for their whole lives until very recently. Maybe satelite radio would be a better example in that hardware+service vein?

Good luck.
posted by Good Brain at 9:22 PM on September 6, 2005

Generally, ideas are worthless. Everybody's got tons of `em.

What matters is IMPLEMENTATION.

Look at TiVo, for instance. The idea of home PVRs was thought up long before Tivo came close to market. There were Hard-Disk PVRs sold years before Tivos were sold.

There's only one reason you know what a Tivo is. Tivo built a great PVR. They did not build the first PVR. They implemented the most usable PVR.

Ideas are nothing. Implementation is everything. There's always prior art.
posted by blasdelf at 10:31 PM on September 6, 2005

Well written Good Brain, there is no easy way, you have to go through a lot of work and networking.

Ideas are cheap and it's very hard to get somewhere with an idea alone. Farther you can get without asking for external funding, whether by angel investors, VCs, or big companies, the better chances you will actually have to get it (and also if you succeed, you will finish owning bigger part of the company).

People with money have many requests for funding, so they can be very picky, and it's easy to get "red flag" in any part of the process. One of the things for which you can get easily kicked out is to be secretive and try to force NDA on your potential investors.

In general, you are anyway better off by discussing your idea with others to get feedback, and to iterate towards better solution. You know, the devil is in the details ...

That said, if your idea is really really brilliant, patents can help, though they are rather costly - in the order of $10K - $20K (USPTO + attorney fees). However, in this thread I learned about "provisional patent application", which can help to delay paying the real costs and get for 12 months "patent pending" status.

BTW when getting funding, a huge part of the decision is made by judging you (well, the team) and not just the idea. Just look at it from the other side - you have X millions of $, who would you trust to give it to? Less they know you, more guarantees you must provide, e.g. other similar ventures where you succeeded before, or working prototype, customers, revenue, profits, the farther you are with actual business, the better.
posted by b. at 11:17 PM on September 6, 2005

Ideas are nothing. Implementation is everything.

Just want to second this. I've had dozens of fabulous ideas "stolen" from me, and I'm still sitting on a few dozen that I can't do anything about right now. I say "stolen" jokingly, because I'm not so arrogant to think that I'm the only person who's come up with them.

Companies like Google and Microsoft have thousands of brilliant people working for them. More-clever-than-God brilliant. I'm sure they have hundreds of ideas they'd like to see come to fruition as well, and they have the advantage of already working from the inside.

Do it yourself. Prove to Google/Microsoft/Whoever Corp. that it's a viable product by actually demonstrating it through action, not through some convoluted business plan. More specifically:

• Who should I contact? : Put an ad in the paper looking for talented people just out of college who want to get on-board with your project, will accept less-than-amazing salaries, and have multiple, overlapping skill-sets to minimize the number of people you have to hire.
• Do I need to file for patents? : Yes. Many states/state universities have programs for entrepreneurs. My state has a program with a free patent search and legal advice. Your state may have the same.
• How do I protect my idea from being 'ripped off' by these companies once I approach them with it? : Simple. The first time they know about your idea should be when someone else tells them about your already working idea in enthusiastic euphoria. The patent lawyers should keep the idea safe from their evil tendrils, but you never know these days.
• What steps would I need to take in order to present this idea to companies and investors? : Take out the smallest possible loans from friends/family to get the idea off the ground. People are a lot more willing to throw money at working prototypes than hot air.

posted by Civil_Disobedient at 9:04 AM on September 7, 2005

To clarify that last point: use the small loans to get it working, then go knocking on the doors of banks/vc firms.
posted by Civil_Disobedient at 9:06 AM on September 7, 2005