Where’s My Angel Broker?
Where’s My Angel Broker?
January 9, 2012
I’ve often said ideas have no economic value. Execution is what matters. Everyone has ideas, but good execution is rare. The exception is patentable ideas. And even that type of value is artificial and imbued by law. It’s the exception that proves the rule. The non-value of ideas has been my view for years. But lately I’m starting to rethink that opinion. Civilization might be on the cusp of a complete idea-execution shift, in which ideas have value and execution is a commodity.
The other day I met a friend for coffee and he showed me his product invention that he plans to market. It cost almost nothing to have the prototype made in China. The product itself will cost so little to produce in orders of 5,000 units that he can fund his startup with the change that fell behind the cushions of his couch. His marketing plan will cost nothing but his spare time. His business has zero barriers to entry. If the idea succeeds, it will be because the idea itself was good. In his situation, the idea has value and the execution is a commodity.
He’s the second person I know who invented a product and had it engineered and built in China. The first friend who tried this approach travelled to China to work out the kinks in his prototype. A few years have passed since then, and the friend I mentioned in the second paragraph did the entire process by Internet. The Chinese company sent him CAD drawings and he simply reviewed them and asked for changes as needed. I believe both friends used alibaba.com as the starting point for their search for foreign partners.
Earlier this year I had an idea for an Internet business that I figured would be worth a few billion dollars if I executed it right. I was curious how easy it would be to develop it myself using foreign programmers. I posted my generic project description on Elance.com, and dozens of offers from offshore companies flowed in. Most, if not all of the offers seemed legitimate, qualified, and shockingly inexpensive. I picked an Indian company, worked out the requirements with them via Skype chat and email, and paid installments via elance.com as the developers delivered phases.
In the end, the project hit some technical obstacles that the Indian programmers couldn’t overcome. I think the problem was in our data source, not their code. I might take another run at it someday, but the time difference with India made it impractical for me to continue. For now, it’s on hold. But for someone with a more open schedule (a single, twenty-something) there would be no real barrier to entry for that sort of business.
Lately, I’ve been working with a friend on another Internet idea, and again there are no serious barriers to entry. It requires almost no investment from us, and little of my time – maybe an hour a week. Yet another friend is developing an app idea that seems to have large potential, and apparently no one thought of it yet.
Put it all together and it seems we’re heading in a direction where ideas are starting to have real value independent of patent protection. You still need execution to unlock the value of the idea, but the cost of execution is approaching zero. And that brings me to my real point: Where’s my angel broker?
Not all startups are as inexpensive as the ones I described. What the world needs is brokers who can help investors identify startups worthy of angel funding. Ideally, the broker would also handle the contract paperwork. You’ll be quick to tell me all of the ways investors already can become angels and identify companies looking for funding, either online or through organizations. Angellist.co is a good start if you want a listing of companies looking for funding. But who among us is qualified, and has the time, to identify worthy investments on that list? I’d be happy to pay a broker a finder’s fee plus an ongoing percentage of the deal if he or she could do the research and hook me up with the best prospects. Why doesn’t the job of angel broker exist?
This is the part where you tell me angel brokers do exist and I’m a moron. I hope you’re right, about the first part anyway. But in any case, the flow of money from potential investors to startups is inefficient at best. When the angel funding system becomes efficient, which seems inevitable, it will mark a crossover point, where execution is seen as the commodity and great ideas are the main source of value.