Idea vs. Business

What’s the difference between an idea and a business. I can’t tell you how many times I’ve come across young entrepreneurs who, although they have no shortage of ideas, don’t understand that the idea is not enough. As Thomas Edison once said, “The value of an idea lies in the using of it.” Don’t forget this.

It seems like everybody these days has “app fever” (and the only prescription is more cowbe-… financing!). Angels and VCs do not invest in ideas… They invest in the businesses which are run by people who have ideas (and dedication, ambition, and dedication, and more dedication… and did I mention dedication?). So what makes a business, you ask? Well, Investopedia defines it as:

An organization or enterprising entity engaged in commercial, industrial or professional activities. A business can be a for-profit entity, such as a publicly-traded corporation, or a non-profit organization engaged in business activities, such as an agricultural cooperative.


If you’re in a startup, you can ignore the last part of the definition (non-profits don’t make good financing targets!). But if we look at the first sentence, there are a few keywords to consider: organization, engaged, activity. Boil this all down, and you get an “organization which is engaged in some sort of activity in the hope of some day making a profit” (we’ll talk about those in a later post). Apps are not organizations. It’s best to think of them as products or services. These are things a business offers.

Organizations involve people. They require leadership and teams. These teams put into action the ideas which drive the “business” by engaging in certain fundamental activities. If you’ve ever taken a marketing class before, you may have heard of the 4Ps (product, price, promotion, place) and the 4Cs (consumer, cost, communication, convenience). I won’t go into them here, but you can get a short summary on Wikipedia. So if you really want to impress some potential investors, know your business, not just your idea.

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