Good Ideas With No Business Model

Originally posted 12/01/09
I have been spending a lot of time thinking about good ideas with no business model.  By a “good idea” I mean innovation that does something clever, something that has a “wow” factor — say, building a completely new kind of mousetrap.  By “no business model” I mean that no one has yet figured out how to make money with the idea.   From an investor perspective, the key question is whether the lack of a business model means that (a) one really does not exist (i.e. end consumers are just not willing to pay enough for products of the idea to produce an adequate return on the capital required to implement it) or (b) no one has yet come up with a business model.  Category (a) includes most (and possibly all) new ideas for mousetraps — there are other ways to kill a mouse than a sensitive trippable spring baited with cheese, but I doubt any of them will ever make money.  Category (b) includes things like the Google search engine when it was first built.  Investors of course should avoid category (a) and jump into category (b), but telling the difference can be very difficult (and distinguishes good investors in innovation from bad ones).  One of the tricky things is that a lot more ideas are in category (a) than in category (b).