How to Manage Expensive Ideas

Turning -$50,000 Mistakes into Great Ideas

I watched an interesting lecture recently. The lecturer said a funny thing: 

“I do not know what is scarier: that Product Managers come up with ideas or that they implement them.”

Indeed, funny thing. Product teams can generate many ideas. But the question is always about: “What are those ideas truly worth?”

📈The true worth of ideas

For me, there are 3 ways of thinking about ideas:

✅ Ideas can be worth millions and billions. 

The meaning is that there are some ideas that are so great that they will make you wealthy, make people happy, and make the world a better place.

Instant image of Steve Jobs and the iPhone moment, Uber revolutionising the taxi industry, and chatGPT moment. Think of some big disruptive product - this will be the gist.

✅ Ideas are worthless, only execution matters. 

At this point, we figure out that not all ideas which sound great end up working. Think of HUMANE pin, Rabbit R1 from recent trends. Great in theory, but execution sucks.

Only once executed right, the idea actually matters.

I remember the craze of 2021-2022 and how people wanted NFTs. It seemed to be only reasonable to build an API to provide data for NFTs. The sad ending of the story is that there was no real demand. Each segment of the NFT market needed slightly different data, and going into each niche did not make sense. Such API endpoints only made sense for a short period of time and covered only basic data. Therefore it made sense only for big players to have them. Smaller players were losing money on them and not catching much of the market.

The NFT API idea sounded good in theory, but in reality was quite bad without good execution.

✅ Ideas are worth –$50,000. 

And finally, we come to the actual point that executing each idea costs resources. Time, money, other resources.

Think of it this way. If you want to build an app, you would need some mobile app dev ($4000), some backend ($4000), DevOps/network ($4000), designs ($3000), etc. So, we easily reach $20,000 per month. It might actually take about 2-3 months to build it. So, we are at least $50,000+ just in development costs.

If you raise $500,000 and each of your ideas costs you $50,000 to test -> you can test only 10 ideas. As we all remember more than 9/10 ideas fail, so you better be lucky.

If you are a big company with an existing “cash cow” product, you can afford it. If you are an early-stage startup, you have one resource which is a great constraint - runway. Being Pre-PMF is the game, and the name of the game is “last long enough to find PMF”.

🫰 Managing Expensive Ideas

When we break down the above thoughts, we find that the value of ideas in a product is a function of the speed at which ideas are generated and the cost of testing each idea.

This leads us to two key constraints: time—how many ideas we can test within a day, week, month, or year—and cost, which involves the resources (people, tools, servers, etc.) required to test an idea.

Essentially, to manage expensive ideas, we need to optimise for these 2 factors. Below are some tricks for it.

⌛ Test Quickly

Validate as many ideas as possible within your given time frame. For example, if you test 10 ideas per week, you may discover at least one good idea. If you test 10 ideas per year… Well, 1 idea in a year is also a result :)

The "sell before building" principle can be useful here. It helps you determine whether there is demand for your product or service before committing significant resources. Techniques like Fake door testing and Hallway testing can be helpful in this process.

Even something as simple as talking to potential users is valuable. Asking direct questions like, "How do you currently handle/deal with X?" can provide you with valuable insights and context that you might otherwise overlook.

🚧 Prototype, don’t build

We all know the definition of development.

Development - expensive, time-consuming, and never delivering what we want.

For this reason, full-scale development isn’t ideal at an early stage. Here are a few approaches I’ve found to work best:

• Prototypes in Figma: When it comes to web products, creating a mockup of your product in Figma and applying a prototype is often enough to test your idea.

• Build with low-code/no-code tools: In the 2000s and 2010s, we needed developers to build websites and services. But it’s 2024 now, and with tools like Webflow, Wix, and even Notion pages, you can quickly build a simple website. Need a backend? Retool, Airtable, and (forgive me, developers) even Google Spreadsheets can do the trick. Would these work for production? NO. Would they work for "I don’t have clients yet, and I don’t know who would pay for this"? ABSOLUTELY.

• Do things that don’t scale: There’s a great article by Paul Graham on this. I recommend reading it.

For example, BD team once wanted to collect user data during the registration step for reach out. We built an integration with HubSpot, designed it, developed the frontend, tested it, and released it. It took us about a month from idea to production.

In the end, we didn’t use it because it turned out to be useless. We didn’t have a clear idea of what we wanted to achieve with it, our success metrics, guardrail metrics, or even if it made sense to have the form at such early stage.

We initially thought it would be "unsexy" if our form was built using something like Google Forms. But you know what's even less sexy? Wasting a month on development only to scrap the idea entirely—especially when you're working with a tight budget.

🎯 Just Risk It

No matter how much you validate your ideas or work to reduce costs, there will always come a point where you have to commit and take a risk.

The points outlined above aren’t a step-by-step formula for building a successful startup. Instead, they serve as guiding principles to lower risk and increase your chances of success. However, even if you do everything perfectly, failure is still possible.

For example, when launching a café, there are often unavoidable upfront costs. You can estimate demand, make initial sales, and test the market, but in the end, you'll still need to invest in coffee machines, tables, rent, and other essentials—regardless of how much you try to minimize costs.

The same applies to digital products. If you're building an investment platform, you can conduct market research, estimate demand, and create a prototype, but at some point, you’ll have to obtain a license to operate. And for that, you'll need to develop the entire app.

TL;DR Summary

"Ideas are plentiful, but their value lies not in their conception, but in their execution."
— ChatGPT 4.0

• Ideas can be incredibly valuable, but their true worth lies in successful execution.

• Execution can be expensive, so it’s crucial to validate demand before investing.

• Use tests like fake door tests or hallway tests to quickly assess demand.

• Talking directly to potential users can provide valuable insights on their needs and willingness to pay.

• Avoid full-scale development in the early stages; prototype your ideas using low-code/no-code tools or Figma mockups.

• Even well-executed ideas can fail, so it's important to be prepared for risks.

• Building and testing ideas can be costly, so focus on efficient validation to minimize wasted resources.