What is a Concept Company
A concept company is an early-stage firm with a novel or innovative product or service, but whose value cannot be readily determined by investors. The label "concept" implies that the founder(s) have come up with an idea, but it has yet to be translated into a visible business model that can project amounts and timing of profitability. Concept companies are formed more from leaps of imagination than incremental ways to "build a better mousetrap." Early backers of a concept company will share the vision of the founder, but because of the high risk of an unproven venture, usually place small or modest bets on the company at first. If a concept company evolves to prototypes and testing stages, it may attract more attention and funding to maintain a path to reaching the market.
BREAKING DOWN Concept Company
Concept companies often emerge from the technology sector. The early days of the internet introduced to the world concept companies like Yahoo, Netscape, eBay and AOL. They were pioneers in internet technology that very few could imagine would be so transformative of the lives of everyone on this planet, whether or not they were plugged in. What about Amazon, Google and Facebook? One could make the case that they were not concept companies; instead, they took existing business models and ideas and injected massive amounts of growth hormones. E-commerce already had begun before Jeff Bezos formed Amazon; the founders of Google thought that they could build a better search engine; Zuckerberg — well, it took a little while before the light bulb went off in his head that the idea (whether or not his own) could catch fire. Besides, MySpace had long before planted the first flag in the social media space before Facebook steamrolled it.
There are concept companies in the fields of artificial intelligence, virtual reality, biotechnology and even space travel. Founders who have made billions in previous businesses are self-funding some of these initiatives, while others are being supported by venture capitalists. Time will tell whether the potential or promise of these concept companies will be realized.