A true economist, the joke goes, would never bother to pick up a $10 bill on the sidewalk because in an efficient market, instant, riskless profit is impossible. Of course, markets are far from efficient, and an entrepreneur would not only scoop up the sawbuck but also scheme about where to find more. Startup companies are ventures whose entire existence is based on exploiting a gap in the market-an inefficiency that existing companies have failed to identify and pursue for profit. Potential investors attempt to assess the size (or even existence) of a startup's designated gap and whether the company is truly poised to take advantage of it.

I recently ran across a fascinating case of attacking such a gap in London, England-based SwapitShop, an enterprise dedicated to creating a universal currency for children. As Jonathan Attwood, SwapitShop's CEO, explains, children have tremendous economic influence via their parents, who purchase endless quantities of toys, food, and entertainment on their behalf. Yet kids themselves generally have very little ready cash. Guiding their economic influence is big business, and marketeers constantly strive to "incent" (i.e., bribe) kids to demand the games, TV programs, and sugary snacks that they sell.