During the past 18 months or so, while developing Grow VC team, company, service and pitching with various people about our service and business model, there have been a certain feedback given about the obstacles that we can expect to face for our service.
One of them that we have gotten more than few times is the issues of “How to protect the idea?” in a very transparent service like Grow VC. Mainly we have got this feedback from those people that have not build their own startup before and/or have not done any investing. Few days back there was a related question about this topic in linkedin that I tweeted about.
Also few days back there was a feedback in our service, asking:
Could you please advise who would evaluate my startup idea? And how my idea is protected? Normally, if I go to a VC, do they sign an NDA or something? I think entrepreneurs are reluctant to release info to the public without protection (in this case, a closed group of people… but still public). Thanks again for your advices. Happy New Year!
and my answer to this was:
In first place it’s evaluated by us (grow VC) and if it’s approved then people with active funder, expert or entrepreneur (that have active/approved startup) will see the information you choose to provide.
In today’s world, VC and more professional Angel Investors don’t sign NDA’s and the reason is simple, they see same ideas many times over and don’t really want to be in trouble by some NDA – much easier just not to sign NDA.
I also pointed to that LinkedIn question for more reading about the subject, where some of the answers point out the following things to think about:
- If the idea is truly disruptive, you can be pretty sure that large companies would not come anywhere near it
- Fear is a great motivator to perform. Use this fear to your advantage in design, strategy and execution.
- Market forces even destroy patentable ideas , there is least you can do if somebody copies your idea and starts producing it
- Get out of this is to reach to market faster and tie up with VC’s/big organisations who can support you with some stake in your profits
- If you are in the process of raising funds and presenting business plans for the same here is what I suggest take all that is propriety out of the biz plan and replace it with a teaser instead, when talks have moved to the next level and trust is built in represent the biz plan with its key elements
- Ensure you have a great team and that the goals, vision and responsibility of all is clear.
Bottom line is that usually “the idea alone” is not that interesting for anyone seriously thinking of acting on it. Some of the other things to consider is that there are plenty of proven and successful business models to copy. So if someone is into copying, they can just opt to copy these business models and take those to new markets. Those can have much less risk and can actually even be acquired by the company that came up with the original idea. Few links: Facebook copies, Graics list (video), and there is plenty more if you want to google them.
Also being first to market is not always the best position to be in. Google is probably one of the most know example of the company that was not first to market (not even close), yet managed to become the most dominant player in Internet, while starting as a new startup, going against the big companies.
If indeed your startup is all alone first in market, that can also be a bad thing, either there is NO market, or it can be way too costly to educate everyone to create and/or wait for the market. IE. wrong market timing.
So how to approach the “idea protecting”- problem?
When you come up with the idea that you are seriously thinking of acting on, you should:
- make a simple plan and move forward with it
- note that most ideas evolve to something else as the plan is moved forward
If you are not going after the idea, you shouldn’t worry, someone will most likely come up with the same/similar idea. Best option may just be to blog about it and have some credit for it later on to build your profile, like many people that do this all the time.
Usually those people that come up with one good idea, come to have more good ideas in the future. So in fact you may hold yourself back from even bigger idea, if you can’t act or give up on the previous one.
If indeed you choose to make a GO for the idea, you should first check the patent option.
Is the idea patentable (this is not a legal advise)?
In some countries you can find free or cheap government or city organizations that can help evaluate if the idea could be patentable. If it would, there can also be some grants or similar to cover some of the patenting costs. – Even if there’s not, it can be pretty affordable to apply for national patent.
In any case you should talk to patent attorney/expert to get their feedback (that is typically free). If they think it’s patentable, you can always try to negotiate for revenue share or some other deal. There is also a tool for this in our service.
If the idea included enough innovation to be patented, then you may choose to do so to patent the core parts of the idea (the secret sauce).
Note. There can be BIG difference on innovations that get patent in different countries and by who does the application and who makes decision.
If you have chosen to apply for patent even in only one country, typically you will get 12 months worldwide priority to continue applying in other countries. As long as you do your new/other markets applications on time you will be able to keep your priority and protect the possible patent you may be granted.
If or not the actual patent is granted you don’t need to wit for that, since you do have the priority protection time you can use, if you choose to continue the patent process. So after the first application is in, you are pretty safe from this priority point of view for several months.
If the patent would be granted then eventually you will end with the cost problem of applying to different country and protecting your patent. So after the initial priority time, it starts to become much more costly, unless the patent is denied.
Speed is your protection
When you choose to act on the idea, regardless if you choose to apply for the patent or not, speed is your best protection and asset as a startup. Before you start to talk about your idea to new contacts, you should focus on optimizing your actions on how you will move forward to build your team, momentum and user base.
Few thing are clear, you simply can not move forward or raise capital without sharing the idea, so you need to make sure you are moving as fast as possible with right steps and using right metrics. Even if you have priority to the idea with patent pending, you still need to keep your speed, before the cost of applying and protecting it will start to add up.
And to do this, as one of the answers in that linkedin question pointed out you should build the other material about the plan so that you explain enough about the overall business model and then put teaser information to any public or general information / presentation, that will still build a “good enough, but interesting” overall picture of the solution/business model, while leaving the “secret sauce” part to be shared selectively or by request only.
Other things to think about
You should consider that most likely there is someone already working with the same idea. The earlier you can find out who they are, in what stage they are and with what resources they are working with – the earlier you can choose to either compete or choose another idea to work on – before you have spent money, time and resources of your own and others, just to learn later that you are already way behind with much less resources. Or both of you could actually see that it may be more beneficial to join forces and make joint and more stronger venture in the very early stage.
Current visibility settings in our service
In Grow VC service at the moment, we have one level of visibility for the information shared in startup, so all information in startup profile is visible to all people that have active funder or expert role and to entrepreneurs that have active startup profile in the service.
So, if there is any core “secret sauce” part to your startup, you can keep that core information to yourself and share it by request. But you still need to make the other part interesting enough or there will be nobody asking for more information and therefore you speed slows down.
In later updates we will add additional level for those “secret sauce parts”, that you can choose to open access to by request.
As for Grow VC – our service is not the first to market, so we are betting on the market timing and better service with some core innovation, where some are out, some will be launched by the end of this month and some later on. – Yet, we also already have some copy cats of our own already and this we consider to be a good sign
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This entry was posted on Monday, January 4th, 2010 at 11:52 pm and is filed under Business Education, Private investors. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.