McStartup

Rodger wrote:

I'm planning on starting a new business with my friend, and was wondering how I can protect my idea. Other than a non-disclosure agreement, is there another way to prevent someone else from using the idea (especially when it's an internet startup idea and does not involve a physical product or invention)? We are looking for funding from angel investors.

I get this type of question a lot, especially when I’m making my regular rounds of speaking at college campuses which often involves a few stops in engineering centric class rooms.  This “how do I protect my IP” or “how do I protect my idea” question is near the top of people’s minds, and if you are of the technical type, it seems to be question number one.

In short:  stop worrying about this.  For nearly every type of business, especially for the type of idea you are talking about, an internet startup, 99.9% of the work is everything that has to happen after the idea is already out there. 

Most investors will not sign an NDA.  Some angel investors will, but very few venture capitalists would.  The idea that someone would hear your idea, drop everything they are doing, have all the motivation you have, create a vision, and start building a company, ONLY because they got the idea from you, is fairly absurd.

Could it happen?  Sure.  Are the odds high?  Not at all.  Don’t slow yourself down worrying about this.

With contractors, other technical types, potential employees, etc, go ahead and get your NDA signed.  You can ask potential investors to sign one but this is probably a waste of time and might look amateurish. 

Now if you do have some patentable intellectual property, you’ll want to take some steps now.  You can file a provisional patent application (available online from Legalzoom), and start actual patent filings.  The provisional patent can be done inexpensively (relatively speaking) but a full patent application is going to cost real money.  In your case, it doesn’t sound like this is an issue, so I won’t go into more detail here.

If anything, what you need to do is work on building your story and polishing your pitch. 

I strongly recommend you read my book, The 8 Slide Investor Pitch before you go out and start pitching angel investors. 

From the nature of your question, I can sense that you are going to go into those meetings and spend a great deal of time talking about the wonders of your product idea.  This is normal, and this is why you are concerned about “giving it away”.   

In The 8 Slide Investor Pitch, I explain that you should spend no more than 4-6 minutes of a 20 minute presentation talking about your product or service.  You will be well served to spend some time with this book and to build your  pitch the right way.  Your idea will not sell itself.

Good luck.  I hope you will heed this advice – I’ve seen far too many entrepreneurs get so hung up on protecting the uniqueness of their idea that they were afraid to tell anyone about it.  Don’t be like Golem from Lord of the Rings.  Your idea is not “your precious.”  You need to get out there and raise capital, and you should not let something like this restrain that effort.