June 24, 2005

Being paranoid about your idea doesn't help

Guy Kawasaki explains why in his Forbes.com Q&A column:

What stops someone who already has the money from implementing your idea? Time, expertise and passion to name three factors. Venture capitalists don't want to be entrepreneurs. They want to invest in entrepreneurs. They don't want to do the work, they want to find people to do the work. The deal they want is: I give you money, you create something great.

...Here's another way to look at it. If merely telling someone your idea means that it can be ripped off, then you hardly have a defensible product. If secrecy is your main weapon, then it will be hard to find investors. By the way, what happens when you ship? Are you going to ask every customer to sign a nondisclosure too?

There is no way to force a nondisclosure agreement with any potential investor whose money you'd want. If you can get an investor to sign it, just to learn what you're doing, then that's dumb money. Even if you get a nondisclosure agreement, then there's no way to enforce it--what funds will you use to sue the investor? Do you think your investor is going to say, "Sure, take the million I gave you and sue."

So the bottom line is: Use your head, don't show your stuff to someone who has a competitive portfolio company. Figure out which investors really should be interested, unveil enough for him to understand what you're doing (as opposed to giving him source code), and go for it.

Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.