The Risk of Idea Stealing
Inexperienced entrepreneurs often worry about sharing what they are working on with others, fearing someone will steal their idea. While there are a few circumstances one should be cautious about, generally, it is far riskier not to share.
While idea theft is possible, the reality is that ideas are relatively easy to conceive. The fallacy of the inventor’s fear that someone will steal that gem of an idea that they came up with lies in a misunderstanding of how the value in an entrepreneurial venture is created. While a good idea is essential, it is not sufficient in and of itself. Witness that as a startup evolves, the original idea is nearly always modified and evolved to make it better along the way. The intense creation and forging required throughout the evolutionary process is the heavy lifting work that develops ideas into products. This ultimately supports a viable business.
Even the patent office recognizes that there are many problems to be solved between an idea and a patentable idea (aka design). Patents are only granted on ideas that are reduced to practice. The reason is that a concept that has not yet been reduced to practice has not had all the nuances worked out of it yet.
Keep in mind that most people who are potential customers, investors, and advisors that get excited about your idea (hopefully!), almost always do not have the time or inclination to develop it themselves. Building a startup to develop, market, and sell the product is a hefty lift. Most people are already fully engaged in whatever work they have decided to do. The risk of someone taking your glimmer of a concept and deciding it is worth abandoning whatever they are already working on to go work on your idea is a monumental shift that rarely makes sense. Most will want YOU to do it. And, they might want to participate so they can get the product, invest in the venture, or become part of your team to help you succeed. The work involved is the most critical protective “moat” around your idea. My experience repeatedly has been that people get excited and want to know when they can buy the product or invest in the company, not take over and build the product themselves. In fact, one of my favorite reactions from potential customers is “when can I get one?” which tells me the idea is worth working on – and is a reason for gathering feedback on your plans.
While it may be tempting to take a stealth approach to building your startup, unless you and your team are deeply steeped in all of the nuances of your target market, you are likely to radically increase your chances of success by engaging potential customers early and often. Getting feedback from knowledgeable people in your space can give you priceless insight into what is essential about your concept’s value proposition. It can help shape your product features and functions, and help you recruit people who can serve as your champions.
High-Risk Scenarios
Now, let’s consider the circumstances when you should be more cautious about sharing your concept.
The time to be careful is when the people you are considering sharing your idea with are better positioned than you are to develop the value implicit in the idea. For example, when I was leading an innovative wind energy company developing turbine-free utility-scale wind power generators, I spoke to many would-be entrepreneurs who had developed an improvement that would make utility-scale multi-megawatt wind turbines better, faster, and/or cheaper. The trouble was that these add-on features did not stand alone. They were an improvement to an existing product – and the only way to deploy them into production was to get one of the few major wind turbine manufacturers to adopt the design improvement. Maybe they had an issued patent – and the resources to enforce it – but usually, to get it adopted, they needed to show it to the very people who were best positioned to simply incorporate a variation on the concept into their next design iteration. To stand alone, the idea would have to be a new material, service, or something distinct that supported their customers, rather than something the customer was better able to implement than they were.
Similarly, word to the wise, remember that when you share a slide deck describing your invention and business plan with a potential investor, part of their due diligence process will likely be to show it to others who have expertise/experience in the area. You want to share enough information so they can determine if it is an attractive concept with an exciting value proposition. However, you should not share your secret sauce, and you should assume that your deck may be shared with competitors. And venture capitalists absolutely will not sign a non-disclosure to discuss a business idea. However, perhaps you can get one very late in the game to cover the details of unpublished patents. Choose what to include in the deck wisely.
I have seen and heard about situations where co-founders have had a falling out, and split apart, and both sides have tried to pursue variations on the same concept. This is when how you set up and protected the intellectual property of the idea becomes important. It also typically becomes evident which side can recruit the right resources to develop the concept effectively.
Possible Practical Steps to Protect Your Idea
Practical steps you can take to protect your idea while still getting feedback on it:
- Focus on getting feedback on the “what” of the idea, not the details of the “how” of implementation. That is where your “secret sauce” is created. Do not share what would be hard to reverse engineer (such as encrypted embedded software that makes your device work or the special recipe of your product that is hard to measure.)
- Consider investing in intellectual property protection, such as filing a patent. This is often what gets sold when a company gets acquired, and for some patentable ideas, it is worth the years and tens of thousands of dollars to protect the idea. Remember you must meet the patent office’s various requirements. However, it does offer a defensible position to sue a competitor who tries to misappropriate your idea.
- Except for investors, ask for a non-disclosure agreement. This alerts the other party that you consider this information proprietary and puts on record what the intellectual property is. However, remember that it is not easy or inexpensive to prove stealing, and many companies may refuse.
In the end, remember that your best protection is rapidly, creatively, and effectively developing your idea into something that others want to buy. If you can create a product that people want and offer value at a price others are able and willing to pay, it will make sense to buy from you rather than taking the risk and effort to try to create an alternative themselves.
First Anniversary of Startup CEO Reflections
By the way, I wanted to extend a heartfelt thank you to the readers of this blog! This week we crossed the first anniversary of the launch of Startup CEO Reflections, with this as my 69th blog! Plus seven guest appearances on podcasts and panels (links here). Thank you for all the feedback, encouragement, likes, and forwards – that makes the effort worth it! What a fantastic journey this has been – and I am grateful to be able to share it with you! Onward!
