It’s a tricky request that can sink a pitch before anyone ever hears it.
5 min read
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When you are starting out in business with little more than a concept, it’s natural to want to protect your idea. You imagine someone with more money, experience and influence than you scooping it up and leaving you their wake with little more than the bragging rights to say, “I thought of that!”
So you may be tempted to ask everyone you pitch to sign an NDA (non-disclosure agreement), but be warned, you risk annoying or offending potential investors and partners before the relationships has even gotten off the ground. At the end of this article, I will share with you a great approach for getting people to sign one without any hard feelings, but before I do, I want to shed some light on the reality of sharing your ideas as a startup:
1. No one will steal your ideas until you’re driving a Ferrari.
The types of people who copy ideas are opportunistic and they can’t recognize good ideas until they are proven. They are too busy trying to replicate the flashy gurus on Instagram to worry about what you’re doing. Companies like Google, with a long track record of success, need to guard their original ideas because outside people assume that if Google is working on it, it must be valuable. But the latest unfunded startup with a two-person team? You probably will not attract the same fervent competition.
2. Ideas aren’t very valuable anyway.
Do you know who had the idea for the iPad? It was the creators of Star Trek, who gave Captain Prichard a remarkably similar device called a PADD in 1988. Then in 2002, Bill Gates started prototyping the “tablet PC” but Microsoft never launched it commercially. It wasn’t until 2008 when Steve Jobs launched it properly that it made waves and became a financially successful product. The idea didn’t matter, it was the execution that made the money.
If someone did “steal your idea” what they actually did was “executed upon your idea” and, in a very real way, the fame and fortune belong to the people who can make ideas happen.
3. Deal flow is worth more than any single idea.
When you share ideas with a highly-credible advisor, investor, supplier or mentor, be aware that they are often amidst a raging torrent of deal flow. They are typically approached dozens of times per month with decent ideas and deals. Their business probably depends upon this flow. If they started screwing people over that deal flow would dry up. Word would spread that they can’t be trusted and it would set them back years — if they recovered at all.
4. Business is a team sport.
I have an idea that’s worth a fortune — tear down all the old buildings in London and replace them with new ones. I might be able to make a case for this being a viable thing to do but who is funding it? Who is constructing the buildings? Who is the architect? Who are the sales and marketing team? Ultimately any idea is only viable if the right people are behind it. When investors look at an idea, they are actually looking at you and your team. They’re probably 20 percent interested in your plan and 80 percent focused on whether they think you can pull it off.
5. So finally, how to politely ask for someone to sign an NDA.
Naturally, many experienced people are reluctant to sign an NDA in order to hear about your idea. They don’t even like being asked to sign one because it insinuates that you think they will steal from you or you think your idea is so much better than anything else they’ve ever seen. Asking someone to sign an NDA the wrong way might immediately create tension. With all of that said, if you still feel it’s worth getting people to sign an NDA, there’s a really great way to ask someone politely to do it. Say this:
“In the interest of maintaining good governance with future investors, we’re asking that anyone closely involved with this project at this early stage sign an NDA.”
What you are saying is that you’re planning to approach investors who will want to see that you follow best practices in the way you run your business. The fact that you can produce a list of people who have been exposed to the concept and who have signed an NDA will bode well with professional investors doing due diligence. It will also prevent them from using this as an excuse to nibble down the valuation.
The beauty of this approach is that it is not saying that you don’t trust someone or that you think your idea is so miraculous that it’s inherently valuable. It’s simply about following a process of good governance, something that most serious business people are happy to agree to (provided the NDA itself is fairly standard and not too aggressive).
Be prepared though, if you do get people to sign an NDA, you better have a great pitch to back it up!
Author: Daniel Priestley