I'm afraid to send my business plan to investors. After all they can just steal all my ideas and go make all the big money without me. What can I do to protect myself?
During the earliest days of business building, entrepreneurs know they are vulnerable. They've heard the stories. Yes, there is competition everywhere, but nothing is worse than thinking your best ideas will be usurped by the very people you turn to for financial support.
I'd like to give you assurances that your business plan won't circulate among potential industry competitors, but I can't. It happens.
What I can assure you is active angel club investors and venture capital funds are not likely to steal your ideas and morph into your main competition. The purpose of startup and early stage investors is to fund high potential companies like yours, not operate them. Savvy investors are happy to let you do the hard work of perfecting products and services and steadily building the value of a company to a lucrative sale.
What I like most about your letter is you take the time to evaluate the downside of every strategic move before taking action. This approach will always give you the greatest leeway to perfect your plans and minimize avoidable problems.
Here are some recommendations:
- Don't send entire business plans, patent filings or other detailed proprietary information to potential investors as part of an initial solicitation. Start with an executive summary.
- Take the time to read about a venture capital fund's portfolio companies. Do any of these companies have similar technology or market goals as you? Be wary if they do.
- Include a standard confidentiality notice on the cover of your business plan rather than ask a fund to sign a confidentiality agreement. Private investors and venture capital funds just don't have the time to negotiate agreements with every entrepreneur who seeks venture funding. Plus, larger funds argue that they see so many similar plans they are not in a position to police innovation. That's the purpose of intellectual property law.
Despite your reservations about the venture finance community, there is a far more likely way you can lose your company's competitive advantage. It's all about how fast good ideas are copied in the marketplace.
The best way to protect your company first-to-market advantage is to capitalize it with deep pocket partners, hire over-qualified employees, lock down your distribution, protect your intellectual property, and consult mentors from your industry. It's easier (and less exhausting) to stay one step ahead if you have strategic help along the way.
You can't let competitive fear paralyze your efforts to raise money or enter into industry alliances that can help your company progress. At some point, you have to trust your instincts and move forward. You can do it.
Susan Schreter is a 20-year veteran of the venture finance community, MBA-level educator and policy advocate for small business owners. Her work is dedicated to improving startup operating performance with reduced personal risk to entrepreneurs. She is the founder of www.takecommand.org, which offers the largest centralized database of regional and national small business funding sources in the U.S., including angel clubs, micro-finance lenders, venture capital funds and more. Follow Susan on Twitter @TakeCommand