How do you stop business partners from stealing your great new idea?
Everyone I know has a business idea, although most have been done before and the vast majority probably would never make any money. However, every now and then I hear of an idea that really has possibilities and I encourage the individual to give it a go.
But few people are capable of executing on their idea personally and will need to seek a partner to provide funding or access to specialised resources to make it work. This is often when I hear the phrase “But if I tell them the idea, they will steal it and make lots of money and I won’t get anything!!”.
In truth, this does happen sometimes although rarely, but it does pay to be cautious and there are some steps that you can take to provide some reasonable level of protection. Before you get too stressed about how much money you might lose, it is worth finding out whether in fact you do have a unique idea and further, whether it is capable of generating significant revenue.
Just because you are not aware of an existing solution to a problem does not mean that it has not been thought of before. I can recall countless times where experienced industry executives have pointed out where and when a specific idea was tested in the marketplace.
If your idea is an invention, then it is worthwhile undertaking a patent search. Many ideas are patented but not commercialized or were produced but failed to generate sufficient revenue to survive. The research in this area shows that even experienced R&D departments only succeed commercially in about 1 in 10,000 ideas they generate.
Even so, you may well have come up with a blockbuster, so how do you garner support without giving away the store. In practice your greatest protection is inertia. Few people have the energy, capability, knowledge and resources to work on your untried idea.
Even people who might be capable of doing so are mostly tied up with their own ventures and hopefully have things that they are doing that, in their mind, have a greater chance of success than a new idea.
Then of course few ideas are so basic that they don’t need specialised knowledge and experience to implement them. Most good business ideas are built on our own personal knowledge, capabilities, experiences and networks. What is a good idea for me is probably not something you would be interested in or even be capable of executing.
Your idea may, however, require an industry partner that you believe would be capable of exploiting the idea, so how do you protect the idea while you are exploring a joint venture.
First establish what intellectual property (IP) protection you can put in place. This might be patents, copyright, brand registration and so on. This in itself is a limited form of protection unless you have the funds to defend an infringement.
The best protection here is a partner that has a vested interest and will defend the IP. This is what I call the gorilla defense. If you are a chimp up against a gorilla, you need to go find your own gorilla.
In the past I have found that the best protection I have for IP is to say to my potential partner that I intend to sell part of the equity to a large venture capital firm or another large corporation. This is normally sufficient to keep everyone honest.
You might also use a non disclosure agreement (NDA) in your discussion. This puts the other party on notice that you understand your rights and will defend them. However many professional services firms and investors won’t normally sign such documents as they argue that they see very few unique ideas. Don’t let this worry you, if you deal with a large professional firm, they are unlikely to risk their reputation by doing the wrong thing.
Another technique is to hold back some key information until you have a good commercial understanding and then bring in your lawyers to tie it up before you hand over any secrets. You can always offer to have a unique element independently audited to verify the idea as part of the due diligence process.
The best protection is, however, that the implementation of the idea needs you. That is, you bring a unique set of experience, knowledge and ideas to the table that, without you, it is unlikely to work.
In the end you may just have to jump in the deep end. An idea that is not exploited is worth nothing and sometimes you need to take some risks to succeed. Don’t be so fearful of losing that you never win.
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