How Do I Protect My Idea From An Investor?

25 replies
How do I prevent an investor from taking my idea, and competing with me?

I'm meeting with a potential investor to get funding for a project. I've just considered the possibility that if we don't reach an agreement, the investor can back out, but still use my idea.

Is there some kind of non-compete or exclusivity agreement that will protect me in case the investor decides to use my idea?
#exclusivity #idea #investor #non-compete #protect
  • Profile picture of the author All Night Cafe
    Best advise is to use your own lawyer. If you can't
    afford one, just Google and you will find forms you your local bank.
    can use.

    You could also go to your local supply store and
    get a form.

    Then get it noteorized at your bank. Not as good as your
    own lawyer but it can work.
    {{ DiscussionBoard.errors[5213227].message }}
    • Profile picture of the author mwright
      Could I also use the same type of agreement if I meet with a potential CLIENT, give them suggestions, then want to deter them from using my suggestions if they hire someone else?
      {{ DiscussionBoard.errors[5213253].message }}
      • Profile picture of the author nm5419
        Originally Posted by mwright View Post

        Could I also use the same type of agreement if I meet with a potential CLIENT, give them suggestions, then want to deter them from using my suggestions if they hire someone else?
        Yes, you can. The NDA would be most appropriate in this situation.
        {{ DiscussionBoard.errors[5213259].message }}
        • Profile picture of the author mwright
          Originally Posted by nm5419 View Post

          Yes, you can. The NDA would be most appropriate in this situation.
          And, do we just write the NDA agreement for a specific time frame?

          It wouldn't be fair or practical to keep someone quiet for 50 years from our original conversation.
          {{ DiscussionBoard.errors[5213279].message }}
          • Profile picture of the author mwright
            Okay...

            I just found a basic non disclosure agreement form here:
            Basic Nondisclosure Agreement

            Thanks (as usual) for all the advice!
            {{ DiscussionBoard.errors[5213288].message }}
          • Profile picture of the author nm5419
            Originally Posted by mwright View Post

            And, do we just write the NDA agreement for a specific time frame?

            It wouldn't be fair or practical to keep someone quiet for 50 years from our original conversation.
            The time frame is negotiable, so you can work out something that's workable for the both of you.
            {{ DiscussionBoard.errors[5213314].message }}
  • Profile picture of the author Toasted75
    NDA - non-disclosure agreement.

    ...but generally it would be bad practice for an investor to go and steal ideas and pimp them out themselves, they would get a bad reputation and would have trouble getting others to pitch them ideas.

    Generally speaking, you need investors more than they need you - there are thousands of ideas out there... yours is just one (no matter how good it is).

    ...also - if your pitch doesn't include why you are the one to do it, and that you've got experience to deliver this... then you're probably not ready to talk to an investor.
    {{ DiscussionBoard.errors[5213233].message }}
    • Profile picture of the author mwright
      Originally Posted by Toasted75 View Post

      NDA - non-disclosure agreement.

      ...but generally it would be bad practice for an investor to go and steal ideas and pimp them out themselves, they would get a bad reputation and would have trouble getting others to pitch them ideas.

      Generally speaking, you need investors more than they need you - there are thousands of ideas out there... yours is just one (no matter how good it is).

      ...also - if your pitch doesn't include why you are the one to do it, and that you've got experience to deliver this... then you're probably not ready to talk to an investor.
      Hmmmm... somehow that's both humbling and comforting.
      {{ DiscussionBoard.errors[5213260].message }}
  • Profile picture of the author travlinguy
    What you need is a non-compete, disclosure agreement. Lawyers obviously have them. You also might be able to get some general boilerplate form online or at a stationary store. But if this is something really important you might want to just suck it up and go see a shark.
    {{ DiscussionBoard.errors[5213238].message }}
    • Profile picture of the author mwright
      Originally Posted by travlinguy View Post

      What you need is a non-compete, disclosure agreement. Lawyers obviously have them. You also might be able to get some general boilerplate form online or at a stationary store. But if this is something really important you might want to just suck it up and go see a shark.
      Whoa! I won't be needing any sharks... yet.
      {{ DiscussionBoard.errors[5213262].message }}
      • Profile picture of the author packerfan
        Ideas are a dime a dozen. Everyone has enough, no will cares about stealing yours. It's fine to do an NDA, maybe even a good idea, but it all comes down to marketing and execution in the end.
        Signature

        Nothing to see here

        {{ DiscussionBoard.errors[5213282].message }}
        • Profile picture of the author mwright
          Originally Posted by packerfan View Post

          Ideas are a dime a dozen. Everyone has enough, no will cares about stealing yours. It's fine to do an NDA, maybe even a good idea, but it all comes down to marketing and execution in the end.
          Hmph! Now that was just "non-nice". But, what else could I expect from someone who's team is 8-0?
          {{ DiscussionBoard.errors[5213302].message }}
          • Profile picture of the author packerfan
            Originally Posted by mwright View Post

            Hmph! Now that was just "non-nice". But, what else could I expect from someone who's team is 8-0?
            12-0, but who's counting...

            I can see where it sounded a little snooty, wasn't meant to be. What I really meant to say was investors are presented with way too many ideas to worry about stealing yours.
            Signature

            Nothing to see here

            {{ DiscussionBoard.errors[5213316].message }}
            • Profile picture of the author mwright
              Originally Posted by packerfan View Post

              12-0, but who's counting...

              I can see where it sounded a little snooty, wasn't meant to be. What I really meant to say was investors are presented with way too many ideas to worry about stealing yours.
              I stopped counting a while back.

              Anyhow, I'm really not afraid of losing an idea, but I do have some processes, and specific combinations of things that I'd like to keep safe... at least for a short time.
              {{ DiscussionBoard.errors[5213340].message }}
              • Profile picture of the author packerfan
                Originally Posted by mwright View Post

                I stopped counting a while back.

                Anyhow, I'm really not afraid of losing an idea, but I do have some processes, and specific combinations of things that I'd like to keep safe... at least for a short time.
                Obviously no idea what it is, but it is something you can patent? If you're talking serious money I'd probably go see an attorney rather than listen to advice from a wannabe like me!
                Signature

                Nothing to see here

                {{ DiscussionBoard.errors[5213347].message }}
                • Profile picture of the author mwright
                  Originally Posted by packerfan View Post

                  Obviously no idea what it is, but it is something you can patent? If you're talking serious money I'd probably go see an attorney rather than listen to advice from a wannabe like me!
                  I'm actually more concerned about the speed at which competitors in my niche can pick up on ideas and run with them.

                  If the investor is a diehard packerfan (ahem), and I like the panthers (*sigh*) a simple disagreement could send him running to one of my competitors, and in a few hours I'd be back to square one.

                  But, your point is well taken. And, I'll probably just end up doing business on a simple NDA, a handshake, and a beer. lol
                  {{ DiscussionBoard.errors[5213378].message }}
  • Profile picture of the author golf69
    Hire an attorney and have him work you up an NDA...
    {{ DiscussionBoard.errors[5213402].message }}
  • Profile picture of the author Chris-
    As someone else said, a NDA. But you'll still have to fight a legal battle if they do use your idea, the NDA won't stop them, it will just make it easier to win a legal battle if you have to. Another protection is to write out the idea, post it to yourself in the mail, and do NOT open that letter. Then if it ever goes to a legal battle, you have proof that on the date stamped on the letter, you knew that idea described inside.

    Chris
    Signature
    Unusual opportunity! CPA type offer (no selling), commissions $1k to $300k each time, in-person (US), phone or online. Click here for more details.
    {{ DiscussionBoard.errors[5213846].message }}
    • Profile picture of the author goindeep
      As all the others have said an NDA is best. But its really more of a superficial for show type thing. If they want to steal your idea they will.

      But also as others have stated most investors wont want to do that. Why risk a bad rep and all the fuss. Plus remember that you need his money and he needs you to do the ground work with a passionate attitude otherwise it wont work.

      I also got given the advice to mail myself my idea and I used it. One thing I have learned about all of my great ideas. They arnt so great, but let me explain.

      An idea is only as good as the results it produces and the effect it has on peoples lives. Most ideas never make it onto paper let alone to market and the ones that do make it to market dont turn over billions of dollars like the stories we are used to... its just the reality of things.

      Plus you have to remember to be humble. Like Jacque Fresco says "Its not your idea. You just discovered it".

      But in staying on the right frequency of this thread. Here is a much easier way to protect your idea whilst not alienating or making the investor feel too weird. This is what I would do.

      Dont use an NDA, its not the warmest way to greet an investor. Instead protect your idea by creating a google document and even adding extra oomph by emailing it to yourself and one other person you trust like a spouse or sibling. Simple as that. Sfter you have the meeting you do the same with another document noting the minutes of the meeting. All google docs get time stamped with the time and date down to the very second of their creation and so do emails, that way having time stamped docs along with another entity is a great idea. The reason people say to send it in the post or whatever is that they think its "more official". But in reality the post office is no more official than your own notes and googles time stamp. Its just a question of perspective.

      Goodluck!

      -Andrei
      {{ DiscussionBoard.errors[5213930].message }}
  • Profile picture of the author CDarklock
    Originally Posted by mwright View Post

    Is there some kind of non-compete or exclusivity agreement that will protect me in case the investor decides to use my idea?
    What protects the investor if someone else has the same idea?

    If you pull out an NDA, that's what your investor starts to wonder. Are you really proposing that he invest in something ANYONE could do if they only had the idea and some money?

    You can, of course, ask him to sign an NDA anyway. But that's sort of like going over to someone's house and saying "before I come in, I'd like you to sign this contract promising you won't steal from me while I'm here."

    What? You think I'm a thief? GTFO.
    Signature
    "The Golden Town is the Golden Town no longer. They have sold their pillars for brass and their temples for money, they have made coins out of their golden doors. It is become a dark town full of trouble, there is no ease in its streets, beauty has left it and the old songs are gone." - Lord Dunsany, The Messengers
    {{ DiscussionBoard.errors[5213996].message }}
    • Profile picture of the author zaco
      Originally Posted by CDarklock View Post

      What protects the investor if someone else has the same idea?

      If you pull out an NDA, that's what your investor starts to wonder. Are you really proposing that he invest in something ANYONE could do if they only had the idea and some money?

      You can, of course, ask him to sign an NDA anyway. But that's sort of like going over to someone's house and saying "before I come in, I'd like you to sign this contract promising you won't steal from me while I'm here."

      What? You think I'm a thief? GTFO.
      If he is an investor then he should expect an NDA since mostly everybody will use it, we do not live in a perfect world, if they use his idea and he has no proof then its theirs

      Same as the Facebook story, if Zuckerberg did sign an NDA then he wouldn't be where he is now lol ..
      {{ DiscussionBoard.errors[5214020].message }}
  • Profile picture of the author nm5419
    Look, investors are used to dealing with things like NDAs. They're part of everyday business for crying out loud. So if you don't have that and plenty of other legal documents prepared, you're going to look like an amateur and you're not going to be taken seriously.

    Be professional!
    {{ DiscussionBoard.errors[5214018].message }}
  • Profile picture of the author Silas Hart
    Sure, go for the NDA, but as someone who has funded ideas and different start ups, I offer this advice.

    Investing in someone elses business plan is really an equation of time, money, experience, and networking.

    If your investor has money but does not have time, experience, or is not in a network of people that do have experience, then I wouldn't worry. If your investor has the time, experience, and knows people who could do what you are trying to do, then I would start worrying about an NDA.

    When someone approached me for an investment to build a laowai sandwich shop in Shanghai, my first initial thought WAS "I bet I could do it myself" but realized that I couldn't- even if I really wanted to because I never owned a sandwich shop before, I didn't know anyone who actually has, and I didn't have the time to start one. Now I partially own one.
    {{ DiscussionBoard.errors[5214222].message }}
    • Profile picture of the author mwright
      I found this page that gives examples of things that are protected by non-disclosure agreements:

      Examples of Information Protected by NDAs

      My main concern is that I'm a small fish in a small pond, and I have a few HUGE competitors who, although they have yet to do what I'm proposing, would totally eclipse me if they did.

      I don't expect malicious intent, but I'm aware that things can slip out in casual conversation.

      For me, signing an NDA would be a gesture that the investor is simply willing to exercise caution in a situation where they may inadvertantly give away my strategies, methods, etc..

      BTW - Once I get my project funded, I can certainly bring in "competitors" as part of the marketing strategy; we all have SOMETHING that the other one needs.
      {{ DiscussionBoard.errors[5216771].message }}
      • Profile picture of the author digitalstamp
        Once you have your idea expressed in a digital document you can, at any moment, time-stamp it using a digital certificate. digital-stamp.com just does that so you can have a PDF document that anyone can verify. The time-stamp and the certificate come from a world wide trusted provider that anyone can check. Use digital-stamp.com today while it is free!
        {{ DiscussionBoard.errors[5392982].message }}

Trending Topics