4 Steps to Protect your Idea from an Investor

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4 Steps to Protect your Idea from an Investor Linkedin.com

This is an age-old question. Sometimes we find ourselves in the rigid position of having to decide whether to share the full content of our business idea with a seemingly

willing investor, or just hold back some aspects of your business model just incase he runs aways with your idea.

Finding an investor willing to listen to your business ideas is hard enough but having one willing to go a step further and request for your business plan. However, it has happened on many occasions that upon receiving a business plan, and realising the idea has the potential to be a hit, investors have taken the opportunity of having the financial clout to steal these ideas or short-change the owner of the intellectual property.

This has made many entrepreneurs wary of them and as such have become very cautious with who they share their ideas with. It’s the way of the world, nothing can change that. Having said that, something has to give. Do you want to remain (and probably die) with your idea? or are you willing to take the chance that some rich investor or Venture Capitalist take your idea and you are left with nothing? Tough choice to make if you ask me. But it shouldn’t be that tough.

I came across the following saying: “Don’t get emotionally attached to your ideas. Be ruthless about killing off the medium performing ideas and just keep the absolute best.” – Ethan Austin 

Its true isn’t it?  For me I think every entrepreneur caught in the middle of this particular dilemma should surely take a chance. If you don’t you will never know. Investors can be sharks who strike when they smell blood, and in addition, they tend not to wait a long time for one particular entrepreneur to decide wether or not to share your business plans with them.

While advising to take the chance and share your plans with them, you must take a few points into consideration. I have come up with 4 proven steps to take BEFORE taking the leap with an investor. Follow these steps and making that decision whether or not to share your ideas with an investor becomes that bit easier.

  1. Ensure you carry out a DETAILED research about the investor. There’s nothing wrong with you asking an investor to send a bit of information about themselves. However you also need to find out about them yourselves. Is he trustworthy? Has he invested in other businesses before? Have you spoken to these other business to find out what was invested and how he invested? What is the general perception of this investor from the public or people who work for and with him? Are there any rumours about him at all? Good or bad? Is there any reason to question his integrity? Carry out this research till you are satisfied.
  2. Put yourself in a solid legal position by asking him to sign a NON DISCLOSURE AGREEMENT (NDA). Basically what the form does is to protect you should he run away with your business idea. It is best to speak to a lawyer and seek some advise. It won’t cost you money for a 5 min conversation with a lawyer friend. It will only cost you time.
  3. Be open with the investor. Tell him you just want to be safe with your idea. Tell him also that you want to send him an NDA if he doesn’t mind. Make sure you keep majority of your conversation to email. That way, you will have some evidence of transactions and correspondence with the investor.
  4. Finally pray and then follow your instincts. We are all very protective of our ideas, but the question is are you willing to take a chance? In the end, it will all come down to your instincts and a bit of business intelligence.
Read 1138 times Last modified on Monday, 28 September 2015 08:22
Kole Obasa

He is a Serial Entrepreneur, author, innovator, blogger & believer in the power of Ideas. A motivator with a passion for global entrepreneurship, he is the founder of a few kick ass Startups - www.innovateanidea.com -www.worldwhatsup.com - www.utribe.co.uk . You can find more of his articles at: www.thiskoleobasa.com

4 comments

  • Comment Link Kole Obasa Sep 28 2015 posted by Kole Obasa

    Thank you Solomon Iyore. In the end, only you will know whether to go ahead with it.

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  • Comment Link Kole Obasa Sep 28 2015 posted by Kole Obasa

    Aniekan Okono, I certainly understand your position. Investors are notoriously difficult to convince to sign an NDA. However, a lack of solid 'legal position' exposes you significantly. I have then article you attached, and although it was interesting to read, the core advice laid out is flawed. They are talking about 'FORCING INVESTORS TO SIGN' while I'm talking about offering them that chance.... In addition, I have also advised to keep most correspondence to email. The whole idea is to have some level of protection from Shark-like investors looking to pounce on the vulnerable innovator. Going back again to the article you shared, the solutions the writer's proffered was to physically be present (with your laptop) with an investor AND/OR to limit access to the information shared. Not very possible for obvious reasons. Its a dicey one, but I ALWAYS ALWAYS advise my clients all over the world to offer an NDA. Whether or not it is refused is a separate matter. This advise is based on years of experience. Most British and American based investors will be glad to entertain it, most African investors do not have the time to entertain it, either ways, offer it.

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  • Comment Link Aniekan Okono Sep 28 2015 posted by Aniekan Okono

    Good advice. It is easier said than done. I've not met an investor that is willing to sign an NDA. Maybe it is possible in the UK and in Nigeria. I've met other European investors and no one has such time. They get more than 1000 pitches and people even pitch to them even when they don't want to be pitched to.

    See here for more info https://www.fundable.com/learn/resources/guides/investor-guide/why-investors-dont-sign-ndas

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  • Comment Link Solomon Iyore Sep 28 2015 posted by Solomon Iyore

    Great piece of thought, I must confess, I like the prayer part and listening to your instinct, that covers every other aspect as discussed in this great piece of thought.

    Thanks Kole.

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