How to protect your business idea while you build your startup. I’ve been kind of hard-line in this space on the value of ideas. I’ve said they are a dime a dozen, aren’t owned, can’t be sold. My personal favorite is this one:
Companies don’t buy ideas. Investors don’t invest in ideas.
Investors don’t invest in ideas. So don’t share it with investors at all when it’s just an idea. It has no value at that point, and you don’t even own it. Real investors don’t steal your idea but resent that you’ve wasted your time with just an idea. Investors never invest in ideas alone. Rarely, they invest in a specific, known entrepreneur, as early as idea stage. But that’s a very special case. You know who you are. And if you aren’t sure, then you aren’t that person.
There are reasons to share an idea
First, share it carefully only with people you trust and want on your team. The next step after idea stage is recruiting a team. Trust is essential. Having skills and experience you need is also essential. Bring them into it so they become co-founders and help you develop from idea to business, motivated by sharing the upside. And real people will sign non-disclosure agreements because they don’t have the same reason that investors have not to.
Maybe, later on, after you’ve done the work, recruited a team, met milestones, and gained traction, then you share it with investors because they don’t steal ideas. Real investors want the team in place so they can invest in execution, not execute themselves. Real investors don’t steal ideas and don’t sign non-disclosure documents. Make sure you do your homework, check backgrounds and history, for investors who are real and not conflicted with an existing investment.
Here’s how to share carefully, and protect as much as possible
- Use a non-disclosure agreement wisely. It’s not inappropriate with potential co-founders and team members, or friends and family investors. Don’t depend on it, don’t make it a huge issue, but use it in every case that isn’t a big problem.
- Patents are for inventions and formulas, not ideas. You can’t patent an idea. If you have something patentable, by all means, apply for the patent. Don’t do a ton of work on it, or spend a lot of money, without first checking with patent experts (but I’m not an attorney; check with an attorney of course).
- Copyright is for creative works. Copyright your code if you have code. Copyright is relatively cheap. It doesn’t protect you against copying because only the code is protected, the actual words; not the idea (but I’m not an attorney; check with an attorney of course).
- Trademarks are for commerce. Trademark your logo, your tag lines, your images, your main selling points as quotes. Trademark is relatively cheap too (but I’m not an attorney; check with an attorney of course).
Register domain name and entity. Neither protects you a lot, but both are a good idea.
- Registering the entity protects your business name to some extent, as long as you were the first in the world. It can cost as little as $50. Registering the domain name, if you have a good one, protects you for that domain but not against copycats with similar names.
- Write your idea down and mail yourself 10 copies via registered mail. This can protect you later, with sloppy problems that come up, showing legal proof of what your idea was on what date.
(Image: Flickr cc: Snail_race)