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- Subject: [Discuss] Startup?
- From: blu at nedharvey.com (Edward Ned Harvey (blu))
- Date: Mon, 2 Mar 2015 11:56:08 +0000
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> From: Discuss [mailto:discuss-bounces+blu=nedharvey.com at blu.org] On > Behalf Of Tom Metro > > I've been involved with or on the distant periphery of the startup > community for several decades, and one of the fastest ways of spotting a > novice is the degree to which they are protective of their idea. Some > people even expect VCs to sign an NDA. Agreed. But that's why I said "be careful" what you expose. Because your exit strategy, if you want to gain Angel or VC investment, will be acquisition. And in order to get acquired, it's very likely you'll need your inventions patented. And you'll be unable to patent what you publicly disclosed. So pay attention to what was written and what was said, and under what protection it would fall. I've heard from dozens of people, that VC's and Angels don't do NDA's. I have found this to be incorrect - I simply ask them, and about 80% of the time, they agreed to do it. It depends on context - No you probably won't get them doing NDA's with you as a stranger, but warmer introductions stand a good chance. It comes down to them protecting themselves - If they meet and discuss innovative ideas with dozens of entrepreneurs per week, they see so many new ideas, they can't afford the risk of being under agreement with any of them, who might be in conflict with others. You can easily enough prepare material to present, which will communicate your core idea, without causing a patent problem or other conflict. > Get over the idea that people are out to steal it. The hard part is > *not* the idea. It's executing the task of bringing it to market. Being > willing to invest years of your time; being able to convince multiple > investors and initial hires that it is worth pursing. Almost no one you > will encounter can be bothered to do that. > > The danger is not that someone will steal it. The vastly more likely > scenario is that you won't find anyone who believes enough in its > validity to put money onto it. Agreed that rarely is someone out to steal your idea, and agreed that the hard part is successfully delivering to market. Disagreed that noone is interested in your original idea. > > The biggest surprise that hit me out of *everything* was the patent > > process. At some point, you're going to need to patent stuff... > > In my opinion a waste of time. Patents work out well for small startups > about as well as people winning the lottery. Sure there are success > stories, but for every one there are thousands (or hundreds of > thousands) or organizations that invest the time and legal fees in > patent filings that either end up being for products that fail, have no > licensing market, or never benefit from the legal protection. The legal protection is probably not the reason you patented something. The legal protection is probably necessary in order to get acquired. Any competitor or potential acquirer is going to look at your product, barriers to entry, cost to recreate, and all of that is going to be a factor in how much they are willing to pay for an acquisition. So actually the legal protection *is* the reason you patented something - when those guys evaluate your business, they'll know if your patent is valuable or not. It's not that you want to use your patents for suing anyone. It's that the patents add value to the business. > "softer target" than a VC. And now we have incubator and crowdfunding as > ways to get seed cash and gain visibility to 2nd round investors. No crowdfunding, unless you're talking about something like kickstarter or indiegogo, where you sell some kind of swag or early release versions of the product. The point is - No securities via crowdfunding. I think this is described on the SEC page that I linked to before - in 2012 there were some new provisions created for crowdfunding selling securities, but I have talked to the lawyer, and it's effectively useless. Maybe someday, but not now. Ask the lawyer if you care.