Hi all, just wanted to update that the TiE Canaan Entrepreneurial Challenge is on. I had posted details on the same earlier and will not repeat the same. It is a challenge for existing entrepreneurs to showcase their aspirations, and get the best in access to mentoring and capital.
Podtech has a news item and podcast related to the same.
Entries can be submitted at http://www.canaan.com/canaantie.html
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Pat,
As an entrepeneur, a mentor and one that is moving towards the league of VCs, I remember what my mentor taught me.
Your pitch is perfect when you have said enough to catch interest and not enough to dump you and leave you on an empty shell.
I agree with Alok that ideas are worth nothing. Well, contacts are, but I wouldn’t reveal such sensitive data, nor ask anyone to share such data till there is some evidence of strong interest from the investors.
As someone said, a dollar in the pocket today is much better than 10 dollars of ROI that you can predict five years down the lane. Given the cautious nature of investors, I doubt they’d invest without hearing our your plan… how you reveal it, and play the balance without saying too much, but yet saying enough, is… well, a talent by itself. That’s why you need mentors.
There sure is lot for discussion here, however what I want t higlight specially is that the issue of confidentiality and information sharing as not as casual as we first time entrepreneurs assume it to be. I want to send a message to all those in th rae for investor’s money to be very careful while discussing their plans with so called angels as angel is just a term to address them and they should not confuse them to be true angels. And this applies for information sharing, negotiations for equity sharing in the event of a funding or even basic mentoring.
And no there is nothing wrong in it, after all we all are here to make money and help others do the same. But there are some basic guidelines and unwritten and unsaid rules which specially first time entrepreneurs and erstwhile tech guys must understand.
Cheers.
Hey Pat
Few thoughts on your post.
1. One needs to understand what an NDA protects and what it doesn’t. Even if you have an NDA, it doesnt erase the numbers and models from one’s mind. Most NDAs prohibit sharing of all information explicitly marked as confidential and proprietary.
2. Investors are in the business of looking at hundreds of plans. Ideas are seldom unique – execution is. That is where most plans lack, and that is where you should focus on even in your own plan. Smart entrepreneurs realise that ideas are a commodity – today we have seen 10 companies in online DVD rental business – all the entrepreneurs know we are looking at multiple companies – we havent shared anything thats non-public with any competing firm. The best team and execution will win.
3. There are investors and then there are investors – credibility is the only long term asset in this business. Firms and individuals that have established a repute in this business have done so because they have upheld such principles. And with communities getting so much more powerful now, the same will be more and more true in future.
4. The practice of not doing NDAs is not unique to India. I have seen fair bit of silicon valley investing as well, and it is more or less a standard practice there as well.
5. It is ok to share information in a staged fashion. If there is something you feel is really proprietary, you can choose to share it only with 1-2 investors who cross every other hurdle in the way and reach the final stage. But can you reach that stage without sharing the idea? I doubt.
Now, for the reason why firms dont want to sign NDAs – Investors see a lot of plans that are around the same idea. They do not invest in 95% of the plans they see. Different partners may be seeing different companies around the same idea. It is just one huge administrative challenge to maintain this volume of NDAs and even more to keep fighting legal suites even if 1% of them felt antagonised and thought that the angel investor they were in touch with funded their nephews with their idea.
I had heard a lot about the issue of protection of business ideas shared by entrepreneurs with VCs or angels and never considered it a threat. All these nobel men very confidently tell you that they are out there to help you and not to steal your ideas hence they would not sign NDAs. Very true, I believed them and by wishful thinking I still do.
However, some recent experience has forced me to rethink. Some angels that I was in touch with regarding funding in my plan have invested in a rival company to me which anyday lacks the experience of founder members and clients that we have but the founder there is known personally to one of the angels in the group.
Now with all our confidential business information with them and no NDA or protection mechanism, even if the guys say that they are not going to misuse it, they cant erase the numbers and client names from their memory. And to be practical, if they are mentoring the company, they wont stop them from contacting those clients and follow the model that we had shared with them.
Our fear here is that even if we were better placed than the other company, with the contacts and money of the investors, all our advantage we had taken due to our early move, hard work will be wiped off. So, is this not a pure case of nepotism that plagues the overall Indian culture from politics to cricket and now to entrepreneurship. Even if it is not, it sure is a cause of great concern for wannabe entrepreneurs.
Hence, I would like to warn wannabe entrepreneurs to be extra cautious while sharing their ideas, business model, plan and numbers with prospective investors, more so in such business plan competitions.
All the best!