Your business idea is undoubtedly novel, exciting, and challenging. The problem is, so are many of the solutions you have in mind. While your passion for your idea is what drives you to take action, it can be equally challenging to articulate your business idea effectively to others who are not as familiar with it.
When it comes to pitching to prospective investors, you’ll need to see that your potential suitors understand its unique value proposition, how they will benefit from investing in it, and how much they stand to lose if they don’t get on board now.
Pitch contests and solicitations abound in the startup world. But how do you protect your ideas from being stolen? It can be difficult to know where to draw the line between building a winning pitch and crossing the invisible line into intellectual property infringement.
Though some ideas are so revolutionary that it’s best not to reveal them before they’re ready for public consumption. However, in order to generate more potential investors and partners, it’s important to create a security framework around your company’s intellectual property (IP).
This is sometimes possible but sometimes not really possible or difficult to do it properly before pitching to prospective investors.
Pitching an idea is never easy but with a little preparation, it can be made much easier. Here are 6 tips on how you can safeguard your IP when pitching to prospective investors.
1. Decide if your idea is patentable
A patent protects an invention from imitation, but it does not prevent others from using the invention as a whole or in part. Patents can also be used to stop others from making or selling products using a certain design.
It usually takes between 18 months to 24 months to patent the idea (except for medical patents that typically take much more time) from the moment you apply for the patent and it costs around 10k in the US or Europe (separately).
Remember that you have to apply separately for patents in the US and other countries although the process is quite similar (check this link for an overview of the process). Once you apply and it is ongoing, you have some levels of protection already that is typically sufficient for pitching to prospective investors.
If another company patented a specific type of widget and the patent was infringed by someone else, the infringing product could be taken away from the offender.
For many products, however, patents are not needed to protect the idea itself because the product itself is its own idea. Thus, the focus of a patent would be on the design rather than the idea itself.
You would want to seek patent protection for your product if it is an original, non-obvious concept with substantial utilitarian value. For many investors obtaining a patent is a plus for investment and should be mentioned when pitching to prospective investors.
2. Record yourself before pitching to prospective investors
A well-recorded pitch can be a valuable asset in the event of a dispute with an investor provided that it is legal and not a privacy violation. It is also useful when you are presenting your idea to potential investors in case you forget any details.
Expecting a VC to sign an NDA would make you appear unprofessional since they won’t before and after pitching to prospective investors. You really don’t need to be concerned about venture capitalists taking your concept and running off with it to create a rival firm because their goal is to earn a profit on their investments, not to operate businesses.
However, to be on the safe side, it is advisable to record yourself explaining your idea so that you can use it as a reference if you ever get into a legal dispute with one of your investors.
Record your pitch, before pitching to prospective investors, on either a computer or a good-quality smartphone. Ideally, you should use a microphone that is of higher quality than what you would use for personal use so that it has a clearer sound.
If you have access to a professional studio, you can also record your pitch. This can be useful if you want to compare the recording to the pitch you gave in a meeting.
3. Don’t pitch to the wrong crowd
The best way to find investors is to put yourself out there. There are many ways to do this, but the most direct way is to attend business-oriented networking events, such as those organized by professional associations.
These events offer the opportunity to meet people in your industry who might be interested in investing in your company. You can also post your profile on relevant business networking websites.
These websites allow users to create profiles that include information on their company and investment interests. You can also create a targeted LinkedIn business page, which allows you to tailor your profile to specific groups of people in your industry.
4. Be Careful who you give access to
While it’s crucial that you protect your ideas with a patent, it can also be important to protect your intellectual property (IP) in a more general way.
For instance, you could have a copyright on your logo and other visual elements. A copyright protects the originality of these elements and prevents other people from using them without your consent.
As with patents, copyrights do not prevent others from using your designs or products. However, you can sue others for willful or intentional copyright infringement, which is much easier to prove.
Nevertheless, it might be unsettling to send your pitch deck to many people in your networks without knowing whether or to whom a VC is sending it.
When you use DocSend to send your deck, you can track the recipients of the link and instantly revoke access for any viewer. Even a watermark can be used to fend off cunning screenshotters.
5. Be aware of the deal terms
If you go the investment route, it is important to understand the terms of the deal you sign with the investor after successfully pitching to prospective investors. The terms usually include a non-compete clause, which means that you cannot start a competing business within a certain distance from the original venture.
Often, investors will include a clause that prohibits you from directly competing with the original venture for a period of time after the deal closes.
This clause is normally aimed at preventing you from competing with the investor’s investments in other companies, but it still has some value.
A typical investment deal will also include a clause that grants the investor the right to buy out your company at a certain price. This is normally done to protect investors from a company failing and giving them no return on their investment.
6. Communicate constantly with investors and partners
Investors and partners typically want to see progress and results from your ideas. Therefore, it is important to meet with them in person, send them updates, and stay in touch with them via e-mail or meeting.
Since most investors and partners are busy people, it is crucial that you let them know how those with whom you work know what you are doing and how you are progressing. Investors and partners are usually interested in two types of updates.
First, you should let them know what your team members are working on. Second, you should let them know what you are doing to bring in new business or expand your current customer base.
It is important to remember that investors and partners expect results. If you do not deliver those results, it is important that you let them know immediately. If you are able to avoid this problem by cultivating good relationships with your investors and partners, then your business will thrive.
Final Words: See it through to the end
In conclusion, protecting your intellectual property isn’t as difficult as it seems. The key is to make sure that you keep your ideas as safe as possible, and that you only give access to those who can benefit from them.
This includes partners, investors, and employees. You should also protect your ideas with a patent, copyright, and non-compete clause in case your ideas ever get stolen. While protecting your ideas is perhaps the most important thing you can do as an entrepreneur, it is also the most tedious.
It’s important to remember that there is no silver bullet when it comes to protecting your ideas. Instead, you will have to approach the problem from different angles. However, with a little effort, you can achieve great results.
