Preserving intellectual property while seeking investors?

[gatorgrizz27]

Hi there,

I have an idea for a service related franchise that does not yet exist, but has plenty of evidence to suggest that it would do extremely well if it were to open. I was talking with a friend the other day and he brought up the fact that his brother who is a lawyer, was looking to invest in the same industry as I have the idea for. I did not mention my idea to him, but from what he said his brother has an idea along similar lines, yet not to anywhere near the extent of what I have in mind. He told me he wanted to get his brother in touch with me to discuss investing in this business, and see if we could work something out.

My issue is that I am clueless about how to present an idea and business plan to an investor while still maintaining ownership of it, and not just having them operate it on their own. I do not know that I could patent a service business the same way that you could a physical invention, or if I can have my business attorney draft up a contract before discussing it with him, or what route I should take.

Any of your experiences in this area would be greatly appreciated.

[Steve7]

You need a confidentiality and non-disclosure agreement that prohibits their disclosure or use of the idea without your consent.

[tweek]

I focus on technology startups and software so this may or may not help.

quick update: Asking a professional investor to sign an NDA is a great way to get laughed out of the room.

If you're dealing with a professional investor then you don't have much to worry about. They are not interested in stealing your ideas. They have a line of bright eyed wannabes wrapping around the block waiting for a chance to sell them on their brilliant idea. They business is investing in other people's businesses.

Go to your bank and talk to a loan officer about SBA loans. They can't get you started on the financial side of things without you having to reveal too much.

All that said:
1 -figure out the absolute minimum necessary to get it started and prove that your idea is viable.
2 - credit cards, second mortgage, sell some stuff, hit up the bank of friends and family
3 - unless you have 2 years of cash sitting in the bank so you can quit your day job - welcome to the world of 2 fulltime jobs!

Now for the fun reality: You know that Tavor you really want. Plan on wanting it for a long time. Every spare penny you have needs to go in to your business. Sniper week in Coleman texas? Nope - that money goes to a google adsense campaign.
When your business finally start making money don't plan on quitting the day job. Your going to use that money to hire your first employee so you can make even more money. Eventually, probably by the 5th employee, you'll start training somebody to take over what you do so you can eventually fire yourself and move to a more hands off role with the business so you can focus on keeping it growing (you're still working your day job). Finally, after about 3 years if the business is doing really well and you've nailed it you might finally be able to quit the Fing day job and enjoy the fruits of your labor.

I honestly hope you follow through and fight your way through the path. The rewards are worth it. Even if you get your ass kicked you'll learn more in 6 months than you will in any MBA course offered.

[gatorgrizz27]

I am 24 and currently self employed, I started a motorcycle fabrication shop from the ground up after I graduated college, and then moved out to Texas and started it over this year. It is already doing better than it was in Florida and is my full time focus. The problem with my current business that while it is what I love to do, it will take awhile to build up to its full potential, and is limited to a customer base within the local area until I am able to start manufacturing parts for online sales.

The new idea I have for a service franchise would be a turn-key operation and dominate that market. It wouldn't need a ton of time to start producing returns quickly, it just needs cash. Once the business is developed and proven, it would be possible to hire someone to travel around and set up the franchises I sell.

I realize that many businesses don't work out, but I have worked for many businesses and seen the ins and outs of them, which is part of what has allowed me to be as successful as I am already. The beauty of franchises is that as soon as people see that you can provide a quality service or product at a competitive or even lower price, they spread like wildfire. Look at McDonalds, ACE Hardware, Wal-Mart, Home Depot, Gold's Gym, etc...

[JeffC]

The problem I see with your original post is that this attorney is about to become your potential competition. There is no way to protect yourself against parallel development other than time to market.

I would suggest that if you are truly committed to this project you skip lunch with this particular lawyer unless you have the meeting in the office of your own attorney.

-jeff

[WinstonSmith]

PM me the entire details of your plan and I'll let you know how to proceed.

Just kidding! Couldn't resist! :lol:

[Knowledge]

quick update: Asking a professional investor to sign an NDA is a great way to get laughed out of the room.



This doesn't sound like a venture capitalist investor it sounds like a potential competitor. I'd get a NDA signed before I revealed anything. With that said, it often isn't the idea that makes a business successful but passion, smart hard non-stop work, and a non-quit pit bull attitude.

[JustMe]

tweeks comments are consistant with what ive seen and been through. but he did say PROFESSIONAL investor.

[Solidus]

Always get an NDA.

If appropriate, always get a non-compete.

If they 'laugh you out of the room' for asking them to sign one, smile politely, shake their hands, and walk out. You don't want to do business with them anyway.

[Base Bleed]

I focus on technology startups and software so this may or may not help.

quick update: Asking a professional investor to sign an NDA is a great way to get laughed out of the room.

If you're dealing with a professional investor then you don't have much to worry about. They are not interested in stealing your ideas. They have a line of bright eyed wannabes wrapping around the block waiting for a chance to sell them on their brilliant idea. They business is investing in other people's businesses.

Go to your bank and talk to a loan officer about SBA loans. They can't get you started on the financial side of things without you having to reveal too much.

All that said:
1 -figure out the absolute minimum necessary to get it started and prove that your idea is viable.
2 - credit cards, second mortgage, sell some stuff, hit up the bank of friends and family
3 - unless you have 2 years of cash sitting in the bank so you can quit your day job - welcome to the world of 2 fulltime jobs!

Now for the fun reality: You know that Tavor you really want. Plan on wanting it for a long time. Every spare penny you have needs to go in to your business. Sniper week in Coleman texas? Nope - that money goes to a google adsense campaign.
When your business finally start making money don't plan on quitting the day job. Your going to use that money to hire your first employee so you can make even more money. Eventually, probably by the 5th employee, you'll start training somebody to take over what you do so you can eventually fire yourself and move to a more hands off role with the business so you can focus on keeping it growing (you're still working your day job). Finally, after about 3 years if the business is doing really well and you've nailed it you might finally be able to quit the Fing day job and enjoy the fruits of your labor.

I honestly hope you follow through and fight your way through the path. The rewards are worth it. Even if you get your ass kicked you'll learn more in 6 months than you will in any MBA course offered.


This is Entrepreneurship in a nutshell. It pissed me off to walk in to the Acura dealer knowing I could buy a new NSX but also knowing I wouldn't do it in reality because the money needed to go back in to the business. Tweek is dead on in every respect regarding the reality of a new business.



God & Tribe

[gatorgrizz27]

Thanks,

Not pursuing the investment deal with him is unfortunately what seems like the wisest option right now. I agree about professional investors not having any interest in taking ideas, however this is a different case. Apparently we have a somewhat similar vision, though mine takes it quite a bit further, and he has the capital to invest while I have the ability to bring it to life. However I am not interested in any sort of partnership deal so perhaps I will pursue the professional investor route eventually.

[darwin25]

I focus on technology startups and software so this may or may not help.

quick update: Asking a professional investor to sign an NDA is a great way to get laughed out of the room.

If you're dealing with a professional investor then you don't have much to worry about. They are not interested in stealing your ideas. They have a line of bright eyed wannabes wrapping around the block waiting for a chance to sell them on their brilliant idea. They business is investing in other people's businesses.

Go to your bank and talk to a loan officer about SBA loans. They can't get you started on the financial side of things without you having to reveal too much.

All that said:
1 -figure out the absolute minimum necessary to get it started and prove that your idea is viable.
2 - credit cards, second mortgage, sell some stuff, hit up the bank of friends and family
3 - unless you have 2 years of cash sitting in the bank so you can quit your day job - welcome to the world of 2 fulltime jobs!

Now for the fun reality: You know that Tavor you really want. Plan on wanting it for a long time. Every spare penny you have needs to go in to your business. Sniper week in Coleman texas? Nope - that money goes to a google adsense campaign.
When your business finally start making money don't plan on quitting the day job. Your going to use that money to hire your first employee so you can make even more money. Eventually, probably by the 5th employee, you'll start training somebody to take over what you do so you can eventually fire yourself and move to a more hands off role with the business so you can focus on keeping it growing (you're still working your day job). Finally, after about 3 years if the business is doing really well and you've nailed it you might finally be able to quit the Fing day job and enjoy the fruits of your labor.

I honestly hope you follow through and fight your way through the path. The rewards are worth it. Even if you get your ass kicked you'll learn more in 6 months than you will in any MBA course offered.

tweek has it right. I just launched my own technology startup and I just raised $1M from angel investors and VCs. Ideas are cheap. I have never made anyone sign an NDA. Ideas grow and improve through discourse.

Anyway, when I quit my job to form my own technology startup, I took consultancy gigs to bring money to the table while I'm making my minimum viable product. At one time, I took to working nights doing virtual assistant work for several US based real estate agents (I'm in the Philippines). It took me several months, pitches and co-founders before I started hitting it off with people. I found a co-founder who took on the CEO role while I took the CTO role. We just launched our startup and we are now on open beta. I'm still doing consultancy gigs with banks. My investors don't see any problem with me continuing my consultancy work because that is how I get most of my contacts.