Join Rudolph Rosenberg for an in-depth discussion in this video How risky is it to share your idea?, part of Entrepreneurship: Raising Startup Capital.
- When it comes to sharing our ideas with other people, many of us have the tendency to overrate the true risk of doing so. When I have a good idea, I have the reflex of wanting to keep it to myself, as if I was taking the risk of losing it to a potential competitor just by talking about it. In reality, there are very little chances of that happening and for very logical reasons. Of course I'm not saying that you should tell everyone about your idea just because there's very little risk of it being stolen, but nonetheless, there is no reason to keep it only to yourself to the point of hindering your development efforts.
First, it takes a big, even a massive, effort, to start a new business, and out of all the people who happen to have a good business idea or hear of one, for that matter, only a tiny portion will actually think about doing something about it. Maybe only one percent. Out of that one percent, maybe just another one percent will actually do something about it. If we quickly do the math here, that means that only one person in ten thousand you're going to be telling it to, could actually do something about it which means that if you talk about your plans within your circle of friends or to your family, the probability of each resulting in someone stealing your idea is very close to zero.
My conclusion here is that there's no true reason to hold back and not share it with your friends and family about what you're trying to achieve. Then you could tell me that you will talk about your project to potential investors who have the means to steal your idea and actually are looking for ideas. Here again, I don't think this is a true representation of how things work. Investors are actually not looking for ideas. Investors want to invest in businesses that have the idea and have demonstrated their ability to turn the investor's money into ten times what it's worth.
If you see a great entrepreneur coming with a great idea, why would you go through the trouble of finding another entrepreneur to do the same thing? Isn't that a pure waste of time? If you need investments, do share your ideas and business plan with investors, and by the way, we don't hear so much about investors putting together teams or businesses around an idea. The simple reason is that this is actually the job of the entrepreneur himself, not the investor. When someone is an investor, that means he wants to see the whole package, not just the idea.
Third, even if you were to tell your idea to that one person in ten thousand or to that one of a kind investor who wants to steal your idea, then what's the worst thing that could happen? You'll just have a competitor in front of you. Once your business is thriving, you'll attract the eyes of many individuals and companies that will want to get a slice of your market. Competitors will pop up all around you and only the fittest will survive.
What difference does it make that you get that first competitor a bit earlier than anticipated? We all tend to not talk about our business idea because we want to be the first to hit the market. But being the first to market is barely an advantage. You might get a few more sales at the beginning because you're the first to offer that product or service but very quickly as competitors join you in offering that product or service, you will most likely have no benefit left from having been the first.
Even worse, being the first is sometimes a big risk as you invest a lot of money on an idea that has not been tested yet for which the market could not be ready. Some of us just have the vision a bit too early and take a bigger risk of failing and in that case, being the second one or actually the third one in the market is actually sometimes an advantage because you get to see what your competitors are doing right or wrong. I'm not saying that you should walk around with a sign on your back explaining your business model.
I don't think either that you should hold back from sharing it with investors or telling your friends and family about it.
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- Identify the best strategy most entrepreneurs can use for finding capital and investors for their company.
- Name two elements an entrepreneur must consider when determining the amount of capital their business will need.
- Cite two details that should be included in a business plan to help investors become familiar with what they will be funding and the term of their investment.
- Explain what the JOBS Act did to facilitate crowdfunding for entrepreneurs.
- Summarize the typical characteristics of an angel investor.