This post is a follow-up to the Protecting Your Business Idea post.
Many people who have a great new business idea often times don’t have the money to get their idea up and running. Investors can sometimes be a good source of funding, however you have to provide them with convincing reasons why your idea is going to succeed and is worthy of their investment.
When speaking with these investors you will likely have to tell them about your product and your sales ideas. This scares many people, because they think the investor may steal their idea. However, this should generally not be a concern.
One common mistakes new entrepreneurs make is asking an investor to sign a non-disclosure agreement or confidentiality agreement before a meeting. This mistake while seemingly small will likely result in the investor canceling any meetings and not doing business with you at all!
Investors hear so many pitches from people regularly that if they signed an agreement with one company and then gave a similar company money they could set themselves up for legal trouble, even though nothing illegal occurred and no secrets were given out. It just so happens that they hear from so many companies there are often overlapping ideas.
If an investor signed a non-disclosure agreement with every company they heard from they would have to hire someone (likely an attorney) to review all of the documents, file and keep track of all of the documents. This is money that is better spent toward an investment in a business idea or product.
Once you have spoken to the investor and reached a point where they are ready to invest they will likely sign a non-disclosure agreement. Before that time there is no reason to give away the secrets of your product, you must provide just enough detail to build interest.
Keep in mind, that investors are not there to start or run a company. They are there to invest in a company that they see has potential thus making them less likely to steal your idea.
Submitted by Alica Levy of The Levy Law Firm