How to Stop an Investor from Stealing Your Business Idea

You’re an entrepreneur with a new idea for a business. You approach an investor for funding and pitch the deal to her. She rejects it. Then, six months later, you learn that she has stolen your idea and turned it into her own venture.

Though I’ve never actually seen this happen, it’s something that concerns a fair number of my mentees. That’s understandable given the amount of work that goes into establishing a new company. If you’re going to share your vision with someone else, you want to make sure that they don’t capitalize on it before you do.

There is no sure-fire method to protect your ideas. The closest way is to trademark or patent them. However, that can cost thousands of dollars in legal bills and can take a year before approval (if approved at all). For those reasons, it’s often not a viable option.

Moreover, many ideas aren’t patentable. For instance, if you want to build a gym in a certain area of town, you can’t stop someone else from doing so through a patent or a trademark. These are generally reserved for inventions, innovations and technologies.

The next best way to protect your idea is to have your potential investor sign a non-disclosure agreement (NDA) before your meeting. This is a contract that precludes a person from sharing what you discuss. In my view, it’s probably the most realistic path to accomplish your goal. However, NDAs are not bulletproof and don’t actually stop someone from launching the business themselves. They simply disallow them from sharing what you present.

It’s important for an entrepreneur to balance theory with reality. While someone may find your idea intriguing, will they have the resources, experience and wherewithal to execute on it? In most cases, they won’t. If they want to make money on it, the path of least resistance would probably be to invest with you.

For example, a couple of weeks ago I was offered the opportunity to invest in an encryption technology that was developed by an academic at Oxford University. There’s a good chance that the firm will revolutionize data delivery and its founders will likely earn millions from it. But as potentially lucrative as the idea may be, I have no interest in trying to copy it. Ethical reasons aside, the science and math involved is beyond my comprehension and I have no relevant contacts or executional capacity. It would be too hard to steal.

That’s not to say that it can’t, won’t or doesn’t happen. Indeed, it does, which is why patents exist. If you believe your idea is truly ground-breaking and could yield substantial profit, then you should consider patenting it. Just be aware that stealing and then creating an unprecedented venture is not as easy as it sounds.

If you have a good idea, but don’t want to incur the time and expense of a patent, then you should do two things. First, don’t discuss it with anyone unless they sign an NDA. Second, work your butt off to make it a reality. As you begin to earn money from it, you can then apply for a patent and trademark.

If you have the resources to file a patent, then you should. But not having one won’t automatically mean your idea is destined for theft.

About The Author

Alexis Assadi

Alexis Assadi is an investor, entrepreneur and writer, who advocates for making high-performing income investments and the lifelong pursuit of financial intelligence. He is a shareholder and director in three companies that provide funding to small businesses, entrepreneurs and real estate projects. His most recent venture is a firm called Pacific Income LP.

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1 Comment

  • Ramo

    Reply Reply July 24, 2017

    Really interesting and useful article Alexis. Thank you for sharing that with us!

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