Will business angels, venture funds or investment consultants steal my idea?

Among startups whose project is still at the pre-startup stages of its development, this is probably the most frequent question, and it is quite logical: a startup is required not only to describe the concept of his project in a business plan, but also to give a detailed layout - how and where exactly he plans to attract the first customers (that is, describe the project launch strategy), who exactly are these first clients, whether he communicated with potential clients, if so, with which ones, how he plans to conduct a marketing campaign, what are the "bottlenecks" in the project and how the founders of the startup intend to "embroider" them, etc., that is, in fact, The founders of a startup should provide the investor with a step-by-step guide to the development of their project. Naturally, this raises concerns – and will a business angel, venture fund or investment consultant, with such a detailed guide to action and financial resources, simply "throw" the founders of a startup and implement the project himself?

Projects that are at startup and later stages of development, which are already operating on the market and, accordingly, no longer hide their idea and business model underlying the project, also have concerns - they should describe in detail in their business plan what know-how is able to provide them with separation from competitors, describe in detail the marketing moves required for successful development, reveal their technical solutions, which are the competitive advantage of a startup, etc. Each company considers all this to be its trade secret, and here it is necessary to write everything, explain it and present it on a platter…

And finally, all startups, who, as a rule, do not have any administrative resources, nor large financial resources, nor, in the end, deep legal knowledge, are interested in one more question: and when they develop their startup, will they simply be thrown out of business? The business is registered as a legal entity, raiding technologies in Russia (and in the same States, too – they just have a more sophisticated legal form there) are worked out to perfection, and a grated investor is quite capable, if there is a desire, to easily circumvent a naive startup, passionate about his brainchild, around his finger.

At the same time, let's look at the situation through the eyes of an investor: are you offering him to invest in your belief that the idea and business model you have come up with will bring him profit? After all, he invests his funds (and it often does not matter whether they are small or large) in your project, he either does not know you at all, or knows you superficially, and no previous achievements are able to convince him that you are a good guy and will bring him a lot of money. There is only one way to convince him: to show that you have thought everything through in your project to the smallest detail, that you imagine the realities of the market in which you are going to work, clearly imagine how and where you will find your first customers, who, most likely, it will be, what arguments you will convince them that that they should be your clients, how you will promote the project in the future, have you provided for the scalability of the project, what is your competitive advantage, etc. The investor will ask him to explain every detail that is not very clear to him, will involve experts to check your conclusions – but he has every right to all this, it's his money, and you offer him to risk it.

Nevertheless, there is a problem: startups are afraid that their ideas, know-how, marketing practices will be stolen, or in general, when everything is already good, they will be thrown out of business, and investors will never invest even a penny in the business that they will not be given a detailed study. As a rule, investors always answer such questions from startups that, they say, they invest in a team, that the most important thing in a startup is a team, that it will be much more expensive and more troublesome to find a replacement for the startup founders' team than honestly sharing profits with startups, etc. All these words about the team are, of course, correct, but one thing should be clear to everyone: this is not 100% protection of the founders of a startup from being "thrown" by an investor.

Igor Vlasyuk, President of the Association "Private Investors of Ukraine":

There are such business angels, which it is more correct to call business devils. They are looking for attractive patents available to inventors, which they put in the basis of their startup, and select them in order to resell or implement the project on their own. Some business devils invest in projects they like, and then, when the project is successfully developing, they dilute the share of startup founders in the company and throw them out of business. These are raiders, and they exist on the market. Those people who are constantly "spinning" in this environment – other investors, serial entrepreneurs who are already implementing their first and not their second project, know these business devils and do not do business with them. However, those startups who do not have such experience are hooked by them. Why do business devils throw startups, and not do business with them? Because they lack 51%, they need 100% of the company, this is their principle.

We have about 40 business angels in the association. There could be much more, but we carefully filter those people who are members of our association to prevent such business devils from entering it, because by "throwing" startups who came to our association with their projects, they will spoil our reputation, and the reputation of business devils will be at all our members. And a reputation for a real business angel is almost the most important thing he has.

David Tsiteladze, publisher of the Russian version of the magazine for business angels, venture investors and startups "The Angel Investor":

There is also raiding against startups, patents, innovative developments and good business ideas in Russia. But most business angels have a "code of honor", and they will never even attempt to "throw" their partners. After all, everyone knows about everyone in this market, news spreads around the community very quickly, and reputation is much more important.

The only thing that really gives reliable protection from "kidka" is the REPUTATION of a business angel, a venture fund or an investment consultant. If a person has come into this business for a long time, and hopes to find "his Google" among many projects, he will not only value his reputation, but also multiply it in every possible way. And you can increase your reputation with transparency and only transparency. A venture investor who cares about improving his reputation will be open to the press and the "startup crowd" – like Guy Kawasaki, who publishes his thoughts on a blog, discusses his investments in various startups there, actively travels to various conferences and speaks there. Venture funds created by large investment structures – such as Finam, which has many mutual funds and is completely dependent on the trust of the population in it, Troika Dialog, which has more than $ 5 billion in management, and is also completely dependent on the trust of people and businesses in it, Allianz Rosno, one of the the largest financial and insurance groups in Europe will never risk their reputation for tens or even hundreds of millions of dollars (let's hope that the startups of some of the readers of this article will achieve such capitalization). Maxim Karimov and his partners, who have been working as business angels under the name E-Trust Group since 2003, are also unlikely to spoil their reputation, nurtured for 4 years and cherished even now.

Therefore, the reputation of a venture investor is exactly what actually protects the founders of a startup from "kidka". And before you run with your valuable project, laid out in the most detailed way on the shelves in the business plan, to the person or organization that uttered the magic phrase "bring us your project, we are interested in it", check their reputation. Look for information about them on the Internet, in the Venture Capitalists Profiles section of the IdeaBlog blog or in the "Dossier" section on venture investors and reviews of them on the IdeaBlog forum. Ask about them in the section "Who knows what about this investor, angel or investment consultant?" the IdeaBlog forum or on other sites where startups hang out. Do not hesitate to ask these potential investors questions – about what projects they have invested in, whether they can give contacts of startups with whom they have everything worked out – especially do not hesitate to ask questions if you have not found any information about them, although you have asked many people about it. After all, they offer you an equal partnership in a joint business, and just as they ask you about what experience you have, where you worked before and what successes you have achieved, you have the same right to ask them about it, especially if Google is silent about them as a partisan. I hope that if you had the courage to throw a quiet life to hell and start making your own startup, then you will have the courage to find out everything about the investor with whom you may be implementing it.

PS: It should be particularly noted that not all venture investors (especially business angels, and not only in our country) can afford transparency. Here, in the vast expanses of the former USSR, a major official can be engaged in business angelism, and an oligarch who does not want his business partners to tease him about investments "in alchemy", and people who have earned their fortunes on, for example, cashing out, and do not want to shine them - such business angels They prefer to invest "behind the screen" of business angel networks, such as Private Capital, SBAR or the association "Private Investors of Ukraine". And in this case, you should pay attention to the reputation of the network, because absolutely all serious networks of business angels are carefully watching to keep business devils away.

Source: IdeaBlog

Portal "Eternal youth" www.vechnayamolodost.ru29.11.2007