Finding the resources to get your idea for a new product or service off the ground can be difficult. It is usually necessary to approach several investors before you can find one who is interested. Often, the best strategy could be to go to a company that deals in the same line of business and pitch your idea.But you could have a lurking fear that the organization you approach could carry out minor modifications to what you propose and claim your idea as their own.
While it may not be possible to completely protect yourself from such a possibility, there are some practical steps you could take:
Sign a non-disclosure agreement (NDA) - This is a legally binding contract that will ensure the confidentiality of your information. But remember that you are bargaining from a position of weakness. The company that you approach could balk at signing a formal document. They may even refuse to meet you if you mention that executing an NDA is a pre-requisite.
If it is not feasible to get the investor to sign an NDA, consider printing a confidentiality statement on the documents that you give them.
Do your research - Is the company that you plan to go to trustworthy? What is their reputation like? If possible, get referrals and recommendations from people in the same industry.
During your discussions talk about how your product or service can satisfy a market need. It may not be necessary to explain how it works. That should follow at a later stage when you are closer to formalizing an agreement with them.
Keep detailed records of your meetings - Each interaction with a potential investor should be documented. Make notes of what was discussed at meetings. This will help you recollect the details of exactly what you revealed.
Consider applying for a provisional patent - Getting a patent is a time-consuming and expensive affair. Protecting your idea through this route when you are trying to sell it to an investor is usually not a good idea. But applying for a provisional patent is relatively inexpensive and easy.
A provisional patent is valid only for 12 months and cannot be renewed. Be careful who you discuss your idea with - It is one thing to reveal details about your new product or service to a company that has the resources to market it commercially. It is quite another to divulge key parts of your idea to a group of people. If you do that and your idea is stolen, you will not even know who is responsible for the theft.
Don't alienate potential investors - Find a balance between taking steps to protect your idea from getting stolen and revealing enough to convince the company you are selling it to about how brilliant it is.
If your idea does get stolen, it will be difficult to prove it in court. In any case, the legal proceedings will be long-drawn and expensive. A better way to protect yourself would be to reveal only as much as is necessary to a prospective investor.