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Advice needed for start-up
Posted by Peter Cunningham on December 26, 2008 under Miscellaneous | 
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Hi
I’ll add a few comments:
- Protecting your business. That is simple. When you meet people you tell them the 90% which is obvious and evident and do not mention the 10% which is the real strength of your business. The investment memorandum or business plan you submit to the prospective investor should not give away that 10% – but it should be a teaser to get them interested.
As you get further into serious negotiations with an investor you will need to disclose more as part of due diligence – but often this is done via an expert eg a coding expert will look at your code, a biotech expert will look at your patent etc. You can control how this is done – eg the expert gets to see the code and writes a report on its merits etc. But worry about that when you get to that point.
Part of protecting your business is to do your due diligence on the
investors before you disclose anything of value to them – are these guys sharks or do they have good reputations. Most successful business models look as if they can be copied from the outside but actually it is much more difficult than one would think. So telling me you are creating a social network for the travel industry that will match people according to their personalities based on a new algorithim blah blah is hardly going to blow your business plan. In fact a seasoned investor will probably say – ‘I know of ten businesses trying to do the same thing’.
My memories of the late 90’s with all this nonsense about ‘first mover advantage’ and ‘I can’t tell you my idea or you’ll steal it’ shows just that – that there is no merit in the idea and it is not defendable. If I can copy your business by just knowing what you are doing then your idea has no merit. The best you will get is a few months advantage until
you come out of stealth mode and then someone with more resources like Microsoft will just copy your great idea. But if there is something you have that noone else has – a patent, a great management team that combines knowledge, contact and experience that would be impossible to copy, something else that is unique.
If your business plan is based around ‘we thought of this first and if we spend more money quicker than anyone else then we are made’ then you will not get funding – you might have in 1999 and 2000 though
 As has been said in other responses – ‘every idea has already been thought of’. I would also say that so many start ups begin with one idea but as they get funding and get a team together they end up shelving that and developing some annexed project. So an investor will want to know you have a team capable of seeing and taking that kind of opportunity.
With NDAs – it is not a 100% fact that investors will not sign an NDA, I have heard of cases where they wanted the deal so much that they did. They will claim they don’t but it can happen – it is just extremely rare. If you try to insist on one then you will seriously limit your chances of getting funding.
2. In today’s market being able to bootstrap is a great advantage – at the recent Techcrunch Talk in London the VCs and Business Angels said their advice for 2009 was ‘bootstrap bootstrap bootstrap’.
A serious investor will admire the fact that you have another source of income as Kay mentioned. That you will not give up the day job until the start up can pay you a wage will be seen as a reasonable step as long as you can find enough time by working weekends, holidays etc or alternatively by hiring someone to work for you. Showing the investors a business plan that shows the
company earning enough to break even and then earn enough to pay you a wage (at which point you go full time) will show that you understand running a business – just beware that you are not creating a ‘lifestyle business’ ie one that pays you a great wage but leaves nothing for the investors. That kind of business will never get funding. Good luck
taufiq <[address removed]> wrote:
Hi Everyone,
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