3 Facts for Founders: The Myth of Originality

Or how to stop overvaluing ideas and undervaluing execution.

I have made a lot of startup mistakes. So has anyone who has been involved in the early days of a startup. An entire group of these common mistakes relate to what happens at the very beginning of the start-up journey as we attempt to build a startup around our original “idea”.

The three “facts” we are going to walk through are: why your idea probably isn’t that original, why you should think hard before keeping secrets and why trust is the key to finding co-founders.

1. If your idea’s good, it’s probably not original

Stop worrying about people stealing your idea because that will make it seem like you overvalue ideas and undervalue execution

I really couldn’t say this any better than Anil Dash so I will quote his well know blog post from 2010:

If your idea’s that good, it’s probably not that rare. I hate to be the one to point it out, but protecting your idea in general is a fool’s errand — good execution is hard to find, but good ideas are cheap. — Anil Dash

This mindset is still common among many early stage founders: My idea is wholly original and by itself has tremendous value. While I like the confidence this exudes it often leads to founders spending too much of their mental energy on protecting their “idea”. This is energy that needs to be focused on execution and building a team of co-founders who can execute on the KPIs (Key Performance Indicators) for the business that this idea is supposed to help launch.

When you begin every new potential business relationship with advisors, potential investors or even potential co-founders, by asking them to sign an NDA (non-disclosure agreement) before you tell them basic information about your “idea”, you are starting off on the wrong foot. If you want some of the more personal reasons this is a terrible way to start a relationship you can read Anil Dash’s take: One More Time: No NDAs. What I want to focus on is that founders think this makes them look prepared and professional, but it doesn’t. Instead potential business partners are often left thinking one or both of the following about the founder:

1. The founder thinks that they are replaceable but the idea isn’t
2. The founder overvalues the idea itself and undervalues execution

In successful start-ups, driven teams of people who can execute an “idea” have value that far exceeds the value of the idea itself. This is just as true with a totally unique idea or one that is replaceable, derivative or in some other way ‘unoriginal’. So if you feel your idea is so vulnerable as to need an NDA then you should seriously consider why you think that is. Is the idea not as good as you think it is or are you and your team of founders not the right people to execute it?

Regardless, almost no Venture Capitalist or Angel investor is going to sign an NDA so you only make yourself look incredibly amateurish by suggesting it.

One last thing: If you think you need an NDA because your idea is so good that anyone can do it then you should assume that someone already has. Every Venture Capitalist has been asked to sign an NDA by an entrepreneur who eventually tells them anyway after they refuse to sign it. If that happens and you get the chance to pitch your amazing idea for a business, make sure that it doesn’t already exist. This happens more than you would believe.

Don’t worry about people stealing your ideas. If your ideas are any good, you’ll have to ram them down people’s throats. — Howard Aiken

2. If there is a secret sauce, keep that secret

You don’t need to share everything about how you are going to execute your idea but you do need a realistically believable story

The implementation of your idea, or execution of your business, is a critical component to every startup’s chance of success. Sometimes this includes details that are critical to your success but are not necessary to share with everyone. These secrets may be foundational processes or they may just enhance the perception of scarcity or desirability in your product or service. The fast food chain KFC has used the “Colonel’s Original Recipe® seasoned with a secret blend of 11 herbs & spices” in their advertising campaigns for years but at this point I am not sure if it is foundational or simply a part of their brand value. Either way it’s reasonable to keep secret.

“A secret’s worth depends on the people from whom it must be kept.”
― Carlos Ruiz Zafón

Sometimes these details or “recipes” may be patentable, in which case you will eventually need to make them public in your patent application but you would need to keep them secret beforehand. Sometimes they may never be made public because they are integral to your “competitive advantage”. Either of these strategies can create barriers that potential competitors would have to replicate before they could directly compete with you, resulting in a long-term sustainable competitive advantage.

At an early stage you likely have very few of these types of secrets and any you do have are likely to be unproven. However, there may still be a case for keeping these details secret. If you can explain how your idea will work and why it will succeed without divulging this information then KEEP IT SECRET. The best-case scenario is to minimize the importance of any secrets so that the potential investors see in you is one of execution not secrecy.

“The best way of keeping a secret is to pretend there isn’t one.”
― Margaret Atwood

You may end up needing to reveal these secrets to prove the viability of your idea or business. If so then at the very least make the NDA incredibly specific to the secret(s) being revealed and what tangible benefit the signer is getting in return for signing away their rights. These two things will help ensure the NDA is actually enforceable. This allows you to respect the people you deal with, continue to be open about your idea but protect anything specific that really needs protecting.

3. Founding a startup is about trust + execution

When co-founders come together to start a company it should be based on trust, complimentary skills and execution.

What if you are in the market for co-founders should you ask them to sign an NDA before you discuss your idea with them? Personally, I think this is a terrible idea and one born of fear. This will likely be seen as a red flag that will cause many experienced entrepreneurs to not take you seriously. You are asking someone to put him or herself in legal jeopardy before they even know enough about you or your startup to be sure that they want to be involved. This annoyed @ work cartoon shows what it is like to be asked to sign an NDA from someone just so they can tell you (brag about) their idea.

Founding a business together is based on trust not on NDAs or non-compete agreements. Trust needs to be built over time. It needs to be earned and it needs to be given. If you think you can rush trust and build a long-term relationship with co-founders based on the ability to sue each other, than you aren’t building that relationship in a way that will stand the test of time. So as a start-up founder don’t put yourself in this position.

Sunlight is said to be the best of disinfectants; electric light the most efficient policeman. — Justice Louis Brandeis

When you gain each other’s trust and respect one another then you can formalize the relationship with the business itself. Because, we should all remember, an NDA or any contract isn’t there to protect you from someone stealing your idea. It is there to protect the business from you or anyone else that works there from revealing confidential information or damaging the company’s prospects in any way. It is literally part of a founder’s fiduciary duty to protect the company.

As a bonus: Part 2 of the brilliant NDAGuy comic from above.