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Hi, I’m Brad Feld, a managing director at the Foundry Group who lives in Boulder, Colorado. I invest in software and Internet companies around the US, run marathons and read a lot.

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Implied Suspicion Versus Implied Trust

Comments (51)

I just had an exchange with an entrepreneur that I don’t know.  It went something like the following via several emails over the course of a week.

Entrepreneur: I’m working on something really amazing that I’m looking for funding for.  Can we get together to discuss?

Me: Can you send me a short email overview so I can tell you whether or not it’s something we’d be interested in exploring?  I don’t want to waste your time if it’s not.

Entrepreneur: I’d much rather get together face to face.

Me: Can you send me a short email overview so I can tell you whether or not it’s something we’d be interested in exploring?  I don’t want to waste your time if it’s not.

Entrepreneur: My idea is special.  Will you sign an NDA first?

Me: I don’t sign NDA’s.  If you are unwilling to send me a short overview that you are comfortable sharing, then I don’t think I’m a good target for you.

<time passes>

Entrepreneur: Following is an email describing my idea.  Since you won’t sign an NDA, you agree that by reading beyond this paragraph you are agreeing not to share my idea with anyone, forward this email to anyone, or discuss the idea without my consent.

Me: I have not read past the end of the first paragraph (“<paragraph copied>”).  I have permanently deleted this email from my inbox.

Entrepreneur: Why aren’t you willing to read my email?

Me: I’m unwilling to have an implied NDA applied to me via your email.  You seem to be operating from a perspective of “implied suspicion.”  I don’t work this way – I much prefer to operate from a perspective of “implied trust.”  Since you clearly don’t trust that I’ll behave responsibly, then I don’t think I’m a good match for working with you.

I’ve written about my “fuck me once” rule in the past.  In the book Do More Faster, I have a chapter about this – Wiley made me change the title to “Two Strikes and You Are Out” but the rule is the same.  I enter every new relationship from the perspective of implied trust and allow this trust to be violated once (where it’s my responsibility to bring up and address the violation.)  If there’s a second violation of trust, I’m done with the relationship.

I’ve generally decided not to engage in new relationships with people that approach things from a perspective of “implied suspicion.”  Yes, I know there are plenty of people in the world that behave badly, but I try really hard not to be one of them and when I do, I own my bad behavior, apologize, resolve things, and try to learn from the situation.  It’s easy to find out about me (both the good and the bad) if you are concerned about starting a relationship from a position of “implied trust” and – if you are interested in a relationship and unwilling to do the prep work to start from this perspective, I don’t really know what else to do other than disengage.

I spent some time thinking about whether this was an inappropriate, arrogant, or naive position from my perspective and decided it’s not.  I’m already completely maxed on “new relationships” so setting a certain type of expectation for the entry into a new relationship (namely one of “implied trust”) helps filter out relationships with people who I likely won’t connect with anyway since they have a 180-degree difference in their view of how to approach a new relationship.

I know there is an enormous amount of noise around the system about “how to protect your idea” and “how VCs behave around your idea” although in my experience the noise is completely disconnected from (and much louder than) the actual signal.  I’m curious what entrepreneurs think about this in the context of a first engagement with a potential VC investor that they don’t know.

  • http://freepository.com John Minnihan

    see my reply on twitter for a broader perspective (’10 yrs ago, I wld have said NDAs are necessary. I’ve since learned they aren’t, because trust can’t be codified. It’s earned.’), but I’m floored that someone wld ask you (or any of your partners, ftm) to do an NDA.

    This is one of the aspects of Foundry that is so freakin’ transparent you may as well call it your Scotch Tape Policy.

    • eric norlin

      i’ll echo john’s comment – and throw mine in….a) agree that any amount of research about you or foundry should’ve done the trick here (ANY); b) implied trust is the proper beginning stance; c) working w/ you and foundry is one of the true joys of my work life. don’t change a thing about your rule or approach.

      • http://freepository.com John Minnihan

        Trust is a big deal.

        It’s the single most important (and thus valuable) thing I can give to another person & is the foundation upon which everything else in a relationship is built. But you have to give up a little – show some vulnerability – in order for this to work.

  • http://www.facebook.com/robertdewey Robert Dewey

    Ideas don’t win, execution does… and execution isn’t something that can be secured via an NDA. If you can’t give a basic overview to a VC that you’re willing to trust a significant share of your company with, well…

    • GRGM

      Yeah, I’ve heard this trope too. But I can’t help but wondering: What does it mean? It’s so vague as to be meaningless.

      In fact, a lot of what “execution” is is just a bunch of micro-ideas that are interspersed with work to realize them.

      What’s I’ve learned is that when you meet with an investor, either ideas or execution could be worth a lot – but it’s all context-sensitive, based on what you’re doing.

      Take Bell. When the telegraph came out he had an idea that was worth a ton of money. When you use one wavelength of signal in a telegraph, you can actually layer over other wavelengths so you are simultaneously transmitting multiple signals. That is a bloody killer idea.

      Or the alternating current (AC) mode of electricity transmission. Tesla got ripped off badly for that.

      • http://www.facebook.com/people/Boss-Presentonlinenow/100001853471589 Boss Presentonlinenow

        Ideas are free and historically many people thought of the same idea roughly at the same time. Execution is the differentiating factor among those. It is taking that idea and making it a viable product/business/cause.

  • http://twitter.com/Aaronontheweb Aaron

    Going to quote my father here:

    “Any idea which requires an NDA to be signed before it can be discussed probably isn’t an idea worth discussing.”

    Even in my short experience thus far, his wisdom has been proven demonstrably true. Any entrepreneur who’s insecure about sharing ideas usually isn’t secure about the idea at all, but rather their ability to execute.

  • http://www.prudentcloud.com Subraya Mallya

    Seems like the first tutorial entrepreneurs should get is however great the idea is there are 100 others thinking about it (if not already tried). And that ideas don’t make companies work – execution does.

  • http://twitter.com/Buzzmodo Buzz Bruggeman

    My take has been that the VC has vastly more to lose in terms of lost reputation by violating implied trust than the entrepreneur does. Simply floating the modest details of an idea by an investor in exchange for more serious consideration seems pretty risk free to me.

    Alernatively if you and/or your team were to wrongly leverage someone else’s ideas/IP, i seriously wonder if you could ever recover your reputation.

    The world is too flat, too small to besmirch your reputation in a case like this. There are all kinds of ways for the entrepreneur to vet the VC. Too easy to look at the companies the VC has invested in, talked to their management, etc.

    The guy was a fool not to do so, and not to shoot straight with you.

  • http://MeetInnovators.com Adrian Bye

    why are you spending time thinking about this?

    this guy tried to trick you into an emailed contract which you didn’t agree to. just filter future mails from him to trash and you’re done. he has nothing enforceable legally, morally or reputationally.

    if anything let us know who he is so we can avoid him.

    • http://www.facebook.com/robertdewey Robert Dewey

      I agree, but disagree on calling people out. Sometimes people make stupid mistakes. I used to be in the NDA bandwagon back when I was emailing VCs at 18-19 (6-7 years ago) to discuss ideas. After learning that VCs despised NDAs, I never brought it up again.

      In case anyone is interested in stealing: my idea, which I thought was grand at the time, was an on-demand movie service similar to what Netflix now offers, circa 2002-2003. Something an 18 year-old wouldn’t have been able to tackle legally. :D

  • mikeadean

    I don’t think neither side is incorrect. Its simply a matter of perspective. For the person whose idea may be a life-changer, they’re already nervous just because they’re in unfamiliar territory. You ARE a VC. Obviously the person with the idea isn’t. People grow up hearing stories of the unscrupulous businessman. Fact or fiction, it becomes a reality, thus a fear, to one who has heard the stories. Truth of the matter is that the person is attempting to be business savvy.

  • Peter Magurean III

    Dear Brad,

    My first visit to your site…..excellent!

    Based on what you have iterated above about your attempt to engage with the entrepreneur I feel you acted in good faith, and frankly am surprised at your patience in your dialogue. You were polite and direct — well done. I have been on both sides of the equation, and from my experiences I believe you deserve kudos for your sincere but firm approach. You are a person of high personal principles because your still questioning yourself and willing to give that entrepreneur benefit of doubt. It is a shame that the obvious inexperience of the entrepreneur nixed getting to first base with you.

    I will now download your app. Thanks fo your fine writing!

    Peter Magurean III
    Sammamish, WA

  • http://occipital.com Jeff Powers

    Totally makes sense from your perspective and that attitude is one of the best things about you and Foundry. We get a lot of business proposals and we have the same attitude. 99.5% of the time, a founder asking you to sign an NDA is vastly overestimating the value of the idea on its own. That aside, I’m curious what your stance is when the information is far more than an idea, but instead a combination of long-running development and valuable trade secrets that arise from it. Would you guys ever entertain NDAs when the information at stake is, in fact, far more valuable to a competitor than a raw idea?

  • Ryan Clarke

    Brad,
    I admire your patience and I hope that the entrepreneur understands it value in this situation. Having been in that same position a year ago I can confirm that he/she is a first time entrepreneur and has entered the game uninformed and paranoid. I simply suggest you direct them to any of the posts on the subject of NDA’s by fellow reputable VC’s like Mark Suster or Fred Wilson.

    As others have said, it’s about execution and ideas are a dime a dozen. Unfortunately your emailer doesn’t know that yet. I can attest to this as I have had a “great idea” and found it challenging to execute without the required technical skills. I’m finally on the path to wicked execution after partnering with capable technologists.

    Again, thanks for your patience with the uninitiated.

  • Anonymous

    Not necessarily a novel issue, but a refreshingly straightforward and personal take on it. Takes some bravery to admit that you took the time to send 5 replies to someone who I wouldn’t have guessed would even get one. Cue 1000 emails to your inbox that begin: “I’m working on something really amazing that I’m looking for funding for. Can we get together to discuss?” Is this an example of priority inbox creating a moral hazard?

  • Anonymous

    Maybe a simple but good way to respond to him is just to say that a description of the intellectual property is not needed yet and that in an initial contact describe a little, in high level, general, and non-confidential ways, the market being attacked, what the project is to bring to the market, and the background of the team. Also if there is a working prototype, users, number of users per month growing rapidly, revenue, revenue growing rapidly, earnings, joint agreements, etc., then mention those.

  • http://www.hypedsound.com jonathanjaeger

    You’re obviously not in the wrong. It’s one thing for you to go up to someone and be denied if they’re not willing to share their ideas with you, but this “entrepreneur” actively sought you out (not vice versa). Therefore the onus is on him to be well-researched and know the norms of such engagements, especially after your initial response.

    I also agree with your two strikes rule in the context you define it. Since there are so many potential people to work with, why waste time on people who lack the ability to effectively communicate or conduct themselves ethically? Even if someone begged for forgiveness, even the least judgmental people would have a hard time letting go of past bitterness — that’s not conducive to a working relationship.

  • Anonymous

    The best way to keep an idea confidential is to lock it in a safe and not ever tell anyone about it. If I’m really worried about a VC not being discreet in early conversations, then what makes me think that he would honor an NDA? Further, why would I possibly want him involved with my project long-term, potentially with a board seat? Documents and contracts are great for making sure everyone understands an agreement the same way, but at the end of the day I can’t legislate virtue and I need to trust the people I’m in business with.

    So yeah, I think you’re dead on target, and if the email exchange you posted was representative then were actually more patient than most would be.

  • http://www.taglinemachine.com Simon Gornick

    “Implied suspicion” is the preserve of those who don’t understand the value of and role of ideas.

  • Patrick

    It’s a difficult situation to assess if you are going blind into the relationship (which is often the case). If entrepreneurs cared to do a little legwork about the person/firm by trying to contact some of their investments, then there probably wouldn’t be this whole implied trust implied suspicion debate.

    Does anyone want to invest in an entrepreneur that values his idea that much anyway? It’s all about execution these days.

    • Anonymous

      I think the notion that ideas don’t matter is one of the most pernicious pieces of conventional wisdom floating around among V.C.s and entrepreneurs today. Ideas matter. A lot. My view is that a good idea is necessary, but not sufficient, for entrepreneurial success.

      That said, I agree with Brad on the main point. Having learned from past experience that NDAs are worthless if your counterpart lacks integrity, you are better off putting a little effort into determining whether the people you approach can be trusted.

  • http://www.cs.colorado.edu/~jrblack Jrblack

    I started reading about entrepreneurialism about 2 months ago, starting with Do More Faster, and followed by several other books and hundreds of blog postings and web articles. The “Don’t Ask a VC to Sign an NDA” message appeared at least 20 times in that material. That message is 2nd only to “most start-ups fail” which appears about 40 times in Do More Faster alone. :)

    Anyway, anyone asking a VC to sign an NDA hasn’t done even his basic homework.

  • Stewart

    I think it just takes a little experience before you learn how the business works. When I first got started trying to get people (and funding) behind my ideas a few years ago I would make the same mistake. My partner and I had some killer ideas but that’s all they were – ideas. We approached angels and developers in the startup community and the feedback was always “this is great, a really good idea, how far are you into development? Can I see your website?” Unfortunatly neither myself or my partner have any technical skill (programing or web development) so we had nothing to show. We were trying to get people, behind the idea (developers and angels) so we could move it forward, but we couldn’t move it fwd by ourselves.

    So what does this have to do with NDA’s? We quickly learned that people (especially developers) are to busy with their own projects to take the time to steal yours. I quit worrying about NDA’s not because I think everyone is a stand-up person and trust worthy, but because I know everyone has projects they are already working on. Projects that they believe are going to make them a lot of money, projects that they have already invested a few months or years in, etc. They are not going to just can that idea or put it on the back burner to try and steal your idea.

    That’s my take on it.

  • DaveJ

    Also pertinent is that study I sent you a few weeks ago (can’t find it now) showing that those who “trust first” learn more effectively to detect untrustworthiness.

  • http://www.connectfu.com/ Jeff Yoak

    The issue is probably much less about trust than it is about inexperience and knowledge about value, as some others have indicated.

    We would all *know* he was nuts if he was insisting on meeting in a public place because you might be an axe murderer. We’d similarly know you are nuts if you insisted he turn over the company to you and trust that you’d make sure he was compensated if it worked out as a condition of meeting.

    The problem is that some people see all the value in these situations as existing in the idea. Usually, this is when there is a lack of experience on execution. If you can’t really visualize executing, it is easy to imagine that pretty much all of the value is in the idea when the opposite is closer to true. Still, from the person’s perspective, sharing the idea feels like giving up all the value he has… and he might be right.

    That’s plenty of reason to not move forward, of course, but identifying the issue as trust might be a little off-center.

  • http://www.gooddisruptivechange.com Susan Alexander

    Brad ~

    Your piece in Do More Faster about this rule jumped out at me as particularly useful, so it’s good you’re putting the idea out again. [Note to those who haven't read the book: Read the book.] :-)

    I like this rule because it allows things to get to their natural start quickly, without unnecessary “preliminaries” – which often can transform quickly into barriers.

    I’ve found the rule especially useful in friendships having nothing to do with business. I think pure friendships warrant especially careful thought as to what constitutes a “strike” – because there probably always will be more people out there with whom we could potentially do business with than people with whom we’d actually want to spend time building a lasting friendship. (Stated a bit differently, in a friendship, I’m more inclined to consider a screw up to be something less than a strike than I am in a business relationship.)

    What I’d like to see you write more of is what appears in this piece – sample dialogue. Specifically, I’d like to see, in written dialogue form, the kinds of things you’ve said that have worked well in situations where something’s gone wrong because bad behavior – yours or someone else’s.

    All the best, Brad, and thanks for your good writing.

    Susan Alexander

  • http://filtrbox.com/blog arinewman

    I love how transparent you are with your thought process and that you are willing to share so much of it. This is one of the things that makes you a great blogger, at least for me ;-).

    I recently had an experience with this topic (not investor-entrepreneur related) but same issue – where the other party was operating from a place of implied suspicion. I also operate from an implied-trust POV and I couldn’t figure out at first why the interactions with this person were so challenging, but your post made the light bulb go on.

    Agree with some of the other comments that this entrepreneur may have just been naive (and certainly hadn’t done their research on you – takes 2 minutes to learn how to interact) – sounds it will be a learning experience in the end.

    I tend to operate this way in many aspects of my life, not just business, and sometimes it bites me, but more often than not it opens the door to great relationships and opportunities. Seeing and knowing when the other party doesn’t operate the same way *earlier* is something I have to work on…

  • http://twitter.com/mgrosso Matt Grosso

    At the risk of piling on with the “ideas are cheap” meme, I resolved recently to post a new business idea for every day this year. see http://blog.mattgrosso.com for the first eight (or nine after I do todays…). Although doing this is proving to be a minor distraction, its been very effective at reminding me how important it is to focus on execution every day, which is why I’m doing it.

    I think if you are trying to get NDA’s from investors it means you aren’t far enough along to talk to them number one, and number two it means that you haven’t taken the time to do the research and learn the norms of the community you’re about to participate in.

    For my current company I’m trying to get as far as possible on the execution before I start a lot of conversations with investors. I’m not worried that they might shop my idea, since sites like TheFunded and VentureHacks have helped to level the playing field by exposing that sort of behavior. Any investor or VC firm who screws their entrepreneurs will get an online reputation for it and won’t get my pitch, for whatever thats worth. That kind of public spotlight creates a one strike rule for investors which makes it really easy to adopt the implied trust stance.

    I /am/ worried about spending time and energy distracting myself investor conversations at a stage when I haven’t gotten enough done, and about setting a lot of external expectations when I’m still cycling through the early loops of Steve Blank’s Customer Development.

    Once I have a minimum viable product and have found real paying customers for it, then I’ll know my idea is valuable because my execution proved it, and for me at least, thats when to start sharing with investors.

  • Tom Chikoore

    Ideas are overrated. NDAs for ideas – even more so.

  • Anonymous

    Brad:

    I could not be more pleased to read this. We feel the same way about NDAs. I’ve actually seen people (more than once) stand up at a place like Boulder Open Coffee Club and ask for input on an idea “if you’ll sit down with me and sign an NDA first.” No input from me.

    Sometimes I use the line: “I’m a PR guy. I get paid to tell people things. If you’re not paying me, I’m not saying a word!”

    Great post!

  • Rocco

    I am sad to see that the age of entitlement has seeped into the entrepreneurial space. We are owed nothing, and if one cant operate from a position where they understand any investor is a partner, they as an executive don’t deserve the investment, and odds are, the business isn’t really good enough to warrant it as well. Ideas are things that most people have, those who have the guts to execute, would treat investors with more respect. Well said, and I doubt you missed anything.

  • http://www.knyshov.com Leonid S. Knyshov

    Locate competitors, disclose as much as the competitors already do, explain in general terms why you think you’ll do better. I actually showed a demo of a competitor’s product when explaining the level of simplicity I am trying to achieve. The demo of my own product was not ready, so I used someone else’s product as a mock-up. That may be a bit extreme, but I am sure I am not the first or the last to have done that. I have no particular intention to disclose the 5yr feature roadmap in a first meeting, but that is not necessary either.

    Level of tech detail should be minimal. Bad example: we will use SAML and ADFS to enable cross-enterprise authentication. Reasonable example: we will find a way to access information from multiple companies not otherwise connected, which is currently not possible with any solution offered by our competitors in our proposed price range.

  • http://www.linkedin.com/in/deanwolf Dean E. Wolf

    Brad, I’m glad that you consciously choose to advocate the “implied trust” way of interacting. I too am of the same mind…although, as an IP Attorney, I do acknowledge that it is preferable for an entrepreneurs to seek some form of IP protection before disclosing their ideas to 3rd parties. When situations like this arise in my practice (e.g., where an entrepreneur request the investor to sign an NDA before disclosing his/her idea, and the investor is unwilling), I typically advise that the entrepreneur be instructed to first independently seek and secure IP protection for their idea(s) (e.g., file a provisional patent application at the USPTO, which can be done quite inexpensively) before contacting or re-engaging the investor.

    That being said…IP rights may be irreparably lost in foreign countries if it is deemed that a non-confidential disclosure occurred (in the US) before a patent for the idea/invention was filed. For this reason, if the idea/invention has the potential for a significant foreign market and/or if it is desirable to preserve all foreign IP rights, it is strongly advisable that some form of NDA be recorded between the parties (prior to disclosure) so as not to jeopardize foreign IP rights to the idea/invention. Of course, the filing of a provisional (or non-provisional) patent application will also serve to preserve all foreign IP rights for the ideas/concepts disclosed in that application.

    Regards,
    –Dean Wolf

  • http://razvan.co Razvan Tirboaca

    He is a first time entrepreneur. Meet him in 3 years from now and I can bet he’ll have a different approach :)

  • http://thedigitaltiger.wordpress.com/ Boaz

    Not going to rehash what’s been said: a newbie, ideas vs execution, NDAs good or bad (NDAs do have their particular place though). I think Matt Grosso is on the right track: the entrepreneur didn’t do his homework, neither about how to approach VCs in general or Brad and Foundry specifically.

    If the founder in this case wanted an NDA he is implying that he doesn’t trust Brad. In that case why would he want him as an investor? And if he asks every VC for the same then why is he speaking with VCs at all?

    Trust is not an absolute nor is suspicion. Trust is built over time (same with suspicion…) but must start with a kernel of trust. No lasting relationship begins at full throttle.

    As to Brad’s question – don’t meet with a VC you don’t know. Even if you’ve never met or corresponded at least do a brief search on the firm (and their portfolio!) and the person. The point of the first meeting is to get the second meeting. C’est tout (that’s French, BTW). Industry, problem, solution, why yours is great, and who you are. (I think the Founder was trying to get a face-to-face meeting thinking that he’d be much more convincing in person than his written materials or (probably) half-baked idea). You should imply your trust in the VC, yet don’t say more than you have to to express the opportunity.

  • http://www.facebook.com/profile.php?id=511338768 Steven Bergstein

    I tend to believe that those who are least trusting are the least trust-worthy. So, although Brad didn’t say it, the decision to disegage (IMO) was justified not only because the guy didn’t do his homework and didn’t understand how to play the game, he sent a signal suggesting that he’d be a poor partner.

  • http://www.linkedin.com/in/ellenkhall Ellen K Hall

    Humm… you’d think this person would take the time to read your book and research you as carefully as possible before even contacting you at all! You don’t even need to read your book – just skim the chapter titles to know your feelings about NDAs!

  • http://www.isnazz.com Charlotte

    Brad, great post, as your others. As an entrepreneur;

    1) You’re kind to be kind in your response when first approached (twice).

    2) It never hurts to ask, but in your case, it’s crystal clear where you stand.

    3) Investors are really customers, but seem rarely to be approached as such. It’s wise to treat those engagements as partnerships – it takes two to tango.

    4) Everyone has an “I was an idiot” story. Once is likely forgivable, twice means you really probably are an idiot.

    5) Back to #2 – if an entrepreneur doesn’t do their homework first, how can any Investor believe that person can build a business?

    6) If a person bombs #2, #5 and STILL can’t listen, adjust and read between the lines when coached, then they’ve succeeded in achieving the status of #4.

  • James Mitchell

    One criteria for judging an entrepreneur is, “Is this guy totally clueless?” If an entrepreneur is going to approach a VC, he should have at least a basic understanding of the VC perspective/mindset. Fifteen years ago it took some digging for a new entrepreneur to figure this out, but now so many VCs are blogging (and so many of the VC blogs are quite good) that for an entrepreneur to not know the basics means he is really really clueless.

    As for NDAs, about 50 different VCs have written posts on “Why I don’t sign NDAs.” This entrepreneur apparently has not read any of them, which if you think about it, is quite an accomplish, kind of like taking the SAT and getting every answer wrong. Nor apparently does he have an attorney or other advisor who has explained the facts of life to him. So putting aside the implied suspicion issue, this entrepreneur is simply dumb. And cluelessness rarely exhibits itself in just one area, he probably is clueless in most areas. So if there was a way to short the stock of his startup, I would like to purchase some options today.

    James Mitchell

  • Jon Callaghan

    Wonderful post, Brad. Just yesterday I explained to a group of entrepreneurs that at True, we live life trusting and are every once in awhile disappointed. That is a far better way to live than to live life suspicious and be every once in awhile surprised.

    When entrepreneurs come to me asking for the NDA, I don’t even take the meeting. It shows they are closed-minded and have not gotten nearly enough feedback and input. All of my past success has come from smart, open people unafraid to share, be vulnerable, and grow.

  • http://www.24pagebooks.com MartinEdic

    I think what you are dealing with here is not someone protecting an idea, you are dealing with someone who is paranoid. It is irrational to think you are going to go into business without telling thousands of strangers about your idea- this is called ‘marketing’. When you go to raise funding you are doing early stage marketing. As we made our first seed deal I realized that much of it centered on our ability to explain our ‘secret sauce’ very clearly, a marketing challenge.
    As for the IP attorney who recommends seeking patent protection early on I can only say that patents are expensive, time-consuming and so costly to protect that most start-ups simply don’t have the resources to deal with them, especially pre-funding. The best protection is to get out there first and do a better job.

  • Anonymous

    Having been on the Idea side of this a long time ago, being young and inexperienced and then being burned by a VC; I have to say I am a little put off by the article. Now that said – I also have to say I get it. That is the way I WANT to do business. I agree an NDA or a non-compete is not worth much. However there are enough disreputable people in the business that it is disgusting and they are on both sides of the fence. Let’s face it people are people and it doesn’t matter what “business” they are in there are enough bad ones to cause people to pause. When someone has what they think is a great idea that should give even more pause. So how does one sort the good from the bad? How do you know you can trust this one person you have never met or their associates? I mean reading your previous article on the subject apparently a LOT of people around you have had negative experiences with a particular VC investor yet you had no clue and were burned once and this is your business. I can read your blogs, investigate your company, etc. but that does not provide me any guarantees.
    Idea people may not be the most business savvy. They may not know how to do the research on companies like yours or even the right questions to ask. They may also not be the best executors. A lot of time that is where VC comes in as well – not just the money. I totally agree that execution is key to any business. I also agree trust is very important. However implied trust is very very difficult for most people to just come by.
    I can see it from the reputable VC side as well though. I recently looked into purchasing a private business for sale via a broker as well. What a joke that turned out to be. I was supposed to perform my diligence without informing anyone that the company was for sale, without knowing who vendors were or major customers, without visiting and talking to key people in the company. Just from a short question and answer period with the seller where the seller would not give up a lot of “proprietary” information. i.e. Do my diligence without any access at all to the company records and employees – just based off public record information. Not to mention that Financials were not available until you agreed to the purchase and put 20% down on the price and you had 14 days after receiving them to close. I just walked away and I am glad I did. The company it turns out lost about one half of its income and the owner apparently knew it was coming.

  • http://lichtman.ca Anonymous

    Would his NDA be enforeable anyhow? If he’s looking to a VC for funding, chances are he can’t afford the legal fees to deal with somebody going around the NDA anyhow.

    • http://www.feld.com bfeld

      Who knows. However, I never sign something that I won’t live up to.

  • Adrian Meli

    Brad, really great post and I think a healthy way to approach things. I think the fact that you are forgiving on the first mistake is noteworthy and your post did not come across as elitist. The email exchange was pretty surprising given that it seems you were being generous by answering an unsolicited email. I have to imagine your view leads to more productive relationships and would think starting a partnership any other way would be fantastically unproductive. Thanks for the good thoughts. – Adrian Meli

    • http://www.feld.com bfeld

      I always find it interesting that when I answer unsolicited email
      (basically something that I do continually throughout the day) it
      occasionally isn’t viewed as an extension of trust or respect. This
      really stands out given the number of people that thank me for simply
      responding after I say something like “thanks for reaching out to me
      but I don’t think I’d be interested in exploring investing in your
      company.”

  • Kedar

    Fully support your view regarding your point on trust, you have made so much of your life public on this blog that one should be suspicious initially pitching the idea.

    Also ideas are dime a dozen. There is nothing in Ebay, Amazon or Groupon idea. It is the execution that counts.

  • Anonymous

    Being a first time entrepreneur looking for funding, I think its gratifying to hear that there are people who still operate from a position of “implied trust” as it is also one that I would naturally want to start from. I will add though that advice we have been given by everybody we have asked is that we should always insist on an NDA…We are going for our first meeting without one and frankly feel much better, as the whole idea went against our natural instincts for starting a new relationship…

    • http://www.feld.com bfeld

      Glad you are going with your natural insights. I think you are getting
      bad advice!

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