Venture Capital

by Mike Masnick

The Age Old Entrepreneur-VC Paranoia Question

from the new-generation-of-entrepreneurs dept

More evidence that startups are back in fashion: we're seeing a repeat of articles about the startup process that were published during the bubble years. It seems that every new generation of entrepreneurs has to find out how things work yet again -- so the old stories are resuscitated with new actors filling all the usual roles. The Boston Globe is running the ever-popular "how secretive should you be with your business plan in pitching VCs?" story. This article was probably written and published twenty or so times in the mid-to-late nineties. While this one includes the story of how Sidestep pitched some VCs who later went on to found competitor Kayak, the example case five years ago was UrbanFetch being created after an investor heard Kozmo's pitch and figured he could do a better job. Of course, VCs who actually do take someone else's idea are being pretty stupid -- because word gets around (such as in articles like this one, where VC firm General Catalyst is accused of poaching Sidestep's ideas) and it makes it more difficult for them to get the good deals in the future. Venture capital is a reputation business -- and jeopardizing the reputation over a single investment is a bad bet. However, in the long run, this issue is a silly one. If you have a good idea, keeping it secret is never going to be the answer. It may make sense initially, as you sort out some of the details, but if it's a good idea there's always going to be competition -- and the real trick is how well you can compete in the market, not in how well you hide your business plan.

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  • identicon
    Anonymous Coward, 14 Mar 2005 @ 11:42am

    VC and secrecy

    The first thing to keep in mind is that VC's are sharks and they will do whatever it takes to maximize their revenue.

    I actually have two business plans in my files, both for online somethings. One was pitched to VCs (and got about $100 million in funding), the other is the EXACT (down to typos) same business plan for a company started by a 'resident entrepreneur' at a VC.

    So business plans get stolen all the time. I would suggest to anyone reading this that if someone reading your business plan can just clone it, then there is not much of a barrier to entry to your business and you are pretty much screwed anyway. Just take the VC money and have fun with it while it lasts, and make sure to pay yourself a nice high salary.

    And don't stress if it tanks, since you will have plenty of VC driven opportunities in the aftermath.

    reply to this | link to this | view in chronology ]

  • identicon
    Michael Clouser, 28 Mar 2005 @ 12:11pm

    Execution is Key

    Last sentence....yes it is how you compete that matters...but how do you do that? Good execution. Knowing the market, having an entrepreneurial spirit in the organization, and hiring good people all around you, or working for good managers. Remember, 95% of management is BAD management.

    reply to this | link to this | view in chronology ]

    • identicon
      Joe Spinoso, 9 Apr 2006 @ 6:46pm

      Re: Execution is Key

      I too have an investment opportunity, but finding the right person/investor to talk to is difficult. It happens to be a new film that has never been done before. That's right it's not another Hollywood remake. It's an original and not a documentary. I have patent protection and through months of trying; I finally got a major movie rental store to listen. They even made an offer in the millions to buy the rights. I'm not selling. I want to make it myself. Would you sell your patent for a few million or try to find an investor to make the movie so you could make a Billion? I think I'll keep trying to find an investor. Just need a little help. Does any one out there know a good investment company? Or, someone that wants to fund a Blockbuster movie? If the lead works and they invest in my movie I will give you a finders fee. I've got three different production companies chomping at the bit to make this film. I just wanted to test the water to find any negativity to make this film and I have none. Everyone that knows about this film gets excited; to say the least.

      Thanks for the help.
      Joe Spinoso 813-597-4666

      reply to this | link to this | view in chronology ]

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