This post is the third in an educational email series for capital seekers. To watch the series from the beginning, visit us on Facebook and register. Click here.
One of the first challenges of any new venture is deciding when the time is right to tell your family, your friends, investors, prospective customers and anyone who’ll listen about your grand plan. There are generally two schools of thought:
1. Don’t tell anyone!
Personally, I find this approach flawed for a number of reasons. Here’s why.
(Let me know if you disagree in the comments section below.)
Lotto Entrepreneur Syndrome
Many entrepreneurs find it hard to talk about their ideas, usually for fear of criticism. However, the most common seems to be a fear of the discovery that the idea is flawed beyond redemption.
I call these people Lotto Entrepreneurs. The pleasure they receive from the startup comes from the idea that it will one-day make them rich (like buying a lotto ticket for the chance to dream). The benefits of the dream outweigh the possibility of failure, so they never seek criticism.
They also never launch. Sad really.
Fear of idea theft
Another common reason is fear of idea theft.
This can be real in some industries. However, in nine years of launching my own businesses, watching the Australian entrepreneurship space mature and commentating on everything along the way, I could count the number of times that I have seen an idea genuinely stolen on… wait for it… the fingers of one hand.
This is because large competitors are slow to act. And small competitors usually don’t have the desire or inclination or even capacity to pursue new ventures. The few times that I have seem it happen occurred when two parties were already on a path to launch a similar venture.
So, as such, the idea was not stolen. Rather, it was improved upon by watching the evolution of another startup.
Ugly? Yes. Theft? No.
The need for IP protection
If your business or innovation is heavily IP based (i.e. built on a foundation of strong intellectual property, such as a biotech venture or design innovation), the protection of your IP is probably already part of your strategy.
But, in most cases, the time spent carefully locking down IP is time that could be used forming commercial partnerships, building a customer base and refining the innovation or business.
We live in a fast paced world where execution usual beats protection.
Furthermore, do you have the resources to protect your IP anyway? If someone stole it, what would you do?
In short, most of any organisation’s valuable IP comes in the form of secret sauce — systems, processes or technologies that organisations keep close to their chest, don’t talk about widely and use for their own organisation’s competitive advantage.
What about the second school of thought?
2. Tell the world!
You may have already guessed that, in my not-so-humble opinion, the benefits of sharing an idea usually trump the perceived benefits of locking it down.
Feedback, pivot, feedback, pivot
The obvious benefit is the feedback any business builder is likely to receive (solicited or otherwise).
I recently talked about the benefit of failing fast and ‘pivoting’ in an article and video about 121cast filmed in November. I wrote about how the three founders of this iPhone app business (in their twenties) managed to raise A$250k, led by SingTel Innov8 and co-invested by Adventure Capital, before bringing on even a single customer. (“How three lads in their twenties raised $250k“)
I described the trio as “the epitome of the ‘new economy’ startup mindset.”
From the get-go, they sought input from just about anyone who would listen and they pitched at just about any event that would have them. Pivoting frequently almost became part of their development model. (If you’re wondering, ‘pivot’ is a chess term that has been adopted by business. It’s an exchange sacrifice. You are exchanging the current advantages you hold for a different set of advantages.)
Not only did 121cast have a clearly defined business model by the time of its launch but the idea had also garnered a passionate following of fans to help it launch, something that a secret startup, developed behind closed doors by a Lotto Entrepreneur, could never do.
The money’s in the list
And that, dear capital seekers, is the main argument for being open and responsive to your target market when launching a new business. The money is in the list.
There is value to be gained from building an audience of prospective customers before launch, particularly if you have given those prospective customers a role to play in your evolution. 121cast users have been made to feel like silent partners, even if they don’t hold a share.
And… 121cast made an effort to court investors as a key part of the development of its fanbase.
WATCH THE VIDEO: Derek Sivers and the First Follower
The following video features one of the best leadership lessons ever captured on tape. Seriously. However, it also articulates the value of courting followers, via your personal, business or your social networks.
Launching with a solid, protected innovation is likely to benefit a business, but not so much as a passionate customer base and an investor market that has already grown to desire and feel partial ownership of your wonderful new venture. Not convinced? Then, watch.
This post is the third in an educational email series for capital seekers. To watch the series from the beginning, visit us on Facebook and register. Click here.
