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The Cult of the NDA
Anonymous Coward writes "After looking at hundreds of business plans during the tech boom of the late 1990's, and starting my own company two years ago, I've long been bothered by the near obsession with secrecy shown by many tech startups. This is especially striking considering how few startups are actually pursuing unique ideas. I finally wrote an article about this, The Cult of the NDA, where I argue that too much secrecy can actually hurt a company's chances. Open-source startups, anyone?"
It's called a bluff. By denying something, changing the topic, etc. you can make people think you have something. It's comparable to taking the 5th at trial. People KNOW what's going on, but it can't be legally used for or against you.
It's just like UFO's. At first the Govt said experimental aircraft were just aliens. Then it bit them on the ass. It still worked though. People weren't talking about the SR71 or the U2. They were too busy building a better tinfoil hat to protect them from martian rays.
The company I interned for over the summer had everyone under NDA: Our subject experts, recruiters, even us low level interns doing the real work. Our NDA was more for the fact that any of us interns couldnt run out and do the same thing, not that i'd want to. While It seemed like nothing at the time, even telling people what i did over the summer becomes a process of "umm, well, i can tell you that i programmed..." and them not understanding. But it was fun, and i wrote mountains of PHP that are being shown at trade shows.
"Something's wrong with you...and I hope we never do meet again." - Deftones When Girls Telephone Boys
Which is exactly the route the startup i interned for followed. While the Funds were low, it was enough to cover my 40 hour pay check, so i was happy not to tell anyone what i was doing. It wasnt really that interesting anyway...
"Something's wrong with you...and I hope we never do meet again." - Deftones When Girls Telephone Boys
Consider the case where your business opportunity has a very limited time frame.
1. you have knowledge that circumstances in an area are about to change (Airport being built, large employer moving out).
2. Your'e business idea is fragile and competitors could concievable kill it still born if they knew about it. ( You have a customer list, that a competitor might litigate against you using is an example)(SCO's business plan is another example)
3. You feel you really are doing something novel and you dont want everybody and their brother doing it. (Ever notice that hollywood will make half a dozen movies at a shot that all seem to be the same idea ?)
More importantly most people don't like blabbing their business around and if they have to tell others what their business, and they certainly don't want their potential investors going out and blabbing.
The idea is somewhat linear, just applying software on a large scale to an area which has never had it before, but the execution is vastly more difficult.
Through luck and creativity, it appears that I've found various ways to execute this. Two and a half years to build one part of the software, another couple of years of building and testing, two years of working for "the man" to pay off my debts run up during the first four years.
Now I've got this fairly decent product which I've just started to roll out to some large customers. And I've had many people sign NDA's along the way. If they are violated, would I have the money to pursue the violators? No, of course not. So that makes them worthless, right?
No, they're not, because people don't know that I don't have the money to fight. So NDA's are just a harmless bluff for me and probably everyone else. But in the interests of thoroughness I should use them.
Yes they're useless. Yes you should use them. Not everything has to be useful to be used.
The baby's fine -- please stop sending business cards.
>I've found that for the most part, people like their own ideas, and just aren't much inclined to steal mine
I can't remember who said this:
"Don't worry about people stealing your ideas. If your ideas are actually good and helpful, you'll have to cram them down people's throats at gunpoint."
Don Lancaster has made the same point about secrecy as the article did. There's only one smartest person in the world, the odds are overwhelming that it's not you, your idea will have occurred to someone else, and the way to make money is to kill bad ideas quickly.
I worked for an "open source startup" a few years back. We were producing accounting software for a specific market niche. No NDAs and public betas of our upcoming products. Worked alright, except our competition always seemed to have our latest features in their latest releases. Wonder how they knew? Seriously, it would be nice if there wasn't a need for NDAs, but truth is, unless you hold something back, your competition will eat you alive.
The Case Against Patents
What does he say about NDA's? Publish your ideas in trade journals ASAP!
He's a wise old man. Go read his whole site. It will do you, and the economy good.
"Don't worry about people stealing an idea. If it's original, you will have to ram it down their throats." -Howard Aiken
I often have to sign an NDA, sometimes just to get a job interview. If the terms are reasonable, I have no qualms about this: the agreement is just a written form of an implicit agreement I see as part of my professional ethics. If somebody trusts you with sensitive information, it is simply wrong to be careless about passing that information on.
It occurs to me this argument is partially about the attitude gap between the open-source (or "free") software community and the closed-source (or "commercial") software community. Thing is, these two communities don't have to be enemies. Yeah, some OS people think that commercial software is evil, and some commercial software people think that the OS movement is economically clueless. But the reality is that no one model is the best possible one for all kinds of software. Some projects will prosper if they're driven by volunteers who just want to advance the state of the art. Others will only succeed if they're driven by well-capitalized entrepeneurs out to make a buck. Neither model is likely to go away, and I predict that more and more companies will come to rely on both.
I work for a small research and development company, and yes, we have very strict NDAs. You need one just to get into the building. But in our case, we need them because we actually do develop new ideas. And I don't think that saying that all these tech companies aren't developing new ideas is giving them a fair shake.
We are much more of a tech company though. We develop new technology, but we also do a lot of design projects, for instance the SmarTruck 2
If you can express your whole "special" idea in a concise enough way that someone who hears it can "steal" it, your idea wasn't worth anything.
Fedex "delivers packages around the world in one day", Starbucks "sells 'gourmet' coffee", and Amazon "sells books on the internet". That's all pretty trivial stuff and, on paper, easily copied.
But how can Fedex do it? Their hub system and computerized inventory system are key to the idea but aren't obvious from simply hearing "Deliver packages". And selling books online is easy but building a community of people to review all the material and offering referral bonuses aren't obvious from hearing about the idea yet are crucial to the company's success.
If your idea is simpler than that, and thus more easily copied, it's probably not an idea to base a business on, it's probably a sideline for an existing business with the resources to exploit it quickly. A product idea, not a business idea.
Summary: "Selling Ice to Desert Nomads" isn't intellectual property, it's not a business idea.
Well - I have tried a few times to get funding for ideas that was partly based on Open Source. The problem is not the engineering side but the VC side of it. I have yet to find a way to convincingly explain to a VC that by using open source I can cut the development cost down to 1/10th of what it would have been if I was to develop everything from scratch, and that it actually will lead to a better quality "version 1" product. But VC's seems completely focused on the IP of the product. Without that it seems that even a good business based on knowhow and delivery of services are unworthy of investment.
I for one would love to hear some good arguments that could convince VC's to invest in Open Source based projects.
I have a world changing idea. (Yeah!) It took an enormous effort for my company to build it. (OK.) It has a market waiting for it. (Good, maybe we can make some money.) There are several big companies that have the resources to reproduce our effort, and once we are successful, they will have the motive to do so. (Uh, oh.)
But wait! There is an answer. This great country (U.S.) has decided that software ideas can be patented. Now this is usually done by those big companies to raise the barrier of entry so startups can be killed or at least threatened if they become competitive. Luckily our idea is far from mainstream and requires much specialized technical knowledge to implement. We will be first to market, and our solution answers many issues that are in the news today.
But we cannot advertise the features AND get a patent on those features UNLESS every prospective customer signs an NDA. Once the NDA is signed, the customer is considered part of the development team, and does not count against the application for a patent.
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This is a true story. In our favor, several of us involved in the effort are consultants to our target market, and have the contacts to create a market for the product under the terms specified above. We are also able to identify that our product is unique. To answer the article:
1) A unique new product or idea is essential to a startup's success.
In this case, yes, but only because we need the patents before a big company decides to clone us. The business plan includes the need for patents, and NDAs are required for the patent application to be successful.
2) The first company to capitalize on a new product or idea has a unique and sustainable advantage.
No, we may be unique today, but that is not sustainable without patents. We are not counting on being "first", we are counting on being "only".
3) I have a unique idea for a new product or service.
Yes, because the idea requires much technical ability to implement, and (so far) no one else has thought of it. And because of our unique skill set, we would probably be contacted to help if anyone planned a similar product.
4) If others find out about my unique idea, they could bring it to market first, and steal the advantage from me.
Yes, but today they would not care. We are protecting it to get the patents that will protect us later when they do care.
5) Therefore, by disclosing my idea only under the strictest confidentiality, I preserve an advantage for myself.
Yes, we need the NDAs to get the patents to have an advantage later.
We also have what it takes to make a startup successful:
- Dumb Luck: We have customers before we have a product.
- Execution: We have a business plan, and several high-level managerial types that believe in it.
- Stay focused: This is the hard one. If we dedicated the resources to the product, it might have been released a few years ago. We actually thought the code was done, and had dates for installing it at customers, and then found a major problem with the platform under it that causes the product to crash under heavy load. Oops. And we have consulting careers that limit the time we dedicate to it. We believe the product can be delayed because the IT world has stagnated. So far, this is accurate.
I spend my life entertaining my brain.