Q: How do instructors deal with
business idea confidentiality when it comes to sharing ideas during classroom discussions?
I have a number of students who don’t want to share ideas, fearing that other
students will steal their concepts.
When this question was posed on NACCE’s listserv we decided to ask
experts outside the NACCE community to respond. They all agreed that business
ideas are rarely stolen. However, cases such as the much-publicized lawsuit
against Facebook’s founders, who were accused by fellow Harvard students of
pilfering their idea, might cause students to be reluctant to expose their
ideas in class, despite the fact that the relationship that led to the Facebook
lawsuit took place outside of class. Here is the advice four experts provided:
It is as common as it is ill informed for entrepreneurs to be
reluctant to talk about their ideas. The truth is it is easy to have ideas and
very difficult to make a viable business of them. Most wannabe entrepreneurs
who don’t talk about their ideas don’t get far with their business.
How can you raise money if you won’t talk about your business?
Anyone, for instance, who will not openly–without a nondisclosure agreement in
place–discuss their ideas will not be likely to get VC money since most VCs
most of the time will not sign nondisclosure agreements.
How can you sell if you won’t talk about your product? The most
needed skill in startups is sales. Why make life more difficult by not talking
about some supposedly secret aspect of your business. Here is a personal case:
I purchased a company in 1993. The valuation was $0. They had repeatedly failed
to meet their sales goals. They did not want to tell their users how the
product worked. The users were scientists who refused to buy the product
without knowing what was inside. After we acquired the company we published a
paper disclosing exactly how the algorithms worked. The product is now a $20m
line. To this day no one has copied it. And I have to admit it’s a pretty neat
idea, a really terrific implementation but the secret sauce ended up being how
to sell it.
Most ideas that entrepreneurs feel are novel turn out not to be
new at all. I serve on the deal review committee for an angel investment group.
I am stunned by how often the same idea turns up multiple times often within
the same few months.
Secrecy has its place but has serious limitations. Anyway, your
students do not need to disclose their secret sauce to write a fundable
Steve Herbert is a serial entrepreneur who
is currently vice president of Sales & Business Development at Cytel Inc.,
a provider of clinical trial design services and specialized statistical
software for the biopharmaceutical and medical device markets.
At one university I handled it this way: I had every student in
the class sign an NDA–it could be short one–but I didn’t sign it. I learned at
MIT that when you’re in an academic position and you have a lot of different
people who are involved with different things, you should never sign an NDA.
Now what I say to my students is that I have never heard of an
instance in which an idea was shared with another student who then took that
idea to start another company. The reason is that you have to have a passion to
make an idea work and if you don’t have that, it’s just not going to happen.
I’ve never had any problems here at Thunderbird or my years at Case Western. If
you make that statement up front as the professor I don’t think you’re going to
have any problems. I also point out in that same statement that first of all
your ideas aren’t worth stealing; I do this in a funny way, but I’m actually
One problem you will have that faculty members need to think about
how to handle in advance–one that I just ran into again last semester–is when
the students form a team to do a project and then one or two people want to do
the project and one doesn’t. This is the more serious issue. The other students
really need to get the student who isn’t interested in the idea to sign a total
release or that could come back to haunt them. There are plenty of examples
like this where people didn’t get this sign-off and it came back to haunt them
later as they took an idea forward.
Robert Hisrich is Garvin Professor of
Global Entrepreneurship and director of the Walk Center for Global
Entrepreneurship at Thunderbird School of Global Management in Arizona. He has
been involved in founding a dozen companies and is author of three books on
entrepreneurship, including Entrepreneurship Starting, Developing, and Managing
a New Enterprise, now in its 8th edition. firstname.lastname@example.org
Nolo Press has a number of good patent, copyright and trademark
books for entrepreneurs; these books have very good real world approaches to
situations like this. Nolo’s Patents for Beginners is a book I used to give
away to prospective clients so they would understand that all this stuff is not
quite so mysterious. That would be a good source of information for both the
professor and the student. (Visit http://www.nolo.com to learn more.)
There is a tendency for students not to want to give details. When
I was in the classroom, I found that students who are at an early stage quite
often weren’t distinguishing what would be protectable, confidential
information and what ideas were such good ideas that if you looked in the U.S.
Patent Office database 10 people had come up with similar things and had them
If students are interested in patents and trademarks, the federal
government has Web sites with basic information. Patents are being issued at a
rate of about 4,000 per week and by the time this article is published we will
hit the 7,700,000th utility patent, so every week it gets harder to argue that
a new innovation is new and non-obvious.
Roger Zimmerman is an intellectual property
attorney with Mirick, O’Connell, DeMallie & Lougee, LLP. He has done
presentations to the entrepreneurship programs at Babson College and Worcester
Polytechnic Institute and also taught for 15 years at Rush Medical College
& Graduate School in Chicago. Rzimmerman@mirickoconnell.com
If you can’t tell your idea to others, you can’t receive feedback
that confirms (or denies) the attractiveness of the idea. When the "market
research” behind a business idea is primarily that the founder/inventor just
knows it will be great and everyone will want it, that isn’t sufficient for
investors- and shouldn’t be. Talking up the core of the idea opens the
student/entrepreneur up to hearing the strengths and weaknesses of the idea,
and should improve the quality of the plan-and maybe of the idea– in the
We tell our students as a general guideline that things that are
discussed within the class should be considered confidential within the class.
You would expect this from your classmates and you should do this as well. I
will not, without permission of the student, discuss their idea in another
class. If you don’t reveal this idea in this class, you might as well stop now
because you will not get investors to support it. VCs will not and cannot sign
DNDs until they go into the due diligence phase; if they need to sign a DND
just to hear your idea, they will pass. VCs who receive a thousand business
plans a year choose to skim and evaluate 100 out of the 1,000; they see a lot
of ideas come year after year. It is almost universal that the student who is
presenting the idea believes they thought it up themselves and that they are
the first and only and that is very rarely the case.
Barry Horowitz is president of Horowitz
& Company, LLC, a management consulting firm, and an adjunct professor at
Boston University’s School of Management, where he teaches a certificate
program for entrepreneurs. He has also been an entrepreneur and raised VC