Bat Around Startup Ideas With Me
Here’s my pitch to a silicon valley startup founder (the batter), “What would you do with $10,000 and 25 days?”
Founders and investors “talk a good game.”
I reflected on that idiom for a moment. Group A, the founders, are in a challenge against Group B, the investors, who yell out, “pitch us.”
So, the analogy is a baseball contest, a sport played by men. Or, it can be a softball tournament, a pastime where women take part in it.
In both arenas, the pitcher is a defensive position. It’s also very vulnerable to a batted ball that is hit hard and can cause bodily injury. The scariest thing that can happen to a pitcher is getting hit by a comebacker in the head or face. The worrisome scene played out just minutes after the Yankees opened spring training 2.0 in The Bronx, on Saturday, July 4, 2020. Masahiro Tanaka suffered a frightening injury when he took a line drive off the right side of his head off the bat of Giancarlo Stanton during a simulated game.
Can a founder suffer a similar injury? Yes. The venture capital (VC) business has an unwritten rule on non-disclosure agreements (NDAs). You can read the numerous excuses why a VC won’t sign an NDA with a founder.
At any given moment, an investor is looking at a lot of similar deals.
Any person with money at risk who tells you they won’t sign a NDA isn’t being forthright. They have signed an NDA. With their firm.
A confidentiality agreement is a written legal contract between an employer and an employee. The confidentiality agreement lays out binding terms and conditions that prohibit the employee from disclosing company confidential and proprietary information.
In essence, a VC is under a signed agreement not to reveal to founders what they know or what the company is working on. So, then, the primary reason they cannot sign an NDA is the founder is not an employee of the investment company. And, vice versa. The investor is not an employee of the startup. In this scenario, the VC firm has the asymmetric advantage and the apparatus to exploit any, and all, ideas entrepreneurs are willing to give them for free.
Venture-backed startups face great pressures to perform. The more money raised, the more pressure. What’s the workaround?
VCs can use interrogative sentences, in an informal setting, to gather information and clear up confusion as well as engage in interesting conversations with founders. Founders can respond under certain restraints like batters do:
- Use forward-looking statements to address any expected future business and financial performance and financial condition. Why? Forward-looking statements by their nature address matters that are, to different degrees, uncertain. (That’s how it’s done in the real world).
- Refrain from revealing a “trade secret” constituting information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and (2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
- Understand copyright does not protect ideas, concepts, systems, or methods of doing something. A founder may express ideas in writing or drawings and claim copyright in a description, but be aware that copyright will not protect the idea itself.
“Bat around startup ideas” means to plan to talk about an opportunity, from various points of view, for the purpose of arriving at an investment decision or formulating a plan of support. An investor can ask clarifying and probing questions. Founders can describe the business generally using the North American Industry Classification System (NAICS) or the discontinued Standard Industrial Classification System (SIC).
By becoming the batter, a founder will either strike out or be in a position to score an investment offer.