Startup Therapy Podcast

Episode #50

Ryan Rutan: Welcome back to another episode of the startup therapy podcast. This is Ryan Rutan joined as always by Wil Schroder Ceo and founder of startups dot com. So will I've got a little secret I want to share with you. And it's that a lot of people get really worried about people stealing. They're startup secrets. How much of an issue is this? Really? In reality

Wil Schroter: it's the dumbest issue ever. There's the way I look at it. Everyone has seen the movie, the social network in the premise of the movie. Spoiler alert, is that the evil winkle voss twins told Mark Zuckerberg the idea for social networking and he stole it and he built facebook and it became a multibillion dollar company and they got screwed. And anybody that ever shares their ideas may find the same fate as the poor winkle vibe. And I just the best part about that story or even the premise, if you're even remotely familiar google how much money the Winklevoss brothers made by not doing anything in telling their idea to Mark Zuckerberg, Let's put it differently. If you're going to have someone steal your idea, make sure it's Mark Zuckerberg right? That's

Ryan Rutan: pretty sweet when you get a golden parachute before your first day on the job

Wil Schroter: without having to do anything. I think billions of dollars by somebody else. I mean, I statistical

Ryan Rutan: Anomalies in so many ways, right? Like I mean they're like, what, like nine ft

Wil Schroter: tall

Ryan Rutan: athletes. They're both model attractive, right? Top schools. They're like, yeah, these guys sound like they're a problem. Like they like my problems are exactly the same as they're, they're not.

Wil Schroter: I have different look than the premise is the same and you can appreciate this because we talked to thousands of founders and to be fair, they all have this concern rightfully. So I don't see a version where someone would get so excited about something, plan on devoting so much of their life, all of their money, their attention, everything towards something and not be somewhat concerned that someone else might take it from them. That's a pretty legitimate concern that said, It's just not an accurate one. That's a real problem. And here's the myth as a whole as it's been perpetuated, I believe. Right? You tell me what you think, You know what, what color may be added to this, but the myth goes something like this. I tell you my idea first startup. You love the idea. You as evil Ryan, go ahead and take my idea, Go build a billion dollar company and I'm left insane walking the streets mumbling about how my great idea was stolen from me. That's kind of how the myth goes. Right? Oh,

Ryan Rutan: sorry, sorry, I missed that. I was practicing my finger tenting. I'm gonna steal ideas. I've got to look like an evil genius.

Wil Schroter: Yeah, yeah,

Ryan Rutan: that's right. Yeah. Evil reign. Yeah. I mean if it was only that easy, right? It's so flawed in so many ways. Like if the idea was all it took, there'd be a hell of a lot more really big businesses, right? Unicorns wouldn't be special. There'd be herds of them running around the the idea is just a tiny piece of it.

Wil Schroter: Right? And

Ryan Rutan: also, who are you talking to on a regular basis that just happens to have the same level of business acumen drive and all of the characteristics that lead you to having that idea. So they can go and do this thing. Who is that guy who's, who's hanging out with these clones of themselves, who just happen to have the same resources and motivations at the same time? It's not

Wil Schroter: happening. It's the equivalent of saying if I just give somebody else my playbook, they can win the Super bowl kind of helps if you're tom brady. I was just getting ready

Ryan Rutan: to say the same thing, right? Like yeah, like if I just go and take Michael Jordan's basketball, I'll be able to dunk. Sweet.

Wil Schroter: Yeah. So, so what I think we should chat about today to dig into because I think people have a pretty strong feeling for our opinion on this one is why you shouldn't be so concerned about it, right? Why? The idea of someone just stealing your idea is honestly fairly ludicrous. However, we'll also talk about how you can protect yourself to the extent that you can, what's protect herbal, what's not and what you should just run with, right? Because again, we've seen really at this point, hundreds of thousands of ideas. Ah And we've seen the journey people go on and I think one of the most difficult and expensive places that folks get derailed is this concept of saying I have to protect this thing. It's got to be locked behind an N. D. A. It's gotta be patented. My attorney told me that all of this needs to be under lock and key. Otherwise I'm going to get swindled by the world. Which is ironic considering that's the person that's swindling you at the time. But I think we should dig into each part and make people feel comfortable with what they can and can't share.

Ryan Rutan: I think we better. And I think that one fundamental principle that always sticks out to me during this particular discussion is the perception of the reality right? And there are real costs to this. But funnily enough the costs that you that you incur around somebody stealing your idea are mostly on the things you do to defend it and those are the likely ones right? The ones that you choose right? Like doing the N. D. A. Keeping it a secret not tell anybody about these things have real costs. The probability of those things happening is much greater and therefore you're likely to incur those costs. The probability of someone stealing your idea and then having it go exactly as you would hope it would go and they get to live your life. The probability of that is very small And so therefore like the real costs that you incur throughout this consideration tend to be the ones that come from trying to defend it. And trying to keep somebody from stealing your idea not actually having it stolen. Right. I think that should be like the top layer as we consider the rest of this. Let's remind ourselves the probabilities all lay on the side of what it costs us to defend this not what it cost us if we don't.

Wil Schroter: Okay well let's start there let's say that most folks say look I've gotten guidance from my attorney. My attorney says that the very first step is to lock this up under an N. D. A. Is to lock it up under in some cases some version of a patent or some other kind of intellectual property lock and key to make sure that my idea stays protected and no one steals it and I'm safe.

Ryan Rutan: And at $600 an hour obviously they know the right answer will. Of course they do.

Wil Schroter: And so what I would say and again I think attorneys mean well right and again I know it's easy to beat up attorneys but did you say well what would you say? Well I think they mean well and their job is to protect you. So I respect that. So if there's attorneys listening I'm not bashing attorneys. What I'm saying is you have to make sure you're using the right tool for the job. If I'm an attorney and I say look I have to lock this up under N. D. A. And I have to make sure that that it's patented etcetera. It's not that I'm wrong and that that makes it protect a ble it's that that's just not sucking necessary. It's part of my branch. Just like the part that's missing in that dialogue is do I need it? And how would I enforce it if I had it? Like what is that protecting me from?

Ryan Rutan: That's the big piece. Right? The enforceability of an N. D. A. Definitely in huge question. Right? And then there are there are certainly cases where where we we've seen them upheld. But before you even get to the part about enforceability of the NDA, let's talk about the practicality of getting somebody to sign one of the damn things.

Wil Schroter: Yeah. It's just not gonna happen to put it this way. We see over 20,000 startups per month on the startups platform. We get people asking us all the time to sign an N. D. A. Before they'll share their idea and we try to be cool about it. Let me get I wouldn't want to think that we're coming across crass and this I'm trying to overstate this point of how silly that that proposition is. But we've never signed one in the history of history investors don't sign them. No one signs your N. D. A. Someone might maybe you got like an angel investor that's not that sophisticated to sign it. Generally speaking no one takes an nd even remotely seriously. You look kind of foolish. If you even ask people for it. Can you gotta sign it? Picture, picture, picture

Ryan Rutan: if you and I were signing N. D. A. Is what the conflict of interest checks would look like would be like yes I'll sign your N. D. A. Um But after the conflict of interest checks first. So I'll get back to you in about 2026 when we've completed that exercise. Can you think about

Wil Schroter: this? Since you're asking an investor to sign an N. D. A. You're saying I want to put you in a precarious legal position to just hear my idea. In fact you may hear the same 10 ideas in the next month. But by all means lock in on a legal proposition with me so that I can sue you in case you overstep right? Why would any investors sign? That sounds great right? I mean listen remember to the investors of the position that I can look at 100 deals this month. Why would I want to look at a deal where I have to sign something that would legally come against me? Well because obviously well you're you're

Ryan Rutan: missing the point here. Obviously the one behind the N. D. A. Is the secret worth protecting.

Wil Schroter: Oh right. Absolutely. Yeah. It's just it's it's just not the case. Right? And and again we should talk a little bit about in this episode about what you can and can't share and why the N. D. A. Actually just doesn't make sense to begin with To be 100% clear investors don't sign N. D. S. We don't sign nds. Is it because we want to go and steal your idea. No we're trying to work on our own idea. Investors are trying to invest in ideas not build them. But if I'm an entrepreneur typically I've never done this before. I don't know any better. I don't know that that's the way things work in my mind. This is a great idea. It's the next facebook and if I tell you and you take it with all the resources and money you have and build it then that was a huge failure on my part for not protecting it. And I get the logic. The one thing you'd be missing is it just doesn't actually happen. So one caveat to that though it's small. I'm sure it's happened at some point. I'm sure there's some case law that's out there where someone has actually had intellectual property stolen And someone sued Winkle Voss style and there's been a whole issue around it. I'm not saying there's 0.00% chance that it's ever happened. I'm saying in the 25 years that I've been doing this with the thousands and thousands of companies we've worked with and and with over a million companies in the platform. We've yet to see it happen now. Let me put it this way. If it was so common and so rampant, this would be the last advice we'd be giving. We're saying we've never seen it happen. Doesn't mean it hasn't just saying we've never seen it happen. So if it was so common, trust me, we'd be looking at this very differently.

Ryan Rutan: Yeah, I mean, and and you know, it's a big world, right? Lots of people are coming up with the ideas simultaneously. You know, there there's there's small twists on on things that already exist, whatever, right? The likelihood that you're going to enter a market with an idea that is unique and remains unique through the life cycle, is starting a company probably something you just need to get over because it's not going to happen, right? There will be somebody else doing something similar this property already. Somebody else doing it. You're probably taking a slight turn on what somebody else doing right? Are the sumerians complaining at this point, having invented the wheel thousands of years ago that Uber is making money off of it now, I don't think so.

Wil Schroter: She had it in the a that

Ryan Rutan: should have been

Wil Schroter: maybe

Ryan Rutan: they did. But given that they spoke in a dead language, we just don't know that now. Right.

Wil Schroter: Yeah. Yeah. But okay. So look, let's talk about not whether nds work or not, You kind of already heard our spiel. Let's talk about when we should keep an idea secret and what parts of it you should keep secret because we're not saying you're right. Yeah. Listen man, we're not saying you should share everything all the time. We're saying here's what you can share. We'll talk about it. And here's what you probably should keep behind your own secret recipe. Lock and key for a later time. So, let's let's make it simple. Mhm share the idea. Not the secret sauce. So, Ryan, when you talked to founders about how to share their idea. Not the secret sauce. What does that look like to you?

Ryan Rutan: Sure. It's It's talking about the problem. Right. And and the problem in detail. Right? Because the problem in details what allows people to attach themselves to it as well, right? To understand and to see value in it. So, if you got to be out there sharing the problem. If you're not or if nobody cares about the problem, then the solution kind of doesn't matter. Right? No amount of secret sauce for a problem that nobody gives a sh it about is going to save you. Right. You can have the most elegant solution for a problem. Nobody cares about. It's not a company. It's not a business. It's not gonna go anywhere. Right? So, being out there and talking about the problem, sharing that with people is a great way to start to gauge the value that could come from a solution to that problem, Right? If nobody cares about the problem solution doesn't matter to your point, trimming down the solution, right? Talking about the solution in a way that that kind of tells you what's going to happen, but doesn't tell you what's what's inside of it. Right? I have you've talked about this before and I think you used the example of coca cola. Right? So I'm thirsty. Here's a coca cola. You don't tell them what's in it and more people be drinking if they didn't know what was in at this point, but you don't give away the secret sauce, right? You don't have to come and say, um, what was the, it was the famous pitch Twilio, right. Problem, telephoning is extremely complicated and messy and it uses antiquated systems. The solution, we have boiled this down into six api calls what he didn't do next was copy and paste the un compiled source code for everyone to read.

Wil Schroter: Right, Okay, so this is an

Ryan Rutan: appropriate amount of sharing, right?

Wil Schroter: I think that's so appropriate. Let's stop and let's unpack that a bit because I think this is really what folks need to hear and try to apply to what they're doing. So let's start from the beginning, we can talk about the problem all day and a lot of people don't understand that. There's a big difference between the problem in the solution? The problem is what's frustrating consumers in the market. Right? What does that look like? A good problem statement can get me fired up about your idea without even knowing what the solution is. If I say one in three americans die of cancer, right? Dude, that's a big problem. It's death and it's it's one in three people. Right? We have a solution to that problem. Whoa, right. I don't have to show you the molecule that I'm using to cure cancer. I have to show you right. I have to show you how incredibly painful and severe and powerful this problem is. And so sharing our ideas begins with isolating the problem. I'm getting people excited about it without having to initially explain what your solution is. Now. That's that's half of it. The other half of it is being able to explain your solution as what it is without saying how it works. In other words, the their secret recipe behind it. So for example, like if if You were pitching Netflix in like 10 years ago, not even like the The DVD mail, you know, version Netflix, but 10 years ago and you were saying, look, problem right now is cable tv costs 100 to $150 a month, which is ridiculously expensive. You've got limited content, you're tethered to your tv, the world is changing so quickly. None of this stuff is going to make sense in five years. I think we need to overturn that model now. You have no idea that I've said netflix yet, but you couldn't start to say yeah, you know, actually that is a huge market paying for cable, you know, paying $100 to $150 is way too much. Uh, the content does kind of suck. I hate the fact that I can't get everything when I want it and I'm tethered to my tv. I want to start watching stuff on my ipad. I haven't explained to the product yet, but I've outlined why you should care about this solution. Yeah. If I talk about the solution, I can talk about the solution at a high level, I can say we're going to roll out a streaming service that allows you to pick any show that you want when you want on any device that you want it on. That doesn't tell me anything. As an investor partner, Hella competitor for that matter about how I'm actually going to do it, right. Just explain how streaming technology is going to work. I go to market customer acquisition plan, nothing. All it explains is this is the ballpark we're going to be in.

Ryan Rutan: And interestingly enough, look at a business like netflix, there isn't that much secret sauce, right? And you can talk about, you know, compression and streaming algorithms and yeah, there's technology there. But is that what made them the success that they are today? I would argue strongly, no, had very little to do with that type of steel, A ble secret sauce. All right. What was it about their technology? That was that was something that you could just grab and take away. Nothing comes to mind. Well,

Wil Schroter: yeah, there is such a unique case because they've actually gone through two entire epics of media from DVD movie rentals, you know, physical to streaming

Ryan Rutan: will you might want to pause there and explain to a significant portion of our audience what a DVD is. I just had this conversation over the weekend by the way, and they weren't being ironic. They had no idea what it was.

Wil Schroter: Oh yeah, my kids, whenever we go on vacation uh we're in the hotel and they watch tv in commercials come on and they don't know what they are. They think they're awesome by the way. They think, oh my God, there's there's a short movie about a toy that I love. This is amazing. It every advertiser's

Ryan Rutan: dream right there. It's unbelievable. Like

Wil Schroter: They've never seen commercials. You know, my daughter is eight and my son is almost four and they've never seen commercials. I mean they see him now barely and they're so entertained by them because as far as they're concerned, their movie trailers for toys, which they are, but they don't see him as this interrupting annoying thing. They see. They think they're amazing.

Ryan Rutan: They're interrupting and annoying for us more than one. So

Wil Schroter: netflix has gone through this progression. But for an idea as big as netflix, the way we just described it, here's the problem in the market. Here is the solution we're going after. That's your calling card. As a founder. I need to be able to articulate problem solution and ideally market size and that's it. And here's why what we're trying to do is we're trying to vie for attention in this case. Let's talk about investors because I think that's where people's heads are at right now. Uh, we're trying to vie for investors attention. We can't hold back. We can't say here's the problem, but we're not going to tell you the solution. Like you're competing with hundreds, if not thousands of other founders who aren't going to do that. There's no upside and being slick about any of this stuff. All that's going to happen is you're gonna get passed over, you're gonna be forgotten about. So it's, it's a total miss with that said though, If I say, here's the problem. Here's the solution. Here's the market size. I haven't given away any secret sauce. There's nothing about what I just told you that's steerable. I need the playbook behind it and all the people behind it to make it steel

Ryan Rutan: energy to keep it going right, like, yeah, it's the idea is not the thing, let it go, folks. The idea is not the thing.

Wil Schroter: The idea is not the thing. And so in our minds, you know, as founders, we're so concerned about what I can or can't share. And so like we're saying, I want to share the problem. I want to share the solution again. Not necessarily the secret recipe, but just the solution. The idea isn't the secret recipe. If I say, hey, I'm, you know, I'm sean rad and Sean started Tinder and he said, hey, I've got an app that allows you to do essentially speed dating by swiping left and right,

Ryan Rutan: Oh dude, you just gave away the secret sauce.

Wil Schroter: Everybody's great. It's not that simple. The idea that my secret idea will prevent anybody else from ever doing it is probably the lamest defense of all time. In fact, I would go so far as to say if that's our defense that no one can hear about this idea and if they do, they can steal it. I've already lost already lost.

Ryan Rutan: I'll bet there are a lot of really great startups secrets out there that will never hear about that. We should have for this very reason. Like I think about this quite frequently, like how many things are out there right now on some poor scared founders lab bench or hidden in some google doc that they're just so afraid to reveal that we'd all be better off if they did and they're just not doing it because they're scared. It makes me sad.

Wil Schroter: I'll give you some examples years ago before crowdfunding became a thing I'm sitting down with a good friend of mine and we're having coffee and we're not in southern California time and I'm so excited to share with him my idea. And at the time the jobs act was, was in the process of getting past would allow people to essentially raise capital online. Crowdfunding was, was about to take off and become this huge thing. And I had this idea, I was working on where I was going to allow startup companies to raise capital online. Sounds silly now, but it was there was a time when it was a secret idea. So I'm sitting across to my friend and I'm sharing with him the idea he's sharing with me, his new idea. And as we're going back and forth, we're starting to realize it's the same idea I was starting, he was starting crowd funder dot com and we're going bullshit. And now the idea that he was going to take my idea and run with it or I was going to take his idea and run with it. Both of us have started companies before and we both knew that it didn't matter that we both had let the cat out of the bag that we were starting a company even to people we were going to compete with because we both knew it doesn't matter like you have to go back to your corner and execute, I have to go back to my corner and execute and we're either going to make it work or we're not. You knowing my playbook isn't going to change a whole hell of a lot. Now, to be fair, I'm not advocating sharing your entire business plan pro form and everything. I'm not saying share everything I'm saying. Don't try to hold back the even concept because it's not going to buy you.

Ryan Rutan: That's yeah, that's not it. Right? Today is not the day that will declared open source everything, right? That's not what's happening here, right? But yeah,

Wil Schroter: protective,

Ryan Rutan: right? Worried about what you can control and let the rest of it go.

Wil Schroter: And you've got to share ideas. You have to share your idea with anyone that will possibly listen because that's how you find who the people are. They're going to work with you. I'll give you another sense.

Ryan Rutan: This is why I find it so hard not to be cynical about this topic because all of my instincts are the exact opposite and like I had an idea nine seconds ago, I think I I think it might be cool. I'm gonna go tell everybody I know and see what they think about it, right? I'm the exact opposite of this. I can't keep a secret, horrible secret keeper. Apparently remember that.

Wil Schroter: Well look, man, I'll give you another example. So, again, running around southern California at the time. This is uh, circa 2008, I don't remember exactly the year and I was running a bunch of businesses, but I was telling a bunch of people about this idea that I had, which was to allow anybody to get off all of their junk mail by a single button press. They would become this idea unsubscribe dot com. In fact, that's what I was calling it ironically, even I didn't have the domain that time, I guess I was just wishful thinking. Um, but I was telling everyone that I was having coffee's and beers with or whatever about this idea without any idea whether I'd ever launched it or anything else like this. But this is the point of why this is so valuable. Two of the guys that I told out of probably hundreds that had to listen to me babble wound up becoming my co founders in the business, right? Because they heard the idea. They said, man, that's something, you know, I love, I would love to get involved with and ended up leading in to people that I had never worked with before. That had never occurred to me in a million years that I would ever work with on something. But by sharing the idea was able to bring them into the fold and build something together. And I got to tell you if I had held it close to the vest, then I wouldn't talk to anybody about it. None of that would have happened. I, I think there's some real danger in trying to be too guarded.

Ryan Rutan: Do you earn uh interest on secrets,

Wil Schroter: definitely not. And I'll tell you what, I think people have this concept that if if someone else here's my idea, they're gonna steal it, build it and kind of box me out. Look, I gotta tell you, I can't emphasize this enough. If someone can just hear your idea, steal it and build it better than you. They deserve to be building it. Not you.

Ryan Rutan: Exactly it. Right. That was easy.

Wil Schroter: The point here isn't about you getting robbed right? The point is you have to be the best person to execute this. Now, here's what the entrepreneurs thinking again. Earlier in my career, I would have thought the same thing like, well, hold on a sec. Guys, if I tell an investor that investor has far more money to put to work, I have nothing. But I am a student. Let's say they can put all their money to work. They can put their network to work. They can recruit all these people if I just tell them and they're better and better equipped than I am to build it before I'm able to raise money or anything else like that. Well then I'm gonna just gonna be stuck out not true. Just hearing the idea. Just having access to resources doesn't make that a better company. It helps. But what makes it a better company is the execution is how we get in there every single day for years and how that collective arc changes the company, anybody that tells you otherwise that somebody could just take the idea and run with it as if it's mine is kidding themselves. You know, actually Ryan, I've got a funny epilogue to this because now I just thought about this. So the two guys that I talked to about unsubscribe dot com, Jamie Simon off and josh Roth, both great guys, uh, you know, serial entrepreneurs themselves and the three of us started unsubscribe company grows up, does okay, not great. And we ended up selling it and Jamie said something really interesting to me. He said, you know what, I'm never going to start another company, that's somebody else's idea again because I only want to yeah, well he said, I only want to do things that I feel personally passionate about, you know, well this was your thing, you know, and I kind of ran with it and Jamie discredit did a great job, but I only want to work on things that I personally care about. Well, you know what, that's how most people feel, most people aren't looking to steal other people's ideas. They want to work on something that's their idea.

Ryan Rutan: Yeah. And and obviously that worked out well for him, right? Following following his passions the next time opportunity knocked, it was actually a doorbell, right? And he went on to build ring and and chase that for years and and push that all the way to the finish line and had an amazing exit. So yeah, it wasn't something he grabbed from somebody else, right? You didn't steal that idea. And you know, your, your own ideas are the ones that are going to have the, the amount of passion energy drive required. I think that, you know, we forget how much goes into these and that's why it's probably more of an early founder issue alright? Until you've gone through this and realized the amount of life and energy and everything that this is going to take to make happen, it seems like somebody could just come and pluck it for me said said differently when all you have is the idea, the idea feels like the most important thing ever, Once you spent two or three years working and building and grinding it out, you know that somebody's not just gonna grab that and run with it right? At a minimum, they're three years behind you. Right? So it's worth remembering guys that again, the idea is not the thing. Um, and that they're a hell of a lot harder to execute on than, than you might. You might hope we all hope they're easy. They never are.

Wil Schroter: It's exactly the case and what we tell people and I think this is really important for everyone to understand ideas are not protect Herbal. The idea, the concept isn't protect Herbal, even if you wanted to protect it, it's so damn hard to even try. Yes, you can apply all the nds, all the non competes, all the patents you want around it. What's protect a ble is the actual execution, What's protect Herbal or the people behind it that see that idea through you take any great idea, any great company that's been built and it was never the idea that got it started. That made it a huge company. It was the people who carried that idea through every single time.

Ryan Rutan: That's a wrap for this episode of the startup therapy podcast. This is Ryan Rutan on behalf of my partner, Wil Schroder and all the startups dot com family thanking you for joining us and we hope you'll continue to join us. Be sure to subscribe rate and comment on itunes or wherever you love to listen to startup therapy. You can find all of our episodes at startups dot com slash podcast. If you're looking for more amazing resources to launch or grow your startup, be sure to head to startups dot com and check out startups unlimited. It's everything we have to offer from our online university to our amazing community of experts and founders and even all the tools we've built like biz plan, fungible and launch rock. It's everything a founder needs visit startups dot com slash begin that startups dot com slash B E G I N. You'll thank me later

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