First Mover Disadvantage
A number of entrepreneurs fear that their idea would be stolen. Because of this fear, they do not participate in competitions or communicate clearly with investors. Some entrepreneurs have even asked for the protection of their ideas as intellectual property. An entrepreneur feels that if someone were to know about their idea, they would implement it before them and they would be left without business. After launch, others would anyway get to know the idea and they can copy it thereafter. This also assumes a massive first-mover advantage that might not always exist as evidenced in the papers mentioned below. For innovative technologies, second movers have a slight edge. Since the path is unchartered, each startup makes its share of mistakes, the second startup learns from the first and avoids those mistakes (to make new ones).
Another difference in the case of startups (as compared to traditional businesses) is that most startups have to create a market for themselves. They have to warm up the market to the utility of the product and, in some cases, even alter customer behaviour to that effect. App-based taxi aggregators are a case in point. Taking a cab was not routine in India. Autos were considered sufficient. Today, a cab aggregator strike leaves most people hanging. This is because booking a cab has become part of our routine and we see nothing novel in it and no other alternative. The first few startups have had to burn money by incentivizing drivers and riders to use their service and make it a part of their routine. Similar is the case with e-commerce. Ensuring trust in a transaction is difficult as it is. In the case of online transactions, it is even harder because the users can neither see the seller nor feel the product. If they were to get conned, they won’t even know where to go. Heavy discounting was used to incentivize people to order online. Step by step, trust was built, but the first movers had a tough time therein. It is hard to imagine how convincing investors would be easy for a startup that is the first of its kind. Calculated risk-taking is one thing, but this would be closer to taking a gamble.
The value of an idea is in its execution
As soon as you hit the market, everyone can know about your idea. With some competition, it comes down to who can execute it better. This is a staple in investor presentations: Why You?
The answer to this lies in convincing the investors as to why you and your team are the best people to execute this idea. If it is something that anyone can do, then you should probably not do it. At least an investor would not like to bet their money on you. They can fund a team that is better suited in terms of years of relevant experience, education, or commitment and better presentation skills. AskJeeves existed before Google was all over the place. The difference between them can surely not be attributed to first-mover advantage.
If you think ideas are valuable, please visit the Startup India idea bank and transfer funds to Startup India team through cheque or cash. There are over 300 ideas across sectors and each one of them has some grounding in problems faced by Indians or targets of various government programmes such as cleanliness, hunger, poverty, Olympic medals, railways, making the country friendly for the differently-abled among others.
Intellectual property is construed as a loose term that can include all brain droppings, but legal protection is not available to all of those. While legal protection is available to plant varieties, and industrial designs, in the context of startups, it is mostly patents and copyright. While a patent has to be registered, published and granted, copyright is enforceable by the author even without registration in most cases.
- Copyright includes any document, piece of music, video, sound recording, art or creation. A rule of thumb is that if anything has an author, it can be protected through a copyright. An important caveat here is that if someone writes a poem about a cycle, the cycle is not their intellectual property; only the poem about the cycle is.
- A patent requires certain conditions to be met before it is granted. It should be novel and it should involve a non-obvious step. In other words, the step should not be obvious to anyone well versed with the field. It should have a positive utility for society and should have an industrial or commercial potential. Patent applications are detailed and include all aspects of the invention. Patents pertain to new systems, inventions and products that are better than existing options.
Neither patent nor copyright protect just an idea. If I get an idea today that in all hostels there should be a standardized laundry service, which would allow economies of scale and better prices to the students, I might have a right over this line but not over this idea. If tomorrow someone were to link laundry services in IIM Ahmedabad and CEPT Ahmedabad, I shall hold no enforceable claim over this. If this were not the case, then I could create a list of ideas and publish them on my website and kill all innovation in the world or make money from it.
If you are applying for a competition sponsored by the government, then the government would be most interested in procuring your services/product towards the betterment of the society. The government is organised in a strict fashion where each department, each ministry has a defined set of activities they can undertake. Ministry of External Affairs cannot start aggregating insurance providers to get a cut on marketing. Similarly, each Public Sector Undertaking has a defined mandate, each employee has a role and a set of responsibilities. It is not possible for them to pick up a new idea. On the contrary, PSUs such as GAIL and BPCL have been actively collaborating with startups. They have not only made investments in startups, they have given grants and work orders. If someone is able to provide something in a more efficient manner, any organisation would like to procure from them and carry on with their core business.
In case of private clients, startups are more apprehensive. They feel that private people further lack accountability. The efficiency logic applies to private clients as well. One voiced concern is that a client might see one pitch and feel that their existing vendor should be able to provide the same set of services. This is also a case of failure of 'Why You?'. In case, other people can provide the same service that you are proposing then, there is little uniqueness in what you are doing. In case of trade secrets, I received advise from Mayank 'King' some time back. He said: "As soon as you feel someone is trying to get your secrets out, you can politely but firmly tell them that further conversation should be initiated only after a commercial engagement has started. They would understand and respect you for that."
If no one is copying your idea, not sure if that is a good thing.