April 27, 2005
I figure the title will entice someone new to read this (although he or she might be sorely disappointed with the actual content). Fred’s posting today about VCs’ conflicts of interest, besides giving me fodder for my weekly counter-cliche posting, brings up another interesting point, one about entrepreneurs and their levels of confidentiality or secrecy about their business plans.
I heard a quote once from Vinod Khosla of Kleiner Perkins that has stayed with me for years: that “to be successful in the new economy you must be open to the point of promiscuity.” I think Khosla is right. As Fred says, VCs are notorious for meeting lots of companies before making an investment, and as an entrepreneur on the other side of the table, it’s impossible to completely protect your ideas and thoughts if you want to attract outside capital. You just have to trust that the VCs are going to be as honest as possible in how they use the information you share with them. Same goes for potential partnerships and even M&A as well. You simply can’t have productive conversations on those topics without opening the proverbial kimono at least a little bit.
But being promiscuous with the state secrets of your business carries certain risks as well. If the partnership or M&A conversation goes awry, you could easily find yourself with a competitor that knows part of your game plan. We’ve had this happen at least once at Return Path, and to this day, it still irritates the heck out of us. But we still think we made the right decision at the time to share that information — and now at least we know that our new competitor isn’t creative enough to come up with his own ideas!
On a completely side note, anyone who’s not using desktop search like Google or the Lookout plugin for Outlook is missing out. I couldn’t remember the exact quote from Vinod Khosla, but I remembered that it was emailed to me years ago by my colleague Mary Lynn McGrath. It took Lookout 0.06 seconds to find the exact email from September of 2000 using keywords McGrath and Vinod. Amazing (and thanks again, Mary Lynn!).