Imagine yourself in a conference room, presenting your business plan to potential investors. How do you answer the question: “Where’d you get that idea?”

This comes to my mind today because of a post I read yesterday on Ask the VC. An e-mailer asked what it means when investors ask that question:

Are they looking for an emotional and inspiring story or are they worried that we may have taken our idea from someone else or, what I believe is the case, do they want to see if we were driven by an opening in the market that we observed?

Jason Mendelson answers that question, from the VC’s point of view, in his post “How Did We Get the Idea for Our Startup?” Yes, inspiration and emotion are nice, he says. And yes, a great new market is even better, for obvious reasons. However:

“Taken Our Idea from someone else”–This is a big one. If you come and pitch a next-generation social networking site and previously worked at Facebook, we are going to have an in-depth discussion. Maybe you didn’t steal it, but maybe your former employer will have a claim on the intellectual property developed while you were employed.

That last one is one that I’ve run into more than once, in reading business plans and consulting. When entrepreneurs are employed already in the same industry, that sends up red flags.

And I also enjoyed Mendelson’s last couple of possibilities. Maybe the VCs want to see how well you pitch an idea, giving you a stage to play on; or “perhaps it is just a trite icebreaker and the VCs are just asking you this so they’ll have time to answer e-mails on their Blackberry while you wax poetically.”

The discussion reminds me of the critical scene in the 1988 movie Working Girl. The old guy asks the two women where they got the idea–a contested idea, where ownership is being argued. One of them just hems and haws. The other reconstructs the thought thread in detail, with references to news pieces, gossip and other connections. Guess whose idea it really was?

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Tim BerryTim Berry
Tim Berry

Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry.