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Think person A has a great software business idea. He also knows software programming and converts his idea to a mobile application. Then he needs to raise some money to launch the application, do advertisement, hiring staffs and buying stuffs. Then he searches through the internet and finds some venture capitals, angel investors, etc. and sending a pitch and demo from his application to encourage them making a deal and investment on his idea/application/business.

But person B who is one of these investors who received this email says "Why should I invest a lot of money and just get 10-20% equity? I can call Bob who is a computer software engineer and ask him to write a similar application for me, or even better than that! So I will have 100% of this company not only 10%!".

Is it possible to prevent such a thing to happen?

EDIT: In respect to Joe's answer I like to add something that I couldn't write in the comments. I saw many of the "Shark tank" series (that I don't know if they are really investors or just showman?). When they do want to say what do they can do behind/after their money offer, they say "I will add some value to the product", "I must do a lot of work for this business that you don't know/understand", "It takes a lot of my time and drains a lot of my energy", "It is a good fit for me and I know what to do", etc.

It seems they want to say they are not only a paycheck to the business and they do not just sit and see what do the inventor will do after getting the paycheck.

My confusion is, do they want to give some money to a person/team like a loan and get back more money as their profit of investment, or they would like to engage into the business? If they do like to engage, why they don't do all the jobs by their teams and earn more money?

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    Even if you could, what's to stop B doing the same once person A's company is up and running ? Unless there are powerful patents in play, you can't say "now that I have a <widget making> company, no one else is allowed to <make widgets> !!"
    – AakashM
    Sep 20, 2021 at 8:58
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    If all they have to do is call up Bob the software engineer to build something better than you, you don't have much of an investable business to begin with.
    – Seth R
    Sep 20, 2021 at 19:51
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    @SethR: I meant that it's not hard for a experienced developer(Bob) and his team to write an app like Uber, Airbnb, et or even better than them. And if you are someone with a new idea like them, and wrote the first version of your app(MVP), how can you protect your idea and application and help it to become another next big company?
    – user109157
    Sep 20, 2021 at 19:56
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    That represents a misunderstanding about the value of ideas. The guy who invented Uber, PayPal, Amazon, Facebook etc. had completely obvious ideas. They just had better execution. Ideas are cheap: literally everyone trading on eBay in the 90s got the idea for PayPal, since necessity is the mother of invention, and boy, we needed it! But Musk did all the other stuff that makes an idea into a business. All the other dreamers did not. Placing value in ideas is vanity. Place value in execution.
    – Harper - Reinstate Monica
    Sep 20, 2021 at 20:33
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    As for your addendum - yes, investors are often not entirely passive (e.g., they may provide some sort of advisor), but don't get fooled by these shows into thinking that any angel investor or VC will be looking to take some sort of operative role in your business. That's not what they are about. If it's easy and cheap for them to help you they will do it (especially if it helps them steer the company in a direction they like), but they won't show up helping you code your app ;)
    – xLeitix
    Sep 21, 2021 at 11:50

3 Answers 3

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Sure, this is what non-disclosure agreements are used for. Non-disclosure agreements ask the other party to not "disclose" (ie, tell) any private information you tell them, and sets penalties for them doing so.

However, NDAs are not common with Venture Capitalists (ie, the investor); realistically, they have the power and the inventor does not, so the inventor has no leverage in the situation. The VCs don't want to risk getting into a situation where they hear two similar proposals from two different people, accept one and not the other, and then are sued by the other.

Realistically, while there is some risk in pitching to a VC/investor, if you're talking to a professional VC you don't have too much to worry about. They're not trawling for ideas to work on - they're trawling for people to invest in. When they invest in you, they're investing in you, and they don't want to steal your idea - they make more money by handing you money and then waiting for you to send the returns back to them!

You can read more at this article, or several articles similar to it, on why NDAs aren't common, but also aren't necessary, in the VC business.

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    My 2¢: 90% of ideas are worthless, 5% are patentable, and the other 5% might actually be worth protecting with an NDA. But in most cases, it's the execution that matters, not the idea.
    – Kevin
    Sep 20, 2021 at 16:56
  • @Kevin: I am agree with you but if the idea is among the 5%, and you are a VC who knows many software development teams, many marketing teams, etc. they working for/with you, it would be so interesting to do it with your team instead of an unknown alone man who sent you an email and seeking for money and will give you 1/10 of what you can earn lonely.
    – user109157
    Sep 20, 2021 at 19:20
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    I don't think that's how most VC's work, @ensan3kamel - they're not looking to be CEO of the new company. They're looking to get people to do useful things for them while they passively earn money (well, mostly passively - the active thing they do is find good investments.) The good people they have already, are presumably already doing useful things.
    – Joe
    Sep 20, 2021 at 19:59
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    @ensan3kamel I think that's a good separate question - it's much different from your original question (and deserves its own answer!)
    – Joe
    Sep 20, 2021 at 20:46
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    @Joe, money.stackexchange.com/questions/145059/…
    – user109157
    Sep 20, 2021 at 21:36
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You have the original programmer, who has a completed product.

An investor could decide that they could make a better version of the product; but by the time they gathered a team, paid them for development, bug testing, and released the product, the original programmer likely has found another investor and has had their product on the market for more than a year.

If the functionality of the App was actually something that took off and became popular, the "do-it-themself" investor is a year behind the curve in picking up market share, likely doomed to just being a generic knock-off of the original product.

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There is a big difference between an idea and a functional product. Just because you tell them your idea and show them a demo doesn't mean that they have (or can hire) the technical expertise to recreate your product.

You can protect yourself by showing them the working product, but not giving them your source code until after they have signed something.

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