non-disclosure agreements (NDAs)

In business, people use non-disclosure agreements (NDAs) when they need to talk with another party about something confidential-- if the other party wants to hear the idea (might get some benefit from working with the inventor) they sometimes will agree to sign an NDA, and thus to promise to keep the idea confidential.

If you are an entrepreneur, note that professional venture capitalists (VCs) and most big companies will generally never sign your NDAs. They don't want the hassle of lots of poor unhappy entrepreneurs wasting their time later with lawsuits. They figure if you are coming to ask for their help, you need to trust them enough to tell them the idea. If you don't trust the VC, then don't bother calling. The VC says that they live and die on their reputations, so of course they would not steal your idea. In general, I think most VCs are inclined to be fair, but use common sense about who and how many people you tell your idea.

In my experience, most entrepreneurs are too paranoid about confidentiality. If you don't take a chance and trust someone who might be able to help you, you'll never get anywhere.

When I'm at an early stage in developing a new business plan, I just write the following at the top of the plan:

"Confidentiality: Paul asks that you not show or tell anyone this idea without first calling to ask his OK. If you tell one person you trust, they will tell one person they trust, and so on. If this idea gets out too early, Paul's business could be ruined. Thanks."

In business, NDAs are important when you get a little further along, when both sides know just enough about each other to know they are seriously interested in pursuing a relationship.

When I've sat at the big business side of the table and entrepreneurs have come to me, I've refused to sign their NDAs but told them to tell me just enough that they are comfortable telling without me signing an NDA.

So it all comes down to taking some measured risks with good people who can help you, and then expecting an NDA only when the other party is already knowledgable and motivated enough about your idea to really want to do something with you.

home ::updated Sat 11-Feb-2012 11:02 AM::