VCs, startups, and NDAs

It happens.  Every now and then I see a company that is about to ask a VC for funding that is completely clueless when it comes to NDA etiquette.


The worst offenders are entrepreneurs who insist on having a potential investor sign some non-disclosure paperwork before even showing them their business plan (or even slide deck!).  Offenders to a lesser extent, but offenders nonetheless, are ones that insist on “not going into details” because they are proprietary, patent-pending, whatever…  Excuse me?

First, get this, little guy.  No one is out to steal an “idea” — an idea by itself is worth very little and means very little without an execution plan and a team that can execute.  Having an “idea” by itself is almost worthless.  It’s having a plan for building a company that matters.  No one is going to steal your thinking because, chances are, these people have seen the same thing about ten times prior to your showing your slides to them.

Second, no self-respecting VC would ever take what you gave them and either send it along to others or execute on it themselves.  They won’t be in business too long if they do that.  Word will get out, and no deals will come their way.  I know, everyone has a story of how Sequoia stole their idea or fed it to one of their companies.  ”Yeah, but they did with my idea….” — not!  Sorry guys, I don’t think Sequoia has any shortage of people with an idea just like yours at their door every couple of days.

Most ideas, at least in the software space, are not unique.  And an NDA will not protect you from someone else coming up with something just as clever two days after you’ve had your epiphany.

Wise up, and make sure your investors are decent people.  Decent people don’t need lawyers to protect each other… trust and professionalism are what makes VC/entrepreneur relationships work.  Pick your prospective investors carefully — ones that you can trust and ones that won’t violate your trust.

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