I wrote this piece over a year ago but lately this issue seems to have come up again.
You’ve come to my place, at my invitation, so that we can talk about your idea. We drink a little coffee, we trade pleasantries, and then, when the talk becomes serious, you pull out an NDA. The Non-Disclosure Agreement is a staple of business everywhere. Your idea is valuable; you need to protect it.
So why am I exiting the room 10 minutes later?
There are two basic facts you need to understand.
First, my job as a professional investor is to look at as many investment opportunities as possible. We call this deal flow. And there can never be enough. An NDA kills deal flow. It limits what I can look at, discuss with my partners and outside advisers, and eventually execute some level of due diligence upon. I can’t run my business with handcuffs on.
[Read the full article at INC.com here.]
Hi Chris,
Been a long time (former Chapel Hill resident, introduced through our Cuban connection, enjoyed some mediocre Thai and other food together, until I moved away).
From this perspective, the one area I would question is the limitations of the “verbal NDA.” Right now I have just gotten angel in-kind development resources, but the go to business model involves multiple partners. I am one who believes that people can generally be trusted until they prove otherwise, but at what point do I put the NDA on paper?
I sit between the developers, the legal experts (specifically the Obamacare ones), and the distribution teams. My protection is that the individual pieces are much less valuable than the entire solution, which I sit in the middle of. My fear is that one or more of the parts become sufficiently valuable to others, that the whole solution is not as viable or protected, provisional patents notwithstanding.
Although I have NDA’s signed with the development team, in order for them to achieve some of their goals (being recognized as the elite innovative developer for one of the largest software companies, for example), that they may “give away the store” prematurely. At what point do I force my partners to “NDA” everybody, in ways restricting their main goals for the decisions they made to invest in the company?