Why Give a Damn:
It’s time to kick the idea that everyone, including VCs, will steal your idea. Don’t be scared to put all your cards on the table and don’t expect a formal agreement in return.
The author of this post, Pascal Finette, jumps back and forth between startups (he’s now on his fourth startup), Internet powerhouses (he worked for eBay, Mozilla and Google.org) and Venture Capital (he founded both a VC firm and an accelerator program). But most of all he loves to mentor, coach and work with entrepreneurs who are doing something meaningful.
Here’s the three letter-acronym you should never, ever ask an investor for (in your early interactions): NDA.
The venerable NDA (non-disclosure agreement) binds two parties to confidentiality about information which is exchanged between those parties. The theory for founders seems to go:
- “I have an idea which will be the next Facebook, Google and Apple combined. I need to protect this idea from the evil world. If I tell my idea to anyone, including a VC, they will steal it. Thus I need to protect myself. By protecting myself I show the world how professional I am.“
Will your idea be the next Facebook, Google and Apple combined? Tweet This Quote
That is not how it works. This is…
A VC can’t sign an NDA as it would preclude her from doing business: If she signs an NDA, say for the a private 1-to-1 message exchange, passes the opportunity on (which VCs do with 99.9% of ideas presented to them) and later decides to invest in any company that operates broadly within that space, she would violate her NDA. Therefore, she doesn’t sign NDAs to begin with. Simple as that.
1. They potentially preclude her from doing her business.
2. It is a complete pain for her to track NDAs signed in the past and when they expire.
The truth is, a founder who asks for an NDA signals that he doesn’t understand the game. Not a great first impression.
‘Protecting yourself’ with an NDA can do more harm than good. Tweet This Quote