Entrepreneurs: Don’t Let Your NDA Be A Self Inflicted Wound That Kills Your Start Up Company
A recent question came up about non-disclosure agreements, the always popular NDA, and whether it was required when seeking outside investment in a start up company.
I have been on both sides of that argument with my own companies and with my clients.
I mentor and consult to a lot of start up companies and one thing is clear – ideas by themselves are not worth very much without a genuinely implementable plan, an experienced team for realistic
execution, some kind of traction to demonstrate you can grab wallet share – and the funding to make it real.
Nevertheless, I am often presented with an NDA by my entrepreneur clients – and in most cases, I am usually willing to sign it although I immediately share with them that almost no angel investor or venture capital group will be willing to do so just to see their business plan. (There’s already a ton written about the reasons – just Google “NDA Venture Capital” and you will quickly see why you will instantly lose a lot of credibility just in the asking.)
I can remember one NDA presented to me by a prospective client that I would not sign: He wanted $400 million in expressed liquidated damages if he, in his sole opinion, felt that I violated the NDA anytime in the next 20 years.
This was for a company that only existed on a single Excel spreadsheet. I refused to sign, returned his retainer and wished him well.
My intuition is that this guy’s company still only exists on that same single Excel spreadsheet.
Don’t let your own NDA be a self inflicted wound that kills YOUR start up company!
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