It’s natural to want to protect one’s awesome new business idea from copycats and competitors. So it’s not surprising when entrepreneurs start asking everyone they meet to sign a Non-Disclosure Agreement (NDA).
This is a bad idea. For the reasons below, non-disclosure agreements are a waste of time.
NDAs make you look amateur. Seasoned businesspeople know that ideas are worth nothing, and it’s the execution that really matters. By asking people to sign your NDAs, you signal your ignorance about what matters in business.
NDAs are off putting. Most investors and mentors have very little time and care a great deal about their integrity. By asking them to sign an NDA, you waste their time and question their integrity.
NDAs hurt you more than they help you. What may seem like a protective measure can actually hurt you. In early meetings you will be getting more info from customers, mentors and investors than you’re giving them. Putting an NDA between you and that info just limits the amount of info you’ll get.
NDAs are unenforceable. As a startup, you have neither the time nor the resources to litigate if someone does steal your idea.
There are, however, some cases where you should have people sign non-compete agreements and non-disclosure agreements. Have people sign non-disclosure documents when:
- they work for or with you as either employees, vendors, or joint ventures and
- they have access to patentable or real trade secrets or
- they have access to sensitive business information like passwords, customer data, and financial documents.