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NDAs

Hey FD,

There are many opinions out there about why you should/should not sign a
Non Disclosure Agreement(NDA).

What is your opinion on NDAs?

Under what conditions are you comfortable signing a NDA?

Cheers,
Chris

10 Replies

Jessica Alter
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Jessica Alter Entrepreneur • Advisor
Entrepreneur & Advisor

Really depends who wants you to sign them?  In general, my policy is not to sign them (Ever).  if you're working for a company and they ask you to or you're doing a partnership with a big co. they will ask you to and that might be OK, even then they are nearly impossible to enforce.  Other than that, can't see a good reason.  If a potential cofounder is asking you sign one I'd definitely push back. It's kind of an odd place to start.  
On Apr 18, 2012, at 7:54 PM, Chris Rill wrote:

Jesse Silver
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Jesse Silver Entrepreneur
Online Marketing & User Acquisition Expert

In my experience, these are entirely situational decisions. There really
isn't any way to generalize.

There is a tremendous range in how restrictive these things can be. It all
depends on the language being used.

A 'standard' NDA tends to be fairly innocuous. It's really just a way for a
business to maintain their privacy and trade secrets.

Things start to get a litte more dicey when you add in things like a
Non-Compete, Non-Circumvent, and/or an Assignment of Inventions (for those
engineers out there).

Good rule of thumb: Don't sign anything that you don't fully understand. If
you don't feel like you can trust the person, even if you *think* you
understand the paperwork, don't sign anything without having it reviewed by
a lawyer or someone who knows what they are doing.

Chris Rill
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Chris Rill Entrepreneur
CTO & Co-Founder at Canary

Thanks for the feedback.  I completely agree and have always pushed back.
 I was just looking for some input that wasn't some random internet
opinion.  Whenever I've been presented with an NDA, it is usually from a
first time entrepreneur valuing their idea over execution.      

Jesse Silver
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Jesse Silver Entrepreneur
Online Marketing & User Acquisition Expert

In that case, I'd say 9 times out of 10, it's going to be fine to sign them
in a situation like that, from a person like that.

I've been f**ked over enough times, having not asked or insisted that
people sign them, to know not to take it personally when someone else asks
for one.

To play devil's advocate; if the paperwork is standard and would not be
restrictive outside the confines of protecting the idea, what are the real
intentions of someone that won't sign such a document, which,
fundamentally, protects them, as much as the initiator??

Chris Rill
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Chris Rill Entrepreneur
CTO & Co-Founder at Canary

From what I understand, a NDA essentially gives someone grounds
to justifiably sue you if they feel like the agreement has been violated.
The NDA does a poor job of actually documenting what is covered by the NDA
and the recipient takes on a significant liability in exchange for just
knowing more about an idea.  The exchange is not equal IMHO.

If you can't talk about your idea and keep the "secret sauce" to yourself,
you haven't done your homework and do not really understand the "idea".

Here's an example of something that could happen to me if I were to sign
NDAs. I don't know the legal implications but I can foresee some potential
problems.

I sign a NDA with 2 different entrepreneurs who have similar ideas.
Can I work with the 2nd entrepreneur having signed the 1st's NDA?
Can the entrepreneur #1 sue me and the company if I work with entrepreneur
#2?

Susheel Daswani
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Susheel Daswani Entrepreneur
Mobile & Software Engineering Leader

I think Jesse has it right. You can't generalize one way or another. When
I'm asked to sign an NDA I basically edit it down to something that is
'fair', i.e., the burden is not on me to figure what exactly is covered,
there are reasonable and standard exclusions to what is considered
confidential, the term is not unreasonably long, and, as Jesse mentions,
that there aren't any Non-Competes, Non-Circumvents, and/or Assignments of
Inventions.

Cheers,
Susheel

Roberto Santana
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Roberto Santana Entrepreneur
Entrepreneur

It all depends on the context. If you are talking to investors/potential
partners in Silicon Valley, asking for an NDA is a sign of naivet? or
rookie mistake.
Having said that, you may want to be cautious on how much you share or how
specific you get with a particular technology. In another scenario, if you
are working with sensitive information at a company like Palantir, then it
is perfectly fine to get asked for an NDA.  

Stephen Bronstein
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Stephen Bronstein Entrepreneur
SVP IT & Strategy at ThinkingPhones

Yeah this is a very valid concern and is why investors will not sign NDAs,
or at least not until very late in the process.

Even if you think that execution is much more important than the idea and
thus can't imagine making someone sign an NDA to share your idea (which is
certainly my feeling on things), once a company is up and running, it will
have information which really needs to remain confidential. For example -
 employee salaries, the cap table, other financials. The company may want
to share various analyses of customer uptake or whatever and reasonably
doesn't want that information to become public. The trick is to balance
this valid need for confidentiality against the fact that ideas are a dime
a dozen. One way that NDAs can do this is to say that documents labeled
'confidential' cannot be shared with any third parties. There will of
course always be some ambiguity but this is a step in the right direction
at least.

And yes, non-competes, assignments, etc have no place in a standard NDA.
Although assignments are pretty standard when you are an employee of a
company.

Andrew Wise
1
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Andrew Wise Entrepreneur
I buy, build, and sell web properties for 2-3x earnings.

We've all signed NDAs, does anyone have a template that is pretty vanilla
and can be used for most cases where both sides want some sort of assurance?

Jon Cooper
1
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Jon Cooper Entrepreneur
Chief Technology Officer at Colchis Capital Management

> We've all signed NDAs, does anyone have a template that is pretty vanilla
> and can be used for most cases where both sides want some sort of assurance?

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