Startup’s Guide: The NDA Foul
Today I learned a lesson. It surprised me quite a bit as it counters a lot of my basic understanding of business contracts and relationships. It happened twice in one day and a little
search on Google confirmed that this wasn’t some odd exception.
Two successful entrepreneurs I respect and trust enormously refused to sign our NDA. At first I was confused and worried. You see I was raised on the belief that in business, loose lips sink ships. I was under the impression that the proper procedure with any business idea was to get an NDA before sharing. I have a close relationship with both of them and asked why not. It appears that the business culture and realities of their trade make signing such a document unrealistic.
To quickly frame things, we are going to be launching a new company / service March 1st. We are really excited and if you know me at all – I don’t poke a stick at things or try 15 ideas hoping one will work out. I bid my time carefully and sprint when the timing is right. Over the past few weeks we have been madly working out details, refining the business plan and preparing for the launch. We will be having a private beta mid February, so hit me up if you are interested.
Back to my story.
Rather than try to reword it, I’ll let my friend explain it to you as he did to me:
I remember that when I started my last venture I was paranoid to tell people about what we were working on. I too had a boiler plate NDA and had people sign it before I shared our direction. I started to realize that the people whose opinion I really wanted were unwilling to sign the NDA. They claimed that they were exposed to so many ideas each day (i.e. venture capitalists and other entrepreneurs) that it would be impossible to sign and honor NDAs. Especially since in most cases many people are working on the same ideas or at least variations of the same thing. What I realized was that I had more to gain from hearing their opinions than by shielding myself from the potential threat of them taking my idea and running with it. In fact, if an idea is so easily copied then there is a problem either with the strategy or ability for the team to execute.
I’d write more but he makes his case pretty well. The question is simple. What is more valuable: their wisdom, advice and support, or secrecy? That may depend on your idea, but in our case, I’d like to have these two on our side. Does it mean I won’t ever ask other people to sign an NDA? Probably not, I am sure they have their place and time.
Though I did learn not to ever ask a VC. In the end, the whole secrecy thing may be a bit over the top. The
execution of the idea will be 1000x more important anyways. After all, Google sure wasn’t the first search engine, not the first free email provider, not the first online document replacement…