The subject of NDAs (Confidential Non-Disclosure Agreements) often comes up with entrepreneurs. Many are deathly afraid their idea is so great it will be stolen by some large company. That’s almost never what’s happened in my experience. Much more typically entrepreneurs build a utility that a Microsoft or Apple decides is so useful that they add it to their OS themselves and good bye to the company that made and sold the utility. It’s hard to compete with free.

I advise entrepreneurs about a few things I know from experience about NDAs.

  1.  VCs don’t sign them. Ever. So don’t embarrass yourself by asking them to.
  2. If you are talking with a large company as customer or partner, they may well ask YOU to sign THEIR NDA, especially if you ask them to sign yours.
  3. If you are talking with individuals such as potential hires or contractors or service providers and you really do have something worth protecting, then using what I call a reciprocal NDA is advisable. It simply states that in the course of the business discussion either side may disclose information that they declare to be confidential and each side will make its best efforts to guard the confidentiality of the other’s information as they guard their own.
  4. If you do have to sign another company’s NDA read it carefully first. If there is anything at all that raises a red flag, spend the time and money to run it by a lawyer. You don’t want to be inadvertently signing away your rights to your IP to BigCo, Inc.
  5. Always get copies of any NDAs you do sign or have others sign. NDAs are like house insurance policies. You hope to never have to take it out of the file cabinet, but if you need to, you better be able to find it.
  6. You may well be able to find a nice, clear simple one-page reciprocal NDA on the Web – practically everything else in the world is there. But if not, a LegalZoom or other source can probably provide one for nominal cost.
  7. If you are signing on behalf of your company make sure the NDA covers your employees, or at least key team members, not just you personally.

One rule of thumb you can apply is that if you have something you are patenting or planning to try to patent, then you have something that needs protection and you should use an NDA. But keep in mind only business peers or subordinates are likely to sign it.

If you have a partner or partner it’s a good idea to have them read anything that is being signed on behalf of the company – two pairs of eyes are more likely to catch a snag than one.

I’m sure a good lawyer will have plenty more to say about NDAs, including the whole subject of having your employees sign them. That’s a subject for another day, another post.

Author: Mentorphile

Mentor, coach, and advisor to entrepreneurs, small businesses, and non-profit organizations. General manager with significant experience in both for-profit and non-profit organizations. Focus on media and information. On founding team of four venture-backed companies. Currently Chairman of Popsleuth, Inc., maker of the Endorfyn app for keeping fans updated on new stuff from their favorite artists.

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