How NOT to write an NDA

I used to think that a Non-Disclosure-Agreement (NDA) was a useful tool in business. I’ve now decided it’s a wedge that gets in the way of progress and conversations.

A typical scenario is between someone with an idea and someone who’s in the position to help fullfil that idea. This can be a VC with money, a contractor with skills or a business partner. The person with the idea begins the conversation…

“I need your help, but before I can let you help me, I need you to sign something that says I trust you.”

What a conversation killer. When you put it that way, it sounds rediculous but that’s exactly what these conversations are about.

  1. I don’t know you.
  2. I don’t know your idea.
  3. I don’t know your background or company.
  4. I don’t even know if I can help you.
  5. What is the upside for me to sign an agreement?

Let’s tell some more truths.

  1. Few people read their NDA’s closely. It takes time.  This is time that is spent looking at papers rather then discussing your idea and how to execute it. What would you rather spend time doing?
  2. It’s not clear to me how enforceable NDA’s are if they are violated.  It’s practically impossible to tell how information leaks out and who is responsible. If information leaks out will you really spend thousands of dollars in legal fees?  If you’re a startup the answer is always no.  The only time NDA’s get more serious is when they are with a larger publicly traded company.
  3. In most cases the NDA does exactly the opposite of what actually needs to be done.  If you need help the best way to get help is to put the word out. You’ll find the best people and the best answers to problems. You enable me to introduce you to people who may be able to help.

At best the NDA says that both people signing agree not to be assholes.  Of course you shouldn’t need a piece of paper to tell you that, after all you’re the one asking for help.

Ideas are worthless

Imagine you’re a brilliant entrepreneur, a savvy business women or a brilliant negotiator.  No matter how good your idea, the idea itself is worthless. Zero. Nada.  There are two things that matter with ideas:

  1. Execution
  2. Advantage

As I just said ideas are worthless, litteraly a dime a dozzen. It takes five minutes to come up with a dozens of ideas. Execution, is the way you implement the vision of the idea. No one is going to execute the idea the same way that you would execute it. It may be your drive, your passion, your tenacity. Whatever it is, no one else has it.  You have to be more passionate about your idea then anyone else.

The other thing that matters is your advantage. This may be your connections, your education, your life experiences, your expertise. Whatever you bring to the table that gives you the lead over your competition.  

If you can execute your idea and you have an advantage you can tell your idea to people all day long and it doesn’t matter.  If other people don’t have the same passion and advantage as you they will never be able to bring the idea to completion that way that you would.

It’s been done.

Your idea, however brilliant has already been done. It’s been done by someone else, in some other country, in some related field, in some other time, to some similar product, using a derivative technology. For all the NDA’s that I’ve signed I have never once seen an idea that is totally new. Never.  Even the wildly crazy ideas have been imagined in TV & Film. It’s been done.

Ideas are by nature evolutionary and build upon past ideas.  No matter how good your ideas may be it’s already been done. It’s has already been disclosed. A simple google search of your idea will likely show that there are tons of people doing what you’re trying to do.  What hasn’t been disclosed is how you’re going to do it.

Ideas are a People Business

VC’s talk about intelectual property or the secret sauce for your idea. In most cases it’s not the patents sitting in a drawer. It’s the people who have a vision to execute and a tactical advantage to make an idea successful.  If you’re asking for help you need the right people and to get them you need to have a lot of conversations.  The more NDA’s you sign the less total conversations you can have.  Among other reasons this is one of the reasons you won’t find VC’s signing NDA’s.

Someone is building your idea right now. What are you waiting for?

An NDA?

10 thoughts on “How NOT to write an NDA”

  1. Great post. I agree with everything you’ve said.

    I’d like to expand on the first thing you’ve mentioned about the NDA, that you need it to enforce people not to be assholes. This is important because if you come to someone and ask them to sign a contract not to steal your idea, it already makes an assumption that that person is untrustworthy and you need to use the law to force them to be ‘good’. Sure, it’s “just business”, but that’s doesn’t make this attitude any less shitty. Your potential business partner is assumed guilty by default. If you’re assuming this, why are you even talking to them?

    Of course, people will argue that you can’t take chances, but this misses the point in this case. As you’ve written above, ideas aren’t a big deal, it’s the execution that matters most. If the person in front of you can execute your idea, you need to grab and keep hold of that person, not the idea.

  2. Actually, provisional patents are a much better tool for this. They provide an evidentiary record of what you knew before the meeting (i.e., they document that what you say was your idea was actually something you knew before the meeting), and can be obtained fairly cheaply. I disagree with you that execution and advantage are all that matter, I have very often seen one person come to the table with an idea and another come to the table with the ability to execute in a way that made both very wealthy. Neither would have succeeded without the other.

  3. Mason – Just to clarify. I agree with your last point. My definition of “execution” was more the drive and passion to execute the idea, find what needs to be done and get it done. You need Action and Execution to make an idea a reality and they rarely come from just one person.

    Provisional patents and patents in general are a topic for another post. They are about as useful to a startup as an NDA. They drain valuable time and resources straight out of a startup and provide little tangible benefit in most cases.

  4. Enjoyable read:
    Your points are valid however I think you skate over what I belief is the core reason a lot of people favor NDA’s. Comeback.

    When talking to someone who has the funds to execute your plans ( and possibly the connections and passion ) the possibility of them doing so WITHOUT you is very real. Sure they may not implement it exactly like you but they could do a 62.567% job of it.
    The NDA attempts to provide some level of protection against this so at least ( in theory ) you will be compensated financially if a violation occurs. Sure proving that your intellectual property has been violated is another story but at least it provides someone of little wealth some *feeling* of security.

    And another thing. Sure your idea has already been done and is not totally new but the application of the concepts maybe. Your argument is like someone saying 5 years ago “there’s 100′s of social networks why bother start one for college students?”

    What happens if this concept is easy to grasp and implement just in need of funding? Do you still tell every VC you meet without some form of protection?

  5. think1st – If you go into a conversation worried that someone can steal your idea that means that it is easily reproducible. Why would you invest in something that can be replicated easily? It’s better to be a “Fast follower” or as you said, just do it yourself.

    If an idea or concept is so easy to grasp and implement but needs funding then you need to put the deals in place (distribution, partnerships, contracts, exclusivity deals, etc.) so when you go to investors the thing you’re bringing to the table is orders/deals where the investor just has to invest. In this scenario the thing you bring to the table is a deal, not just an idea that can be copied.

  6. What world are you from?
    Because, here on Earth, everything is easily reproducible.

    So, it’s get there first, done well.

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  8. NDAs may not be the most important thing for a small business or a startup, but I think that’s a far cry from claiming that they’re not a useful business tool. Obviously, some companies invest millions in projects, and are willing to protect them with millions in legal fees, if necessary. In this case, it’s vital that they have NDAs in place, not just for prevention, but to demonstrate in court that they took appropriate steps to protect their IP, if it comes to that.

    And NDAs aren’t just about protecting new ideas — they’re about protecting any sort of trade secret, including the company’s financial data, strategic business plans, HR info, or whatever else you might not want broadcast to the world. There are tons of things business, even small ones, need to protect.

    I agree with the rest of the entry, but I think it should be prefaced with something like “NDAs aren’t necessary in these specific situations, where they are often used anyway, for silly reasons.”

  9. @Ryan makes some good points. There are times that an NDA does make sense. Typically in employer/employee relationships or in situations where you’re disclosing proprietary data or information, not abstract ideas. I would say that the majority of the initial conversations I have with startups do not fall in this camp.

  10. Hi Greg, thanks for this very informative thought process. This is an older post – but I will try anyway. I want help resolving two points here that are kind of left hanging:
    1) What about the fact that (in case one is discussing the core ideas of their startup with VC/executor type people without the NDA) you might actually be denied relevant IPR under the basis that this was a known idea (not sure how they would prove that it was known)…and to take it to a next level, if one of those people puts that new idea on a blog/post like this one even just as a passing comment or analogy, your idea is now a public property… you know where I am going with this… which leads to the next question…
    2) You wake up one morning and find your exact idea described in a public space ( considering you have shared this idea only with people who signed the NDA)….so its definitely one of those 8 people under NDA who has leaked the idea out….what do you do now? You are mad, but don’t know which one of the 8 special people are you mad at….now consider one is already in this situation, ( I know you said NDA’s were useless and unenforceable) what options does that person have? For any legal NDA-enforcement action, you need to know who to direct it to…. So I guess what I am asking is are there any smart ideas or best practices that can be put in place from the get go to later on figure out who might have leaked the idea…something you can do before sharing the idea.

    I agree with you completely that its the execution that matters the most compared to everything else involved. Having said that, a genuinely new idea could be a very simple one and could come to someone who is vulnerable in either technology, financing, network or execution aspects of the startup here. Most entrepreneurs I see are vulnerable in atleast one of these aspects. Would you still tell them to go about discussing their ideas with potential partners/employees/vc without any contingency plan in place?

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