You should certainly try but many investors (particularly VC’s) won’t give them. It partly limits their ability to do business and there is a major administration burden - some VC’s see thousands of business plans per year. That is a lot of NDA’s to keep track of and takes thousands of hours of time to read them, sign them, file them, track them, etc.
To access investors with millions of dollars, you will have to take some risks and that NDA or no-NDA decision will probably be an early judgement call for you.
With big name investors, your ideas are generally safe. Its in the VC’s best interests not to abuse the info they get - if a firm got a reputation for stealing ideas, they probably wouldn’t have many entrepreneurs knocking on their door.
With private individuals and lesser known investors, I’d try hard to get the NDA.
One interesting point is that while many investors won’t sign, once they are invested in the company, they will want you to have a policy of obtaining an NDA from other outside parties!!
So you could try to turn that around on them - “if you invested in our business, surely you’d want confidence that our info has not been provided to large numbers of others without any protection? So its a double standard not to sign ours now.”
Hopefully this is some useful guidance for you and gives you some material to have an intelligent discussion with investors about NDA’s when you are trying to persuade them to sign!
Cheers
Tom
Thursday, May 8, 2008
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