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NDAs are Not Documents i Agree to

I know, I should have come up with a better acronym, but as you should realize from all of my previous posts, I don’t put that much thought into posts.

I feel like once a month I have a conversation with an entrepreneur about why they shouldn’t make everyone and their mother sign an NDA before hearing about an idea. With this in mind, I wanted to start my running list of URLs that help me explain why this is probably not worth doing.

Don’t ask people to sign an NDA.

Update: Now that I have an extra second, I wanted to spend some time documenting my own feelings on NDAs to supplement the blogs I point to.

First, it is unlikely that someone will steal your idea. No one loves your baby as much as you do. No matter how good your idea sounds to you, it probably doesn’t sound as good to everyone else. How many people have you told something to and they said, “That idea is so good, I am going to quit my job to do it, whether you quit or not!” That basically never happens.

So let’s postulate (an unlikely hypothesis) that there may be some minor risk.

When you are looking at raising money, doing some interesting strategic deal, or whatever, the first X meetings usually don’t involve looking at code. It is usually about the business model and strategy. A business usually has one of two strategies:

  1. We have this super super secret, unduplicate-able secret sauce
  2. We have a little twist on a broadly known idea and are going to out-execute people

If it is #1, I would probably not show your gene sequencing engine/search algorithm/death star plans to anyone. But you can tell them all about how you have a crazy engine/algorithm/death star and there is nothing they can do about it. So who cares if they sign an NDA. You have a death star, they don’t. End of story. Lot’s of people would like to build a better search algorithm and hearing that one exists – even hearing how it works at a high level and what makes it better – won’t change the fact that they can’t.

If it is #2 (more likely, so we spend more time here), then a) doing the whole NDA thing is slowing your execution, and that is bad! And b) you are saying “I think everyone can out-execute us, so I am praying that no one finds out.” That is called “playing to not lose”. Play to win! Honestly, in 99% of these situations the issue is that you are extremely early-stage and probably under-capitalized. If you show someone the idea and they steal it, even with the NDA, what recourse do you have? Do you wait until they are rich and you are not and then you hire an army of lawyers? Good luck. Do you sue when you both are poor? Smart! The only way there is a positive outcome is if you make it happen.

Furthermore, what are really the odds that someone steals your idea? That would require that they both love your idea enough to steal it and hate you enough to not want to do it with you. This combination of outcomes is unlikely. If it did occur, then would having them sign an NDA really protect you? They hate you and love your idea enough to steal it! Will a piece of paper stand in their way?

Not my best written post, but good enough to post and move on.  I know this is a post that will be updated over time!

Moral of the story: If they want to steal your idea, they will. Generally speaking, nobody loves your baby as much as you do, so it is extremely unlikely they will want to steal your baby.

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