November 13, 2007

Why Most VCs and Angels Don’t Sign NDA’s

One of the questions that is asked most often is, “Will you have the investors sign an NDA before looking at my plan?”
(NDA = Non-Disclosure Agreement)

Here are a few responses to that very important question:

  1. At some point, we may provide the option to upgrade your service in order to have a “password protected” business plan. That way, if an investor is desirous to look at your plan, they would have to first contact you in order to get a password. That being said, it might defeat the purpose of posting your plan on our site. Most people are here to get their plan in front of investors (exposure). It seems that if you required an investor to request a password, it may reduce the amount of investors that viewed your plan.
  2. That being said, we don’t suggest that you shout your “secret recipe” from the roof tops for everyone to hear. My recommendation would be to tell investors that you have a “secret sauce,” but don’t tell them the recipe or ingredients.

I guess that one of the key points is to work with good angels and VCs. For the most part, I have confidence and trust in the angels that I know. However, I did read this article that made me think twice about who I should trust.

Brad Feld — one of the best (entrepreneur-friendly) venture capitalist’s in the nation (in my opinion) wrote a great blog post on Why Most VC’s Don’t Sign NDAs. After you read that article, I believe that most entrepreneurs will be able to understand why investor’s are hesitant. With good angels and VCs, it’s not that they want to take your proprietary information and go create a competitive company… it’s that they don’t want to get into trouble by signing thousands of NDA’s each year.