Why We Probably Won’t Sign Your NDA

Entrepreneurs and potential customers sometimes ask us to sign non-disclosure agreements (NDAs) as part of figuring out whether we can help them or not. We usually don’t sign NDAs at this stage of a potential relationship for several reasons.

The Idea Isn’t Everything

We want to help entrepreneurs understand that “the idea” is not the critical factor to their success.

We’ve learned a lot from Paul Graham. Here’s what he says on the subject:

An idea for a startup, however, is only a beginning. A lot of would-be startup founders think the key to the whole process is the initial idea, and from that point all you have to do is execute. Venture capitalists know better. If you go to VC firms with a brilliant idea that you’ll tell them about if they sign a nondisclosure agreement, most will tell you to get lost. That shows how much a mere idea is worth. The market price is less than the inconvenience of signing an NDA.

– Paul Graham, How to Start a Startup

The unimportance of “the idea” when compared with execution has become a relatively common theme in strategic business thinking. In 2005, Derek Sivers wrote a short post explaining that ideas are just a multiplier of execution. In a similar vein, Rob Adams of Inc magazine wrote an article titled, “Ideas Are a Commodity; It’s Execution Intelligence That Matters”. [Brad Feld has recently made a variation on this theme in his article Note to Entrepreneurs: Your idea isn’t special.]

The Cult of the NDA

We don’t want to perpetuate the cult of the NDA.

Sharing is Critical

We believe most entrepreneurs would be better off sharing their idea with everybody and anybody to get feedback. Sentence three of Paul Graham’s Startups in 13 Sentences is “Let your ideas evolve.” That can and should start before you’ve spent a dime on development.

Listening to our Lawyer

NDAs are serious legal documents. Our lawyer says it’s a bad idea to sign one before we know the party well and understand what we’re promising not to disclose. He’s particularly not fond of NDAs that are broad and general. We try to listen to him.

In the rare event that a potential client has genuine intellectual property that hasn’t yet been protected by filing for a patent (or maybe even a provisional patent) we can usually still have a valuable conversation without getting into trade secrets. We’re happy to sign the proper legal documents once we start working together.