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Should you ask potential partners and investors to sign an NDA?

On Behalf of | May 28, 2022 | Business Law |

As an entrepreneur, you want to protect your ideas. You’re determining whom you need to require to sign non-disclosure agreements (NDAs) to protect these and other information. Is that necessary (or even wise) at this early stage?

If you’re just starting out, it’s important to be cautious about putting an NDA in front of someone whose help and support you need. That includes investors and partners. Sure, you don’t want anyone stealing your idea, but you also don’t want to offend them and push them away.

Are they really going to steal your ideas?

As one author who has written books on entrepreneurship notes, “No one will steal your ideas until you’re driving a Ferrari.” Most people aren’t going to steal an idea from a person seeking investors and partners for their start-up.  Further, it’s typically the way an idea is executed that’s valuable – not the idea itself.

Also, think about whom you’d be approaching with an NDA. If you’re looking for partners, aren’t you considering people you already trust? If you don’t feel you can share your ideas with a potential partner without an NDA, is this really someone you want to be in business with? 

The same is true for investors. Besides, people with money to invest in start-ups typically have a reputation that precedes them. If they’re stealing ideas from entrepreneurs who come to them for money, that would be pretty widely known.

How can you ask someone to sign an NDA without offending them?

If you decide that you feel more comfortable having potential partners and investors sign an NDA, it’s important to approach the subject the same way with everyone. Tell them that in order to maintain “good governance,” you’re asking everyone involved with the business in its early stages to sign an NDA. Many people will appreciate the fact that you are taking this care to protect your budding business.

After your business is up and running, you’ll likely have instances where you need employees, contractors, vendors and others to sign NDAs. Whenever have questions or concerns about what should be included in an NDA and the best way to use one as you start your business venture, it’s wise to have legal guidance.