Why don’t investors sign Non-Disclosure Agreements (NDA’s)? This is one of the most frequently asked questions in our pre-accelerator program,JFDI Discover. So much so that it’s one of the biggest worries of our potential participants – one team even pulled out of the program because of it. This post addresses that question once and for all.
Why JFDI Doesn’t Sign NDA’s
It’s not just JFDI Asia – in fact, most VC’s do not sign NDA’s at all. I’ll get back to that later, but for now here’s our answer: We promise not to disclose information shared with us in confidence. In addition to anything you explicitly label as confidential, we make sure our staff understand, respect and maintain the privacy of personal disclosures that emerge in mentoring, private contact information and the plans of individuals and organizations. We won’t publish or speak about you or your organization without your consent. If our own plans might compete with yours, we will tell you.
If that’s not enough, we offer two options:
- Configure their folder or files with a limited access (so only JFDI and Mentors can view it)
- Issue a refund (only if they feel its impossible to use JFDI Discover without an NDA)
Google will churn out 15 million results to explain why VC’s or investors don’t sign NDA’s at all. To save you time, here are the two top reasons:
#1: Practicality
Brad Feld, Managing Director at Foundry Group, wrote a witty blog on the topic of NDA’s. He said:
Even if he was to sign an NDA, he would have to spend time reviewing it (“many of them do – they are usually overreaching for the information being disclosed”, writes Brad.) Dealing with the NDA might end up taking more time than helping the entrepreneur and his idea.
As an entrepreneur with limited time and resources, would you want to deal with NDA’s or building the product instead?
Reason #2: There are many ideas like yours
Guy Kawasaki explained this further. He said that VC’s “at any given moment, are looking at three or four similar deals. They’re not about to create legal issues because they sign a NDA and then fund another similar company–thereby making the paranoid entrepreneur believe the venture capitalist stole his idea. If you even ask them to sign one, you might as well tattoo “I’m clueless!” on your forehead.”
Ideas are dime a dozen. Understand that it’s not the idea that protectable. The execution and value of the thing is what matters.
Exceptions – Know When To Ask and If You Can’t
Clearly there are times when it’s necessary to keep a secret: you might agree with the buyer of your business not to discuss the terms of the sale in public.
Efraim Pettersson Ivener in the Open Frog forum brought up something worth knowing. He said NDA’s is only useful startups that are, “truly product-oriented and building deep technology which is actual IP territory.” Unfortunately, not so many startups based in Singapore do that.
Brad Feld said on his blog that some large companies will want to show you stuff, but then don’t want you to tell anyone about it “until they are ready.” Which brings us to this conclusion (and common sense), if you have something that’s absolutely secret, then simply don’t tell anyone about it. No need for NDAs just a simple, “Please let this just be between us” will do.
Credit: Photo by Startup Stock Photos
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Speaking of JFDI Discover, that’s our 21-day pre-accelerator program. It runs every month and will teach you how to apply and get results from powerful startup tools. The next Discover program starts 5 Jun.
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Crystal Superal is the Social Media and Content Marketer at JFDI, the #1 business accelerator in Asia. She finished her Multimedia Communications degree while playing golf for a San Francisco-based art school. Today she lives in Cebu City, Philippines. For her thoughts about tech and lifehacks, follow her Twitter @crystalsuperal.