Recently I have been asked a lot of questions regarding nondisclosure agreements (NDAs) and investors, either angel or venture capital. I previously wrote my thoughts on trying to drop NDAs on venture capital firms in “Why a VC Will Take a Lighter to Your NDA.”
And yesterday, Guy Kawasaki echoed my NDA-VC sentiments in “The No-Bull-Shiitake Investor Wishlist,” Guy’s latest post on the Open Forum by American Express. In his post, he gives some candid advice to those of you debating whether to hand over your nondisclosure agreement to a venture capital firm for a signature:
[D]on’t ask any potential investor to sign a nondisclosure agreement (NDA), because asking them to do so will make you look clueless. Venture capitalists and angel investors are often looking at three or four similar deals, so if they sign an NDA from one company and then fund another, they expose themselves to legal action. If you find an investor who is willing to sign an just to hear your idea, you probably don’t want his or her money.
I’ve never heard of a venture capitalist or angel investor ripping off an idea—frankly, few ideas are worth stealing. Even if your idea is worth stealing, the hard part is implementing the idea, not coming up with it. Finally, continuing the dating analogy, you probably won’t get very many dates if the first thing out of your mouth is “Will you sign a prenuptial?”
Guy’s advice about NDAs is just the tip of the iceberg in his post, as he also lays out the characteristics of an “attractive and fundable date” for a venture capitalist or investor. I strongly suggest reading the full post here.