At almost every workshop I run I get asked “Should I use an NDA when approaching investors?” An NDA is a Non-Disclosure Agreement that usually runs to five or six pages – and quite often more – that is intended to protect the entrepreneur’s brilliant idea from being stolen.
Now, the problem with this is that most investors don't value ideas. Most investors know that there are hundreds and thousands of ideas, and many of them are quite similar – more similar than you may think.
Also, many investors are, or have been, entrepreneurs themselves. They realise that an idea’s “secret sauce” (if it exists) is in its implementation. It’s in the action, and in developing and adapting an idea as you go along.
Sending an investor an NDA often alerts them to the fact that you’re a newbie entrepreneur. Not only that, they’re very unlikely to sign it. You’re lucky if even 10% of the investors you approach agree to sign your NDA. An NDA revolves around trust, and even if your NDA is signed, it can be almost impossible to enforce it.
This doesn’t mean that you shouldn’t take steps to protect your idea or intellectual property through trademarks, patents, and copyright etc. – there are some great resources to do that. And NDAs are useful in other circumstances, for example when sharing sensitive financial data that would harm a company if disclosed.
However, your biggest challenge as an entrepreneur is, in fact, just getting your idea out there. Enough people need to know about your idea, and understand its possibilities, so that they can take the decision to invest in it.
Disclaimer: I am not a lawyer and the above does not constitute legal advice.
Find out how to increase your chances of investment at my next event How to Attract the Right Investors on 22nd September, 2pm-6pm, at the British Library's Business & IP Centre in London. Other dates are available. Follow me on LinkedIn, Twitter or Facebook for special offers and discounts.
Now, the problem with this is that most investors don't value ideas. Most investors know that there are hundreds and thousands of ideas, and many of them are quite similar – more similar than you may think.
Also, many investors are, or have been, entrepreneurs themselves. They realise that an idea’s “secret sauce” (if it exists) is in its implementation. It’s in the action, and in developing and adapting an idea as you go along.
Sending an investor an NDA often alerts them to the fact that you’re a newbie entrepreneur. Not only that, they’re very unlikely to sign it. You’re lucky if even 10% of the investors you approach agree to sign your NDA. An NDA revolves around trust, and even if your NDA is signed, it can be almost impossible to enforce it.
This doesn’t mean that you shouldn’t take steps to protect your idea or intellectual property through trademarks, patents, and copyright etc. – there are some great resources to do that. And NDAs are useful in other circumstances, for example when sharing sensitive financial data that would harm a company if disclosed.
However, your biggest challenge as an entrepreneur is, in fact, just getting your idea out there. Enough people need to know about your idea, and understand its possibilities, so that they can take the decision to invest in it.
Disclaimer: I am not a lawyer and the above does not constitute legal advice.
Find out how to increase your chances of investment at my next event How to Attract the Right Investors on 22nd September, 2pm-6pm, at the British Library's Business & IP Centre in London. Other dates are available. Follow me on LinkedIn, Twitter or Facebook for special offers and discounts.
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