Should I Ask Investors to Sign NDAs Before Sharing My Idea?

Hello everyone. Today, we’re talking about if you should ask investors to sign an NDA before sharing your idea?

The answer is: Absolutely not.

I am yet to meet a startup investor that will sign an NDA before meeting a potential investment. Most of the time, asking for an NDA will be the end of the discussion as the investor won’t be willing to spend the time explaining their reasoning when they have 300 other startups in their inbox asking for a meeting without pre-conditions.

The reasons why investors won’t sign NDAs are:

First — Professional startup investors look at hundreds if not thousands of companies a year, and many are similar. Investors don’t want to create a legal issue for a startup they funded because they signed an NDA with a similar company that they passed on.

Second — To sign a legal document, you need a lawyer to approve it. This will require the investor to spend time and money on legal fees, before they even know if they’re interested. Even if you do sign it, you have to track and store all the NDAs you’ve signed — that’s even more time.

Third — They’re almost worthless. NDAs don’t seem to be enforceable — I’ve not seen a lawsuit around a broken NDA in startups, and the only time it’s likely important, is during an acquisition process.

Best of luck out there.

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Ash Rust

Ash Rust

Pre-seed Investor. Email: ash@sterlingroad.com. B2B, US only. I work with founders for 3 months before investing. More info: http://SterlingRoad.com/process