No, I Won't Sign Your NDA

Tue, 19 Feb 2013 16:42:31 -0500

I'm in the business of backing great teams, not stealing from them. In other words, you're going to have to trust me.

You've come to my place, at my invitation, so that we can talk about your idea. We drink a little coffee, we trade pleasantries, and then, when the talk becomes serious, you pull out an NDA. The Non-Disclosure Agreement is a staple of business everywhere. Your idea is valuable; you need to protect it.

So why am I exiting the room 10 minutes later?

There are two basic facts you need to understand.

First, my job as a professional investor is to look at as many investment opportunities as possible. We call this deal flow. And there can never be enough. An NDA kills deal flow. It limits what I can look at, discuss with my partners and outside advisers, and eventually execute some level of due diligence upon. I can’t run my business with handcuffs on. (As a side note, if I am good and I create buckets of deal flow, and I sign NDA’s for some amount of them, I now have to remember what I can talk about and what I cannot.)

So either you understand that or you think that you are special and should be an exception.

Second, I am in the business of backing great teams working on great ideas. Inherent in this new relationship is trust. I am not going to steal your idea. I don’t have time to build a company--I invest in companies. I am not in the business of pitching your idea to others to build. And most important, if I did this just once, I would be labeled and my deal flow would disappear.

What does this mean for you?

Keep the NDA in your pocket for future contractors, employees, and business partners. You got that meeting with an investor? Congratulations, you have made it past gate No. 1. Now, sell that investor on yourself and your idea.