Non-Disclosure Agreement (NDA)

NDAs are a hotly debated topic in the startup scene. At one extreme there are VCs who will stop talking to you if you just mention the word “NDA” in an initial conversation. At the other extreme there are entrepreneurs who will not even send out a teaser before signing an NDA.

Our recommendation: Be pragmatic

After having talked to thousands of investors across the globe we feel that a pragmatic approach to NDAs is the way to go. This means the following to us:

  • Teaser / initial discussion: Do this without asking for NDAs
  • Information memorandum: Ask for an NDA before sending it out. Beware that some investors may not be willing to sign it – in case it is a renowned VC we feel that this is not a no-go. But up to you to decide, or leave out a few slides which you consider critical.
  • Data room: No access without NDA (or confidentiality clause defined in the term sheet).
  • Contents of NDA: We feel that the symbol of signing an NDA is often more important than the exact legal terms. So it is usually ok to sign the investor’s version if this makes things easier. Check that duration is at least 3 years, and place of jurisdiction the city of your HQ or a neutral place.

NDA template

Most startups will have NDA templates for research projects, business cooperations and other activities. These are typically mutual NDAs. For the fundraising process they should be one-sided and not require your countersignature (remember that you want to make the fundraising process as efficient as possible.) Plus, we strongly feel that an NDA should be short and simple.

Here is a template which you may want to use (as always, please align with your lawyer):

Alternatives to an NDA

There are additional options to keep documents under control even if an NDA is not (yet) in place:

  • Personalize: Adding the investor’s name into the footer / side bar, jointly with the remark “strictly confidential”, will decrease chances that they forward it to other parties. It would be highly embarrassing for any investor if such a document is later found on the file server of a competitor.
  • Link rather than attach: Several companies such as Docsend let you upload your documents to their cloud. Potential investors only receive links rather than the document itself. Similar as in the case of a data room, this enables you to prevent downloads and register whether and how investors access the provided documents.
  • Email settings: Many email providers are working on improved confidential settings. Gmail lets you set expiration date and password protection. These features can come in handy in certain situations.
However, don’t obsess over these features. In many cases you have more to lose if you annoy investors with advanced security provisions.