It seems the conventional wisdom among the investor world is that an NDA exists to protect an idea or invention from thieves. Do you want to begin your pitch meeting by essentially calling the investors thieves? Or that you don’t know what you’re doing? Didn’t think so.
It’s important to remember that a ton of investors are former inventors and entrepreneurs themselves. They’ve been there and done that. They’re cognizant that you’ve worked your a** off to get to this point and aren’t attending the pitch meeting to reap your rewards. The investors are there to fund you not steal from you!
You might be thinking – what’s the big deal? After all, I’ll only have to enforce it if an investor actually stole my confidential info. Well – the investors don’t know that. Investors (and their attorneys) try to avoid adding to the growing list of companies they have ties to. The more ties, the more liability. They don’t want to take the chance that you’ll start a frivolous case based on some far-fetched connection to a competitor.
If you’re really concerned about disclosing sensitive information at a pitch meeting then give the investors a big taste, but not the whole thing. This is especially true for startups with new or unique technology. You can probably hold off on explaining the inner workings of your product until the second or third meeting. If you ultimately make the decision to use an NDA make sure it’s tailored and attorney-drafted. Investors will be able to tell, and probably reluctant to sign, if you printed some general NDA found on a template provider.
If you have any other questions regarding how startups can best utilize NDAs or need one drafted then take a look at.