22nd February 2019

Legal Talk 5: What Are NDAs?

You just have a quick question.

You say "Hey Legal Coach, when should I ask people to sign this Non-Disclosure Agreement (NDA). I don't want to come over as too formal and legalistic and put them off".

Okay, I understand. It can be a bit embarrassing sometimes to talk about the NDA because it introduces the concept that you somehow don't trust the person you're talking to and fear that they might run off with your ideas. Here are some tips: 

1. Bargaining Positions: Sometimes introducing an NDA will simply depend upon bargaining positions. If you are doing an initial pitch to a big VC then they may just laugh you out of the room if you introduce an NDA, as they might point out that they receive hundreds of pitches every week and so can't sign an NDA with everyone. Also, the VC is not really in a position to take your idea forward anyway, especially if it is quite niche and needs your specialist skills. Plus, you need their money, and so at the moment they  hold all the cards.

On the other hand, if you are talking with some small Angel investors then you might introduce the concept of them signing an NDA. Your argument is (in a more sophisticated way than I can put it and one which needs to be softened somewhat by you), what have they got to lose by signing your NDA if they are not going to steal your idea?

2. Timing: Sometimes you can show someone the bare bones of your idea without disclosing too much. This is a good strategy a lot of the time. However, if it really does become serious where they are doing due diligence on you (i.e. checking you and your company out legally) then at this stage it is good to raise the NDA.

Even if they say no to signing your NDA, at least it shows that you are on the ball, know something about NDAs and have thought about this. I personally enjoyed this link on NDAs: https://www.telegraph.co.uk/news/0/non-disclosure-agreements-everything-need-know-ndas-misuse/. It's a good bit of further research!


However, at this stage you are probably thinking about putting together a letter of intent (basically a letter saying that they are interested in doing business with you or investing), in which case the letter of intent might have a confidentiality clause in it anyway (and so the NDA might not be necessary). 

You say goodbye, but I’m still thinking of you and your business and how we can work together to help it grow fast.

Yours truly,

Jimmy Desai
Your Legal Coach

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