Will Investors Sign Your NDA? Maybe Not

Will Investors Sign Your NDA? Maybe Not

Let’s say that you are starting a new business, and that business needs investors. You want to go out and give your pitch to investors, and show them why your idea and your business is a great place to put their money.

But there’s one problem: In order to “sell” your idea to these investors or possible future shareholders, you need to disclose information that you consider to be private, secret or proprietary. And many of these investors, you may not know very well—in fact, these investors may actually have investments or interests in businesses that could potentially compete with you.

How on earth will you pitch your idea, and solicit funding from investors, while also, keeping your private and proprietary information completely secret?

Using an NDA?

Your first reaction may be to just have everybody who hears your pitch who you are soliciting for funding, to sign a nondisclosure agreement (NDA). But that may be a hard sell.

Most real investors have no desire to sign any type of NDA. They do not want the potential liability, or even the suspicion that they may have misused or leaked information you provided to them.

On top of that, some investors hear numerous business ideas and pitches all the time; they don’t want to have to remember which ones have an NDA and which don’t. If they happen to hear a pitch of one of your competitors after hearing yours, they don’t want to even open the door to the allegation of violating an NDA.

And the fact is that you need the investor, more than the investor needs you, if it is an investor with multiple businesses vying for his or her investment money. The investor doesn’t need to sign anything—there is probably a business pitch elsewhere that won’t require the investor to sign anything.

Pitching Without Giving Things Away

This is why if you have a business that is looking for investors, you need to get good at giving your pitch and selling your idea, without disclosing any trade secrets. Many investors don’t need intricate details or anything that would be considered a trade secret, at least in the initial stages of consideration.

You can create good pitches and presentations, with only the details that you would give to the public—think of your future advertising. You’re going to sell customers or clients on social media or in publications, without giving away trade secrets. So develop a pitch to investors that does the same thing.

This is at least, for your initial pitch. If the investor is interested and wants to go deeper into exploring investment, the idea of an NDA can be approached then. The more interest the investor has, the more willing he or she will be to invest, and hence, the investor is more likely to understand and agree to the need for an NDA at that point.

Call our Fort Lauderdale business lawyers at Sweeney Law P.A. at 954-440-3993 today to help you in the initial stages of your business.

Source:

nytimes.com/2014/07/03/business/smallbusiness/why-more-start-ups-are-sharing-ideas-without-getting-legal-protection.html?ref=business&_r=1&module=ArrowsNav&contentCollection=Small%20Business&action=keypress&region=FixedLeft&pgtype=article