Why we can’t sign your NDA

As a founder of a seed venture capital fund, I’m privileged to spend a lot of time with entrepreneurs during the early stages of their start-ups, when they are perfecting their ideas and looking to kick-start their careers.

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In the last few weeks, we have had a number of entrepreneurs ask that we sign a Non-Disclosure Agreement before we review an initial pitch deck, which is an almost impossible task for any serious VC to undertake.

We appreciate that you are about to share with us some of the best ideas you have ever had! We respect the importance of protecting your valuable information. Here are the answers to common questions about how we protect your intellectual property and business information (“Information”):

How will you keep my Information secure?

Your information will be stored on a secure server in a password-protected file dedicated to your organization, and accessible only to trusted Hillfarrance personnel and advisers.

Who will have access to my Information?

Only Hillfarrance personnel, investor committee, and professional advisers (e.g. lawyers and accountants) will have access to your Information for the purposes of learning about your business and assessing whether you are the right fit for Hillfarrance investment.

Will you sign my non-disclosure agreement?

No, but please keep reading! It is common practice by professional investors not to sign NDAs. In particular:

  • NDAs often contain far-reaching clauses that can be inconsistent with our work with multiple entrepreneurs. We do not want to waste precious time and money (both ours and yours) having lawyers play with your NDA before we start talking about what really matters. Once we start final stage due diligence we may be more amenable to sign an NDA, especially if we have to dig under the bonnet of your product and company to get comfortable with an investment.

  • We are always investigating multiple opportunities at any given time, and it is in the nature of cutting-edge technology that more than one entrepreneur may be working on a similar project at any time. We do not want to open ourselves up to lawsuits if at any point we invest in a company with a similar idea to yours.

  • Most importantly, our relationship with the entrepreneurial community is at the heart of our business. We will respect and care for your information as we would our own. We will assume that the information you provide to us is confidential, unless you tell us otherwise. There is not a more sure-fire way for Hillfarrance to ruin our reputation than by compromising the trust between an entrepreneur and an investor.

As Brad Feld mentioned in his timeless blog post (“Why Most VC’s Don’t Sign NDAs.” 02/2006 - click here), our lack of appetite to sign NDA’s isn’t coming from a place of arrogance or because we have a cavalier nature, it is because we are trying to save you time and money. If you have some super secret sauce that you don’t want to share with investors, just don’t tell us about it. As Brad also mentions that if this is the case, have a little revisit of your assumptions - “especially since value is in creating the thing, not simply having the idea.”

I would also like to thank Juliet Short from our law firm, Tompkins Wake, for making sure that this post was correct and up-to-scratch from a legal perspective!

Best of luck out there.Rob