Signing NDAs With Investors (When and Why)

Signing NDAs With Investors (When and Why)

January 11, 2021 by investor

I’ve had startups approach me and give me one or two lines about their startup.

When I start to ask questions, they say they can’t tell me anything more without signing a Non-Disclosure Agreement or NDA.

I often find this puzzling, as investors don’t sign NDAs to find out what the startup business is.  

They only sign when they understand the startup business and want to find out more about the proprietary details.

These details include specific clients, their contact information, details behind the intellectual property, in particular trade secrets, and more.

It’s best to have non-confidential information available to share with the investor to educate them about the business at a high level.

It’s best to ask for an NDA when the investor is going into diligence.

Startups should examine their business and tease apart what is general information and what is proprietary.

If the information is already on your website or could be obtained by a customer using your product, then it’s not proprietary.

It’s best to sign NDAs on information that is truly proprietary and only when the investor is interested in pursuing diligence. 

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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.