In startup fundraising, the NDA comes near the end of the process, not at the beginning.

An NDA stands for Non-Disclosure Agreement and requires the signatory to keep confidential any, and all information disclosed.

A founder asking an investor to sign an NDA before the pitch signals to the investor that there’s nothing protectable about the business.

In most cases, the investor will not sign the NDA and will take a pass on the deal.

A founder should give the investor basic information without an NDA.

The founder should focus on the benefits of their technology and business model instead of describing exactly how it works.

An example includes, our software reduces cost by 3x.

There is a place for NDAs later in the process.

When investors go into diligence, it’s appropriate for the founder to ask the investor to sign an NDA.

Other cases to use an NDA in the startup space include the following:

A potential acquirer wants to license a product or technology.

A potential acquirer wants to buy the company.

The diligence box has employee, customer, or partner information that is sensitive.

Keep the dialog on a non-confidential basis with investors so they can learn more about the business.

 

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.
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Thank you for joining your host Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.
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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.