The Fuss about Non-Disclosure-Agreements(NDA)
Suppose you have a technology company and technology (which may be a trade secret or in the patenting phase). Then you have to meet an investor (whether it’s a venture capitalist or a business angel). How do you protect yourself from the theft of the idea by the investor? A partial solution is the use of a legal document called the Non Disclosure Agreement (NDA). What does this agreement include? Note that I use the word partially because not all investors like NDAs. I will discuss the possible situations in which it may or may not be appropriate to use it, and provide a template for those in Singapore who might need it.
In short, a Non-Disclosure Agreement (NDA) is a legal contract between at least two parties that identifies confidential materials or information that the parties wish to share for specific purposes, but whose general use is limited (source: Wikipedia)). In short, it’s just a piece of paper to make sure that two parties have agreed not to divulge information that falls under an agreement. If you sell a particular product that requires protection against the replication risk of other competitors, this agreement is an essential piece of paper for you. Other conditions of the same nature include a Non Disclosure Agreement (CDA), a Non Disclosure Agreement or a Non Disclosure Agreement.
Startups sign NDAs when two companies or individuals think about starting a business, an investment proposal, or a partnership agreement. It is also needed to assess a business relationship. NDAs can also mean the following situation: either both parties are restricted in the use of the materials provided, or they can only restrict one party. For large companies or even universities and research institutes, NDAs are required to protect privileged information that is disclosed to employees.
Here are some questions that I often come across when an entrepreneur asks about the NDA:
Where can I find a template from an NDA listing such an agreement ?: Basically, the entrepreneur needs to find an example for creating an NDA. You can find this URL in Enterprise One where sample NDA templates are provided. Note that this is an example and you need to adjust it to your purpose.
I hear from my lecturer or from some VCs that they do not accept NDAs: From the perspective of investors, especially venture capitalists, there are two schools of thought. Some VCs are fine if they sign one, others do not. There is no hard and fast rule. Why do not some venture capitalists or business angels want to sign an NDA? There are two reasons: First, they do not want to be tied up because they’re meeting another party sharing similar technology or ideas as you, and secondly, the arrogance that they’ve made since they’ve got a hundred plans a day, which makes up their plan You give me my personal experience. In the UK and Europe in general, NDAs are widely used. Whether you’re a startup or an established company, an NDA is required if you want to divulge something related to technology. You can imagine my shock when I hear that some local investors (trained in the US) tell me that they do not need it. NDA signings may be cultural from another perspective, but it is generally acceptable to ask the other party to sign an NDA if you feel uncomfortable. You will not lose any brownie points if you ask for them and they refuse to sign. When I am advising or fundraising for a biotech company that needs to disseminate its technology so that I can assess its value, I usually ask for an NDA so that my client trusts me to look at their business.
Why do I need an NDA ?: The answer is obvious. You have to protect your business. If you listen to successful entrepreneurs long enough, the real strategy is not to protect your technology, but rather to protect your markets, ie to create barriers to entry for your competitors, so that they will need a lot of time and effort to introduce a new alternative product technology suitable for your.
In practice, having an NDA sample is good when you get started and set up your product. Usually, some people put a few NDA papers in their briefcase, so it’s convenient to meet investors, business partners and even customers.
Bernard Leong is currently Assistant Professor at the National University of Singapore (NUS).