There are a few situations that can warrant NDAs, but normally this is much further into the diligence process when an investor is doing due diligence into certain types of corporate data, especially for more science, pharma and deep tech focused companies. VCs manage many portfolio companies and are working through diligence for a number of others at any given point in time.
It takes quite a bit of time, effort, and often legal expenses to go through the process of reading NDAs, making sure they are not unreasonable, and potentially going back and forth with lawyers. Many VCs may lose interest during this process which can potentially prevent further engagement. Additionally, if NDAs were signed with every startup, a significant file, function, and process would have to be created to keep track of these legal documents.
Busy venture capitalists can see this NDA request unfairly as a sign of founder inexperience before getting into the meat of what makes your concept unique and investible. Understandably, founders are very excited about their companies and want to protect company information via a legal document. However, in the venture capital universe, information is treated with high confidentiality without the formality of an NDA and entrepreneurs should be aware of this dynamic before speaking with institutional investors.
However, professional investors nearly always refuse to sign NDAs, and in many cases are very open and public about their refusal to do so, and why. VCs will not require detailed technical information in the initial meetings.
As you progress through a series of meetings with a prospective investor, you can hold information that you believe to be especially sensitive for later meetings when you have built a stronger relationship and when you believe that any perceived risk of divulging the information is balanced by the greater likelihood of a potential investment.
Also, remember to perform your own vetting of potential investors, and rely on trusted referral sources.
There are definitely exceptions to the rule; in special circumstances you might consider an NDA covering specific, highly confidential information e.
Skip to content Profile Avatar. Subscribe to Entrepreneur. Magazine Subscriptions. By John Rampton April 14, Opinions expressed by Entrepreneur contributors are their own. He is the founder of the calendar productivity tool Calendar. More About Pitching Investors.
Pitching Investors. Jessica Abo Oct 12, Robert Finlay Sep 23, Entrepreneur Staff Sep 23, Latest on Entrepreneur. Thomas Hughes Nov 12, Entrepreneurship Calls. Mark Vickery Nov 11, Facebook Twitter LinkedIn. However, for investors and VCs in specific they are challenging for a couple of reasons:. We simply do not have the legal resources to check, negotiate and manage NDAs.
0コメント