Biz Plans with a Side of NDA

Rick Segal notes that some entrepreneurs are getting more creative with NDA's.  As most know, VC's, angels, and other serious investors won't sign NDA's before looking at a business plan.  It's just way too complicated.  The message is: you want our money, you have to trust us.

Unfortunately, paranoid entrepreneurs don't like that.  So some are now including an NDA when they send a plan to an investor.

Last week I saw the most creative attempt yet.  After reading a business plan given to me by an entrepreneur last week at an angel conference, I note a page of gobbledygook at the beginning that effectively said "by reading this you have agreed to this NDA" -- no request for a signature even. 

Enough already.  Entrepreneurs need to understand that investors aren't looking to steal ideas, but we see enough that we'd be foolish to sign such a document.  Too much exposure.  And at the end of the day it all comes down to execution anyway. 

Comments

[aka Al Benatt]

Chip,

You're right - it's silly to think investors will sign NDA's. The vast majority won't steal your idea but it DOES happen. A year ago I pitched a well-known group of angels in the Northeast. As fate would have it, the most interested of the angels in the group was an investor in a failing company which, 6 months later launched a mirror image of the business detailed in our plan. 5 months later, having witnessed an explosion in the popularity of their services, they raised $7.5MM from well known VCs. They are now a huge success. On the bright side, they have spent THEIR money proving our business model. Meantime, we are quite confident the USPTO will allow our patent by January '07. So licensing revenue or outright sale of the patent rights will provide some risk mitigation to prospective investors in our company who can see strong evidence that the business model works.