The Non-Disclosure Agreement has been commoditized to the point that start-up companies looking to save on legal costs have found ways to get comfortable executing these types of agreements without bothering to run them by their attorney, particularly in light of the fact that, from a founder’s perspective, the NDA serves as a major barrier to engage in potentially life changing conversations with a possible commercial partner, investor, advisor, or acquirer. Maybe your lawyer provided you with a form in the past or perhaps given the "mutual" nature of the form NDA presented by the counter party, you’ve concluded that the risks of signing are minimal.
Depending on the context of when/why you are protecting your information as confidential, however, the form in play may be missing critical terms that might not be so obvious at first. For example, discussions leading up to a potential:
- sale of the company – does your NDA contain a non-solicit of employees?
- partnership or other commercial relationship – does your NDA include protection on reverse engineering?
- engagement of a high profile advisor or consultant– does your NDA carve out the company’s ability to disclose the existence of the engagement through a press release or pitch deck?
- investment in a company – from the VC’s perspective, does the NDA make clear that your fund will not be restricted in any way from investing in companies in a competing space?
It is easy for a founder to gloss over the NDA but doing so may prove costly in the long run.