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Ask HN: Would you sign an NDA?

16 points by nnd ↗ HN
Recently I've been encountering numerous individuals ranging from VCs to startup founders offering to sign an NDA.

Here are some of the scenarios:

"Dude, I have this awesome idea, and I'm 100% sure it's going to work, I just need someone to build it. I can't tell you anything about it until you sign an NDA"

"We don't have any product yet, but we have a provisional patent for the technology, you have to sign an NDA"

"We would like you to do some contracting for us, and maybe become a CTO eventually, but we need to build an MVP first, to go ahead sign an NDA".

I've read through the documents and it seems safe to sign those, but I'm not a lawyer and I might overlooks some details.

Is it considered a normal practice to sign an NDA? Do you sign those?

14 comments

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codegeek
"Dude, I have this awesome idea....."

No.

"We don't have any product yet...."

No

"....we need to build an MVP first...."

No

For me to sign an NDA, you need to have a heck of a lot more than an idea. If you have a bare minimum prototype, some market validation and potential customers lined up, may be then i might even consider it if I really believe in your product/business and want to be a part of it in the long run. Anything else, the answer is No.

fivedogit
If I think the person I'm talking to has unique knowledge of some obscure market or of cutting edge tech (the kind that comes from universities and labs), then "yes" as long as the NDA is standard and isn't screwing me out of something surreptitiously.

Otherwise, I'd think twice about it, not really because of the trouble, risk (there shouldn't be any) or the hassle, but because I'd question this person's entrepreneurial maturity or, um, view of reality? Everybody has an idea... execution is everything.

In my early entrepreneurship, I tried to get people to sign some NDA-like stuff and I'm red-faced about it to this day. It was unnecessary and made me look like an amateur.

MalcolmDiggs
I've signed dozens over the years. I wouldn't hold it against the asker. The vast majority of the time though, it's a really bad sign:

The prototypical example is a potential-founder who has an idea that they think is too good to let leak; so they force everyone to sign an NDA. The problem with this mindset is that most ideas are total crap; and you only find that out when you bounce the idea off of people who are willing to be honest with you. Also, ideas get stronger when they're discussed with others.

So usually the founder says "Please sign my NDA before I disclose to you" and then I sign it, and they reveal their idea, which is either:

A. An exact clone of something that already exists, which they didn't realize because they haven't had this discussion with anybody yet.

B. A ridiculous spin on an existing product (think "Twitter for Dolphins")

C. Something either illegal or technically impossible

In rare cases, it's something great and amazing. So every-time I sign I just hope for that. 95% of the time I am disappointed.

specular
I generally avoid signing NDAs simply to hear or see a pitch/concept/prototype/etc.

The real question is "what are you gaining and giving up?"

Most entrepreneurs that I talk to are filled with their own concepts and ideas (and the hard part is usually the execution). Thus, entrepreneurs will often avoid signing NDAs in order to preserve their legal purity in the event that they independently develop a similar product. This is, I believe, the reason why ycombinator and most other large investment firms will not sign NDAs.

mindcrime
Almost never, for all the same reasons articulated by the other responders here. Mainly the "I don't want to paint myself into a corner in terms of what I can work on" or "I don't want to get sued by you when it just happens that the thing I'm already working on is too similar to your idea", etc.
elyrly
In the past i try to gauge the persons background (technical, business, marketing, manufacturing, etc) to see if they understand the purpose of the disclosure. This usually gives me a frame of though toward the feasibility moving forward. An idea is worthless without execution.
JamesVI
I'll answer from the other side, as a co-founder.

I won't ask you to sign an NDA to hear my idea. The idea by itself is worthless but your feedback to the idea is invaluable to me.

I won't ask you to sign an NDA to play with my prototype/MVP. It is a product and I want customers/testers/critics to try it out and give me feedback.

I WILL ask you to sign an NDA before I discuss technical details that I will be including in a patent application. Actually, I HAVE to make you sign an NDA because, outside of the US, public disclosure before filing can invalidate a patent. Having you sign an NDA makes it clear (to the courts) that I didn't intend to publicly disclose the information, even if it leaks before I can file the patent application.

I WILL ask you to sign an NDA before I give you access to detailed designs, plans, documents or source code for the product.

Before you do any work for me (even if it is "as a friend") I will have you sign an NDA and an assignment of rights document so that there is no question that the company owns rights to any work done. My co-founder and I have signed these same agreements so that the idea and the product belong to the company, not to us as individuals.

I do these things on the advice of my attorney, primarily to give future investors confidence that there are not going to be any issues around intellectual property rights.

Whenever I sign an NDA that our company lawyer didn't draw up I have a lawyer look it over. That said, they are all pretty similar so once you have seen one you should be able to identify any unusual terms.

alok-g
Cannot upvote this enough. When most people say "idea" (including you here), they are not talking about something that is a non-trivial patentable invention (which you cover later). NDAs are for such IP, not for simple business "ideas" about making this or that app. Probably because what one encounters 99.9% of the time in the simpler class, most of the comments here are biased against NDAs.

I am working on some that are non-trivial, and some that aren't. For the non-trivial ones, we closely examine everything we find or come across for potential overlaps to constantly assess its potential. It is also true that these are very hard to find because people across the world have already worked on many different things. Sometimes the unknowns involved do not resolve in your favor, as in, the technical solution you were investigating does not work out. And this could very well mean that other people may already have tried that path too without resulting in a story that would be found over the Internet.

I have no reason to believe that "such" ideas are dime-a-dozen. But yes, for the same reason, chances of those ideas working out becomes rare by definition.

rahimnathwani
Read the blog post MyraMains pointed out. Don't sign an NDA unless, after you have read that post, you think the benefit you will get is worth what you'll be giving up.

Also, if you do ever sign an NDA, read the document carefully. If someone drafts a legal document and puts 'non-disclosure agreement' at the top, this heading doesn't put any restriction on the clauses within. There could be onerous (for you) provisions relating to liquidated damages or injunctions. Be sure that you're happy with each of the clauses individually, not just OK with the general idea of signing an NDA.

eswat
To hear an idea, no.

Though I do sign them when working with a client if it makes them feel more comfortable while we work with each other (which is understandable since I often need to do thorough research and gain access to source code to do my work). Other than losing a potential piece in my portfolio I feel I don’t lose much in signing an NDA in many of those cases.

craigmj
I will sign an NDA only if it is very specific and very limited, and relates to something concrete: for example, "the list of our clients and their contact details". Anything broader, never. Before we sign an NDA, we need to run it past our lawyers, which means legal fees, which means we have to bill the potential client. Somehow, suggesting that they cover our legal fees seems to scare off most potential clients, which gives some idea of how serious they are.

For ideas, there are patents. If somebody tells you to sign an NDA because they haven't got the patent yet, they're being naive. Assume their idea is really brilliant and technically innovative. They're busy patenting it, but tell you under NDA. You tell your friend Sue, who goes and rolls it out before they do. Well, now they can sue you for the billions they will never make - good luck with that. But they can't sue Sue: she never signed anything with them, and they don't have a patent. If there's really a "secret sauce", patent first, talk later. Generally, though, there's just ketchup.

I've also seen too many NDA's that include some sort of "rights grab", such as "any ideas that come up during our discussions belong to the company."

I wish independent developers would stop signing anything that is put in front of them. It makes me seem quite unusual in the industry, and often means that the first 45 minutes of a meeting is spent explaining why I don't sign NDA's.

vishalchandra
You seem to provide technical services. You can similarly provide NDA signing services (for a fee). If it is really important for someone to protect their great idea and at the same time share it with you, charge minimum $100 for it. Will cover your time and effort to keep a track of all those NDA documents.

Keep the NDAs for discussing ideas, with a really short time validity of just two weeks or maybe just one day. In a month you can be explained all there is to be explained about "just an idea".

Beware of any "non-compete" clause in an NDA.

All NDAs should be mutual. You hear an idea, you give feedback, you have rights over that i.e. your feedback cannot be publicly disclosed to others. Wow ! You can now give brilliantly ambitious feedback!

Also if you follow the above, all those people who want NDAs signed will probably run away from you. So follow advice at your risk!

jpetersonmn
I have people at my office tell me that all the time. That they have some awesome idea but won't tell me what it is unless I sign an NDA. If they aren't willing to tell me about their idea when the first bring it up, I don't even entertain the conversation. I'll just tell them good luck with the project and change the conversation.