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When you need a non-disclosure agreement for your tech startup

You’ve got a bright idea and the talent to bring it to life – but your coding skills might not help turn your startup into a legitimate business. You’ll need to consult business lawyers, investors and potential partners as well. You might be thinking about drafting a non-disclosure agreement (NDA) to make sure that no one takes your idea and makes a billion dollars before you.

Being protective of your idea is understandable, but going so far as having people sign NDAs might not always be necessary. Knowing whom to swear to secrecy is key.

Good times to have an NDA

People whom you believe are likely to copy your idea are the number-one candidates for an NDA. If you think a prospective business partner is going to tell you, “I’ll think about it” and then try to patent your idea the next day, keeping them confidential is important. Employees and distributors could leak information to competitors down the road, so NDAs could prove useful during and after their engagement with your company.

Making sure that the document clearly states what they are forbidden from speaking about, how they can and cannot communicate about your idea and how long the agreement will last are just a few of the components that should make up your NDA.

Bad times to have an NDA

Not everyone needs to be legally bound to silence, since some parties might have a reason to keep information to themselves anyway. Wealthy investors – such as venture capitalists (VCs) – are motivated to keep trade secrets. If they gain a reputation for leaking information, it will be hard for them to find other investment opportunities. Many VCs report losing faith in an investment the moment an NDA is presented, so it could actually harm you to even broach the subject.

Knowing who needs an NDA can keep your idea secure – and knowing when not to bring the topic up can also benefit the future of your business.