Stop asking for NDAs - do this instead.

I swear this is the last newsletter I will ever write about this.

This week, more than a few people DMed me upset about this post:

Unfortunately… so many founders are still completely missing the point.

The quickest way to look stupid in front of a VC: ask them to sign an NDA before you give them your pitch.

Most VCs will laugh if you ask them to sign an NDA.

Me too - it’s so bad I even have a macro on my Stream Deck for it.

But some investors will outright avoid founders who ask for confidentiality, because even asking for an NDA from a prospective investor is hallmark rookie-founder move, and they don’t have time to educate.

But here’s the problem:

• As a founder, you’re scared someone’s gonna steal your idea
• And one of your advisors said “always send an NDA”

The truth: No one’s going to steal your idea - and ideas do not inherently hold value.

But here’s how to move the needle with investors, step by step…

…and what to do about NDAs and your irrational fear of having your sh*t stolen:

Step 1: Hide the important stuff

Assess what’s truly confidential. We’re talking high-value, need-to-know aspects of the business:

• Unredacted customer lists
• Potential customers
• Commercially-sensitive, must-disclose information
• Genuinely-secret, currently-unpatented processes

Assume it’s inevitable that your competition will see your deck at some point, and it’s only a function of time x your success.

Keep truly confidential info out of your deck.

Right now, VCs don’t need that info anyway. Ability to execute »> “super-secret stuff”

Get more general:

• Instead of Coca-Cola, say “a major blue-chip Fortune 500”
• Instead of putting the full title of the patents you’re about to submit, “several omnibus method patents blanketing our space”

You’ll still be able to share sensitive stuff later, but for now:

Step 2: Skip the NDA

Think about it.

A capital raise is a sale, and you would be adding unnecessary friction to what is essentially a sales process, along with:

• Obscene amounts of legal overhead (time x money) just to review documents
• A mostly-unenforceable signature (I know of only one person who has ever successfully sued AND collected on breach of NDA - and they weren’t a startup)

​

If you ask for an NDA, you’re slowing yourself down.

There’s a time and a place to give the secret stuff, and that’s in the dataroom. So your job is to…

Step 3: Bait the dataroom

This is truly moving the ball forward.

At the bottom of any page in your pitch where you’ve redacted info, include some version of the words:

Further information is available within the Company’s Virtual Data Room.

You’re essentially saying, sure, happy to give you more info - once you’re ready to signal your next step with us.

Bonus: Almost every termsheet I’ve ever seen includes confidentiality as one of the headings anyway.

So if you’re giving up the truly confidential info, it’s generally for a good reason.

But stay protected

From a practical perspective, a VC’s reputation > confidential info. If they went around sharing people’s confidential information, founders wouldn’t trust them, and their fund wouldn’t be around very long.

But it’s still up to you to protect yourself, so do your research.

You can even double-protect: some founders I know will even have a two-stage Data Room.

• One with “semi-confidential stuff” that they can easily share outside of NDA, and
• A second “super-secret” Data Room with the customer lists, margins detail, supplier lists etc.

Reduce the friction in your “investor sales” process, and you’ll thank yourself for it.