The Cult of the Non-Disclosure Agreement

"To all those entrepreneurs with innovative, unique business ideas who want to capitalize on them before someone else does, I have one piece of advice: Get over it...

Do the math. If you had an idea, odds are that a sizable fraction of the people with the required expertise and who worry about similar problems have had the same idea at some point. For the vast majority, it will just be a passing thought, but a few will take the time to do their homework, and maybe even put together a business plan...

Good venture capitalists understand this, and many will refuse to sign an NDA before looking at a business plan. Few entrepreneurs understand it, and many get wrapped up in "protecting their idea" so someone else doesn't steal it.

Why the cult of the NDA?

In our culture, we've elevated the creative new idea to be the core factor in determining whether a startup succeeds or fails. Unfortunately, nothing could be further from the truth, but there's a chain of logic which leads inextricably to the NDA:

1) A unique new product or idea is essential to a startup's success.
2) The first company to capitalize on a new product or idea has a unique and sustainable advantage.
3) I have a unique idea for a new product or service.
4) If others find out about my unique idea, they could bring it to market first, and steal the advantage from me.
5) Therefore, by disclosing my idea only under the strictest confidentiality, I preserve an advantage for myself.

Each of these five points is wrong in most cases...

What should be confidential?...

Information which is appropriately confidential includes:

* Trade secrets, unique methods and algorithms, and processes.
* Customer lists and prospect lists.
* Data generated on behalf of a client.
* Information which a third party has asked be kept confidential..."

Read more in this provocative post from frozennorth.org.