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NDAs Decoded: What They Are and When to Use Them

By Vi Hua

Vi Hua is an attorney in the Business practice group at the law firm Perkins Coie, LLP. She has experience representing venture capital investors and companies across varied industries including digital media and software.

NDA Defined

A nondisclosure agreement (or "NDA") is a contract illustrating how confidential information will be shared and protected by two or more parties.

NDA Demanded

Knowing when to request an NDA is key in ensuring the NDA helps you more than it harms you. For example, most venture capital investors will refuse to sign an NDA-they constantly listen to start-up pitches and meet entrepreneurs across all business sectors. Chances are they have heard or will hear ideas comparable or identical to yours, so signing an NDA is not only an unrealistic expectation, it is a professional hazard. Bottom-line, an NDA can damage your new and developing relationships with investors, who may perceive you as inexperienced and/or difficult to work with. But you can still give an engaging pitch without (or limiting) risk to your confidential information by presenting your business plan and/or product without revealing the confidential specifics, i.e., systems, source code, data, formulas, etc.

So when is an NDA useful? First, all of your consultants and employees should be required to sign an NDA or have nondisclosure requirements in their service/employment agreements in the fo...

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