Non-Disclosure Agreements (NDAs) are one of the most common contracts founders encounter - and one of the most misunderstood. They’re often signed quickly, but a poorly drafted NDA can leave your startup’s ideas, code, or confidential data exposed.
Here’s what every founder should know about NDAs, when to use them, and how to avoid common mistakes
What’s an NDA?
An NDA is a legal contract that restricts the disclosure of confidential information shared between parties. It’s designed to protect sensitive business details - think product ideas, customer lists, code, financials, or upcoming fundraising strategies.
NDAs can be:
- Unilateral: One party agrees to keep the other’s information confidential.
- Mutual (or Bilateral): Both parties agree to keep each other’s information confidential—typical in early-stage partnerships, M&A discussions, or joint development projects.
When to Use an NDA
NDAs are useful when you’re:
✅ Pitching to potential investors (some won’t sign NDAs, but others may if you’re sharing sensitive technical info)
✅ Interviewing key hires or contractors who’ll see proprietary systems
✅ Exploring partnerships or vendor relationships
✅ Collaborating on R&D or IP-heavy projects
Pro tip: NDAs are not a replacement for good IP strategy, but they’re a key first layer of protection.
Key Terms to Watch
Every NDA should cover these essentials:
- Definition of Confidential Information: What counts as protected info? Broad is okay - but vague isn’t.
- Obligations of the Receiving Party: Usually includes using reasonable care to protect info and limiting disclosure to employees or advisors on a need-to-know basis.
- Exclusions: Public info, already-known info, or info disclosed legally (like via subpoena) is typically carved out.
- Term of Confidentiality: Commonly 2–5 years. Some clauses may continue indefinitely for trade secrets.
- Use Restrictions: Confidential info can’t be used for any purpose other than the stated business relationship.
Common NDA Pitfalls
🚫 Overreaching language: Asking the other side to agree to overly broad or perpetual obligations can stall negotiations or backfire in enforcement.
🚫 Missing mutuality: If you’re both sharing sensitive info, make sure the NDA protects both sides.
🚫 Not actually marking info as confidential: Many NDAs require labeling or confirming confidentiality in writing—something teams often forget to do.
Final Thoughts
NDAs are easy to overlook - but crucial to get right. They don’t replace patents, trademarks, or good hiring agreements, but they help buy you the breathing room to grow without leaking your edge. We help founders draft lean, enforceable NDAs tailored to real-world use.
Frequently Asked Questions
FAQs on NDAs for Startups
Do investors usually sign NDAs?
Most venture capitalists won’t sign NDAs at the pitch stage. However, some strategic investors or partners may sign if sensitive technical information is involved.
How long should an NDA last?
Two to five years is standard. Trade secrets may be protected indefinitely if defined clearly.
Are NDAs enforceable?
Yes, but courts often scrutinize them. NDAs that are too broad or vague are harder to enforce.
Should contractors and employees sign NDAs?
Yes. Pair NDAs with confidentiality and IP assignment agreements to ensure ownership of work product and protection of sensitive data.
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