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Are NDAs needed for an early stage startup?

Answers

Topic Expert
Kent Thomas
Title: Founder
Company: Advanced CFO Solutions
(Founder, Advanced CFO Solutions) |

Yes, you should have all consultants sign an NDA before you provide confidential information. You should also have non disclosure, non-solicitation and inventions assignment agreements from all employees. It is important to have these signed at the time that they are hired in order to assure that they are enforceable. Take the time and spend the money to get advice from a great corporate attorney for all such agreements - it will be well worth it to you!

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

In addition, you should have employment agreements with both key, highly paid or those who have access to confidential/sensitive/proprietary information as well.

Each group may have differences, but they create both a legal and cultural bind to the company in excess than just a plain "NDA" and that in itself adds value to the new company.

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

My position is that NDAs should be a standard employee (and also for consultants) documentation.(or at least included in the employment contract) for ANY company

NDAs however are generally frowned upon when you are seeking funding from investors and may decrease your likelyhood of funding. The thinking is that investors are NOT investing on the idea or the product but the company and the entrepreneur to execute the idea. .

From an article i read years back....
If your idea is so easily stolen that just hearing the concept is enough to allow anyone to replicate it and launch it better than you, then you’ve already lost.

Topic Expert
Edward Abbati
Title: Vice President of Finance
Company: Location Labs
LinkedIn Profile
(Vice President of Finance, Location Labs) |

Yes, and the biggest reason is that when you going to due diligence during a acquisition, it can be very painful trying to get NDA's with company's you dealt with or carving out some indemnification language in the acquisition agreement that protects the buyer for those companies you don't have an NDA with.

I just went through one and it was painful. Also, make sure you employees all have signed agreements to.

Topic Expert
Peter Freeman
Title: Chairperson - Clean Tech Committee
Company: Keiretsu Forum - Angel Investors
(Chairperson - Clean Tech Committee, Keiretsu Forum - Angel Investors) |

I agree completely with the first 2 comments, particularly as they refer to employee relations.

You will not always be able to get outsiders to sign; VC's in particular routinely refuse, and you need to take a leap of faith there. However, in most other relationships you will get the other side to agree.

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