2011-03-10

Why NDAs are usually pointless and counterproductive

Non-Disclosure Agreements are usually pointless and counterproductive. Forget using an NDA as a crux in most cases unless it's absolutely necessary. Unless of course you're not innovative enough to come up with the next big idea after the current one, and the next big idea after that.
  • Most high-level VCs have seen thousands of ideas per week and will tell you they have seen it all; "there are no new ideas under the sun, only variations on old ideas".  They will generally refuse to sign NDAs, it's not worth their time to entertain your paranoia.
  • Bringing any product to market is 5% the idea and 95% the execution, and execution takes work, dedication and passion.  If you tell me your idea, what am I going to do, drop everything in my life, dedicate myself to your idea, and go bust my gut for 5 years to bring your idea to fruition before even you can?
  • Furthermore, the success of any product is 5% the product and 95% the timing. There were many facebook-equivalent social networks before facebook, many Groupon-like collective purchasing power initiatives before Groupon, and many tablet computers before the iPad dating as far back as the Apple Newton or further.  (Of course ideal timing windows are very narrow, and there are now many Groupon clones riding on Groupon's coattails, but the point is that the idea was around for quite a while before Groupon was successful.)
  • Most people that are approached about an idea but asked to sign NDAs first are the sorts of people that already have way too many ideas of their own and are so maxed out that there's no way they have time to go run off pursuing yet another idea. Especially your idea.
  • In most cases, those asking others to sign an NDA before they share an idea don't have much more to offer than their one pet idea. They are a liability to a VC or potential future business partner.
  • Asking a resourceful or powerful person to commit to signing an NDA before they even know what the idea is laughable: The incentive system is circularly reasoned. They aren't going to sign it until they know what it's worth to them, and they can't know what the idea is worth until they sign it. Why would they commit to paint themselves into a corner before they even know what the idea is about?
  • Typically NDAs do not come with a corresponding counter-agreement that says something like, "If you agree not to disclose this, and you become involved in developing this idea in role X, the payoff to you will be Y% of the stock at release."  NDAs typically uniquely benefit the NDA-writer.
  • Forcing somebody to sign an NDA is often an attempt on the part of the idea-holder to reverse the hierarchy of power. If they didn't think the potential NDA-signee would be of critical importance to the success of their project, they wouldn't be asking them to sign an NDA. Getting somebody to sign an NDA is an attempt to maintain an asymmetric relationship of control and wield authority over the very person whose skills you need to bring your idea to fruition, which is a relationship very few resourceful people are willing to enter into.
  • An NDA may already overlap in IP with an idea the signee is already working on (but they can't know until they sign). If there is any overlap in IP, both of you end up in a very sticky situation.

3 comments:

  1. True.

    I prefer the FrieNDA - www.friendda.org ;)

    @AAinslie

    ReplyDelete
  2. @AAinslie Ugh. You placed a retarded EULA-like clause at the end of your mostly entertaining document. I don't know which I hate more, NDAs or EULAs >.<

    ReplyDelete
  3. PacoBell: which clause is EULA-like?

    ReplyDelete