NDA
A Non-Disclosure Agreement (NDA) is a legally binding contract between parties to keep specified information confidential and not use it outside the agreement's scope. Also called a confidentiality agreement or CDA, it is used to protect trade secrets, business plans, customer data, source code, pricing information, and other sensitive information during business discussions, employment relationships, contractor engagements, partnership negotiations, and M&A processes. It is one of the most-common business contracts and one founders consistently misuse, both by asking for NDAs in inappropriate contexts and by failing to use them in appropriate ones.
The two main NDA types: one-way (or unilateral) NDA binds only one party to confidentiality, used when one party will disclose information and the other won't (typical employee NDA, contractor NDA, NDA before an acquisition where the seller is disclosing to potential buyers), and mutual NDA binds both parties, used when both will disclose sensitive information (most commercial partnership discussions, joint-venture explorations, vendor-customer relationships with sensitive integration details). The key terms in any NDA: definition of confidential information (what's covered and what isn't; common carve-outs include publicly available information, information already known to the receiving party, and information independently developed), permitted uses (what the receiving party can do with the information; typically only the specific purpose of the discussion), term and survival (how long confidentiality obligations last; typically 2 to 5 years for general business NDAs, indefinite for trade secrets), return/destruction of information at the end, non-solicitation provisions in some cases, and remedies for breach. The pattern that catches founders off-guard: VCs almost universally refuse to sign NDAs before pitch meetings (they see too many pitches in similar spaces; signing NDAs would create constant conflict-of-interest claims), so pitch decks need to be designed to share enough to interest the investor without revealing trade secrets. NDAs are appropriate later in due diligence (data room access, customer reference calls) but not at the initial pitch stage. The 2020s reality: NDAs have become ubiquitous and often perfunctory; the discipline that matters is using them for genuinely sensitive information and not asking for them inappropriately.
Ryan's Take
NDA is the document founders try to use in the wrong place (pitch meetings with investors who won't sign them) and forget to use in the right places (contractor relationships where the contractor sees real trade secrets). The right rule: use NDAs liberally with employees, contractors, advisors, and any partner who'll see sensitive information, but don't ask VCs to sign them at the pitch stage and don't expect them to. Design your pitch deck to share enough to interest investors without revealing trade secrets; save the NDA for the diligence stage where it's expected and standard.
What founders get wrong: Asking VCs to sign NDAs before pitch meetings. Almost no VC will sign at this stage, and the request signals founder inexperience. Design your pitch deck and conversations to share enough to create investor interest without revealing genuinely sensitive trade secrets. NDAs are appropriate at the due-diligence stage (data room access, customer reference calls) but not at first pitch.
Related: Trade Secret · Copyright · Work for Hire · Confidential Information Memorandum
FAQ
What is an NDA?
A Non-Disclosure Agreement, a legally binding contract between two or more parties to keep specified information confidential and not use it for purposes outside the agreement's scope. Used to protect trade secrets, business plans, customer data, source code, pricing information, and other sensitive information. Also called a confidentiality agreement or CDA.
What's the difference between a mutual NDA and a one-way NDA?
A one-way (unilateral) NDA binds only one party to confidentiality, used when only one party discloses sensitive information (typical employee NDA, contractor NDA, NDA before an acquisition where the seller is disclosing). A mutual NDA binds both parties, used when both will disclose sensitive information (most commercial partnership discussions, joint ventures).
Will VCs sign an NDA before a pitch meeting?
Almost never. VCs see too many pitches in similar spaces; signing NDAs would create constant conflict-of-interest claims. Asking for one signals founder inexperience. NDAs are appropriate at the due-diligence stage (data room access, customer reference calls) but not at first pitch. Design your pitch to share enough to create interest without revealing trade secrets.
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