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When you are in start-up phase and you are looking for investors, a big portion of your time is spent talking about your idea to third parties. You might send third parties information like detailed business plans, product specifications and all the other really cool stuff about the services or product your business is going to sell. You might also send this sort of information to a third party that is interested in buying you out.
This is part of doing business – you have to share your ideas if you want to get buy-in, investment or to execute an exit strategy. But how to do you make sure that your idea stays yours when you share it?
Any business with intellectual property (IP) that is valuable should have a template NDA (non-disclosure agreement or confidentiality agreement). An NDA is an agreement that a potential investor or other third party signs to say that they acknowledge and agree that your IP and ideas are yours, and not theirs.
A good NDA should set out the consequences of a breach. They are usually very straight-forward, short and sharp contracts that most seasoned investors should have no trouble signing. I’d seriously question handing over valuable IP to a third party that refuses to sign an NDA when reasonably requested.
I recently came across an article by a venture capitalist that urged start-ups not to ask potential investors to sign NDAs. The VC also went on to say that start-ups should only ask for a NDA to be signed when covering specific areas including ‘anything IP related or protected’. Guess what? Your ideas are your IP.
I couldn’t believe that an investor would tell you that it is ok to tell all and sundry about your brilliant idea without protecting your IP in it.
I think that NDAs are important. Until you are in the market with a well-developed product or service, sharing your IP without protecting it leaves you exposed. What’s stopping the investor running off with the idea or selling it to someone else? Nothing.
So get in touch with your trusted legal adviser and get a template NDA on board that you can roll out whenever you are going to share IP with third parties.
Don’t make it easy for anyone to take your idea and run with it. What’s yours is yours. Protect it!