On non-disclosure and keeping trade secrets

Is a non-disclosure agreement the right agreement to draft for a first meeting with a potential partner, investor, or venture capitalist?

There might be a much more straightforward approach to this, one that does not require as much resolution of ambiguity between the entrepreneur and the VC. Consider the approach where you treat the key information to be protected as a trade secret. The entrepreneur impresses upon the VC the value of the trade secret and the efforts maintained to protect the trade secret by carefully marking all documents which would disclose the trade secret and visibly restricting their distribution. The VC in turn provides value by vetting the value of the allegedly valuable trade secret and is prepared to say “that’s not a secret, Paul Baran started a company doing that in 1985“.

A crafty tradesman is perpetually disclosing some relevant fragments of their trade knowledge at all times, in part to demonstrate competence, and in part to test whether what they know is really true.

As far as disclosure of trade secrets goes, I’d be much more worried about details leaking out inadvertently via ill-considered partners and subcontractors than via an investor.

Originally posted as a comment on Summation, in a story on Why Entrepreneurs Should Ask VCs to Sign NDAs.


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