A Non-Disclosure Agreement (NDA) is a very common form of ‘protecting’ an entrepreneur’s idea from being stolen. We often have potential clients ask us about signing an NDA to protect their ideas at first contact.
The cold hard truth is an idea in its purest form is not worth anything in business. It’s the actual execution of it that matters. Unless you have some intellectual property or code already written, an NDA is usually just requested because it’s something someone said you should have, and often a sign of amateurism. Why? Let’s consider a few things:
1. Can you explain your idea at a high level? Without disclosing any of your secret sauce, can you talk to developers in order to understand what sort of time and effort your idea would take to build? Almost always, the answer is yes. Until you start developing the actual technology, there’s not much inherent value in the idea itself. Once you agree to start working with a developer, then it’s completely find to have an NDA in place. Or more importantly, ensure you have a clear contract in place with terms to protect the code and ensure you maintain ownership.
At GEM, this is exactly what we do – when we agree to start working with you on a project, we first make sure we have a clear contract between you and us, which ensures that at the end of a project, you maintain ownership of the code and product that was created, and that confidential information is kept confidential.
2. Are you starting the relationship off right? An NDA is an inherent sign of mistrust. Its certainly a form of protection, but in an informal environment when you are just starting to look for technical help, having a developer sign an NDA before even talking to them indicates you don’t trust them. The best freelancers and agency’s often take this to heart, and will not work with entrepreneurs who require an NDA up front, because it’s a signal to them that the entrepreneur isn’t sophisticated and not worth his/her time.
This sounds pretty harsh, I know. But here’s the thing – how can you expect to build a good working relationship when the very first thing you ask for is a contract to ‘enforce’ trust? Trust goes both ways, and while it’s important to ensure your interests are protected, it’s also very important to start off a working relationship in a way that both you and your developer feel comfortable. Requiring an NDA right away certainly won’t make your developer feel comfortable.
At GEM, we don’t sign NDAs. It goes back to the first point too – once we agree to work together, we have clear confidentiality clauses in place, but for initial discussions its not something we do.
3. Can the developer really sign an NDA? Professional freelancers or agencies obviously spend a lot of time writing code, but also a lot of time finding new clients. They’re speaking with entrepreneurs all day long and if they sign an NDA before speaking to each one, it is highly likely they will infringe on someone’s NDA because ideas are very often repeated. It’s simply not a practical business step, and causes the developer unnecessary risk.
Take for example Uber. At GEM, we’ve quite literally had multiple entrepreneurs ask, in the same day, for an app ‘just like Uber, but for X industry’ (the same industry, almost identical ideas). Had we signed an NDA like the first one was requesting, simply having a conversation with the second would potentially be a breach of the first NDA. In this specific example, both entrepreneurs thought their ideas were completely unique, and one of them was initially adamant an NDA is required before discussing the idea. Neither of them had the funds to engage us to pursue the project though, so ultimately signing an NDA with either of them would have been a lot of unnecessary risk for us as an agency.
I must be clear, NDAs are absolutely appropriate when there are genuine trade secrets and other intellectual property at stake. And you should definitely speak with your lawyer about the appropriate time and place to use NDAs. The situation I’m exploring in this post is when an entrepreneur is looking to speak to one or more developers about taking an idea and turning it into reality, but are afraid that their ideas will be stolen and require multiple developers sign NDAs before even talking to them to understand the cost or scope of building their idea.