The following post can also be found at futurefounders.com.
Let’s face it. As entrepreneurs and innovators, we take great pride in our ideas. We invest days, months, and even years into projects that might never succeed. So when we finally start to gain momentum with an idea and feel that it’s finally time to pitch it to some friends, advisors or even investors, there’s a natural inclination to want to protect ourselves and our idea. This inclination often leads to what I might argue might be the worst possible opening line of a pitch presentation:
“If you don’t mind signing this non-disclosure agreement before I begin…”
Non-disclosure agreements (NDAs) are fairly common forms of legal protection that prohibit the parties involved from sharing the content of a meeting with anyone else. In theory, they ensure that the idea that began with you stays with you and doesn’t get leaked for someone else to seize the opportunity you’ve been chasing.
However, despite their appeal as a source of protection for intellectual property, I have one word for you entrepreneurs thinking of using NDAs for your initial pitches. Don’t. Please. Your instincts are healthy, but misguided. Here’s why.
In all likelihood you don’t need an NDA.
There’s a common understanding among established entrepreneurs that you’ve probably heard before: “Entrepreneurship is 1% idea, and 99% execution.” Basically, if I published your business idea in the Sunday edition of the New York Times, millions of people would see the idea, a few hundred might consider it, 10-20 might try it, but not one of them would be as equipped or fitted to execute the idea as you, the original creator.
Part of this is because the 1-99 Rule might be broken down a bit to something like the 1-14-15-20-20-30 Rule.
14% Head Start
15% Creative Pride
20% Strategic Positioning
20% Inspiration and Passion
Basically, your idea might be golden (it also might be terrible). But in either case, you as its creator are uniquely poised to execute the idea more than anyone to whom you could possibly pitch. You have already done all the thinking and strategizing–they haven’t. You have this thing called creative pride (in other words, the idea is “your baby”)–they don’t. You’re most likely already positioned to follow through with your strategy (minus some startup capital)–these people have real lives with real jobs, and can’t drop everything to pursue just any random idea that could very well fail.
Most importantly, even if you did find some person who wanted to steal your idea, if you’ve made it this far, you also have the inspiration, passion and motivation to persevere. The one with the passion will always triumph over the one pursuing money.
You might do yourself more harm than good.
Even more important than whether you clearly need an NDA, however, is what you lose in having one. There is a very fine line to walk in order to not insult your potential investors with a non-disclosure agreement. While it logically might make sense to protect yourself, for all the reasons listed above and more, it tells your audience (1) that you don’t trust them and (2) that you think your idea is something impressive. Remember: confidence is key–arrogance is not. By attempting to shield yourself against malicious play, you also end up running the very high risk of shielding yourself from any interest investors would have been willing to give.
So how do you protect yourself?
Simple. Use discretion. You can give your audience a real taste of your product without giving up your “secret sauce” that sets it apart. A good pitch doesn’t disclose everything about an idea anyway–just enough to peak audience interest and open the door for future private conversation.
My advice? Leave the NDA at home when you’re pitching–at least for now. You don’t need it. Your idea doesn’t need it. Go and sell it with the confidence that you are the best person in the world to make it a reality.
Ethan Adams serves as Coordinator, Startups at Future Founders, a non-profit organization that believes every youth can become an entrepreneur. He has launched and operated a number of his own entrepreneurial ventures including his own digital marketing consulting business. Connect with Ethan on LinkedIn and follow him on Twitter for regular updates.
Future Founders is a 501(c)3 non-profit organization that believes every youth can become an entrepreneur. Through entrepreneurship-focused programs like Discover, Ignite and Startup, Future Founders immerses youth in experiences that inspire and empower them to realize that they do, in fact, have control of their own future. Learn more or get involved with the Future Founders mission here.