NDAs - Repeat After Me

All together now:

VC firms typically do not sign NDAs for first looks/meetings.

VC firms typically do not sign NDAs with promises not to evaluate the same or similar businesses included.

VC firms typically do not sign NDAs with 5 year no contact clauses included.

VC firms typically do not sign NDAs with promises to report any contact with competitive businesses included.

 

So far this year (and we're only half way through March), I've had requests for 35 NDAs, many including the weird clauses above.

And the best for last.  Repeat this 10 times before you go to bed tonight:

I will not send an unsolicited beautiful leather bound binder with 600 hundred pages of detailed business, marketing, competitive, and financial information about my business along with an unsigned NDA and a request for it to be signed and returned to any VC.

It arrived in my office on Thursday and the binder was off the charts nice.

Comments

[Sandy Kemsley]

Might be helpful to publish a copy of an NDA that you will sign, link to it from your blog. Even if they don't notice it in advance and send something stupid (thereby failing intelligence test #1), you can always just send a link to it back to them.

[Michael Martin]

Probably won't be seeing that as often as the economy tightens up. My view is that this practice became more and more common as VCs competed to differentiate themselves.

http://brokensymmetry.typepad.com/broken_symmetry/2007/07/my-two-worlds-c.html

[Andy Freeman]

I'd guess that whether Segal's firm will sign an NDA depends more on the circumstances than the terms of the NDA.

If that's true, it might be more helpful to post something like "we've been asked to sign 10k NDAs and have signed 3".

[rick segal]

Andy,
That's an excellent point. This year I've signed 2. One post term sheet and one because it was a public company.

[Andy Freeman]

I'm somewhat surprised by the "1 post term-sheet" NDA, but that's probably because I don't understand a couple of things.

The emphasis has been on pre-term-sheet confidentiality. However, there are three other interesting times - post-term-sheet but pre-deal, post-term-sheet and but the deal falls through, and post-investment.

What are reasonable expectations and concerns during those times and what are reasonable ways to address them?

[rick segal]

Andy,
Good point. Post Term Sheet in a private company, I'll sign NDAs or confidentiality agreements where required in order to get accsss to confidential contracts/partnerships where just the nature of the two companies being involved is confidential. I think that's a reasonable thing to do. For Publics, I've signed stand still agreements.

Also for Privates, a few times, I've sign agreements not to speak to employees or customers without notifying management. This applies during the DD process only. Post DD, I agree not to talk about the financing process good or bad as that is for management to do.

thanks,

>R<

[Chris S]

More to the point, don't send expensive binders when you are looking for money. Or else every page inside that binder might as well say "Yes, we do like to waste money".