Fear and Loathing of Non-Disclosure Agreements

Today I was reminded how perception plays a far larger role in whether or not someone will sign an NDA, rather than the actual content.

Without going into specific details, I have found most people can be grouped into one of two broad categories when it comes to NDAs. The first wants “lots of protection” (typically a nervous entrepreneur or company management) and the second simply wants something “simple and basic” (typically sales people or investors). I have two basic NDA templates: the one I use most often is a single page (2 columns in 8 point font) and the other is five pages long (single column in 12 point font). For the most part, experience has taught me that matching the appropriate version to the expectations of the recipient can really move things along.

As you probably have guessed by now, the irony is that content of both templates are EXACTLY the same. I do not do this to be unscrupulous, as each provides adequate protection for each party and are always tailored to fit the purpose, but rather to free everyone to focus on the actual deal by getting past an irrational hurdle.

I use the term “irrational” because I find that too many business people (including the very intelligent and successful) have formed pre-conceptions about NDAs despite rarely actually ever reading what one says. Some are the downright misguided.

Like any contract, an NDA is simply written understanding of what the relationship is between two parties. Having or not having one has little to do with “trust” and more to do with avoiding the future misunderstandings that all-to-frequently arise when you rely on a verbal agreement alone. Don’t believe me? Try playing Broken Telephone by passing a piece of paper with the original message written on it instead of whispering it orally: the outcome will be very different from the traditional variant of the game.

I have found that spending a quick 3-5 minutes to run through an NDA can easily to dispel some of the misplaced angst that seems to surround them. In a future post I’ll run though what I like to see in a non-disclosure agreement and why each point is not really that controversial important for me.