Why We Don't Sign Non-Disclosure Agreements
At this stage of my career, I don’t sign NDA’s. As an experienced angel investor, it's a non-starter for me both as a company advisor and as the primary investment analyst for Tyre Angel.
Q: Why?
A: Deal flow volume, proper priorities and operational Inefficiency.
- High Volume of Pitches: I review 80 business plans per month. Negotiating, signing, and then tracking NDAs for each one would create an immense administrative and legal burden, significantly slowing us down.
- Time and Cost: Each NDA would ideally need a legal review. The associated time and legal fees are impractical.
- Overlapping Ideas: I frequently see multiple companies with similar ideas, business models, or in the same or similar markets. Signing an NDA with one company could inadvertently restrict me from investing in or advising another company, even if the "confidential" information is general industry knowledge or something they were already aware of.
- Liability Concerns: If I sign an NDA and later invest in a similar company, I could face lawsuits alleging misuse of confidential information, even if no such misuse occurred.
- Portfolio Company Support: Information learned under an NDA from a new pitch could create conflicts if it's relevant to a company I have already invested in limiting my ability to provide guidance.
- Ideas vs. Execution: Ideas are plentiful, but successful execution is rare. Tyre Angel invests in the team, the traction, the market opportunity, technology, transformation and the execution plan, rather than just a "secret idea."
- Information Sharing (Post-Investment): I often discuss potential deals with partners and other trusted investors (with explicit permission of the founder, if sensitive information is involved). Broad NDAs signed at the outset can hinder this collaborative evaluation process.
- Difficult and Costly to Enforce: Even if an NDA is signed, proving a breach and demonstrating damages is nearly impossible and can lead to an expensive legal battle for everyone
Also asking for an NDA upfront is a sign of an inexperienced founder who doesn't understand how the early-stage financing ecosystem works. It’s both a trust factor and a speed factor. Requesting an NDA at the very first interaction can imply a lack of trust, which is not an ideal way to start a potential long-term partnership. In 45+ years, I have never seen an NDA enforced.
If you ask me to sign an NDA, I am out.