To NDA Or Not To NDA

by Kate Swanberg
Blog Post

The other day, we had a potential client ask us to sign an NDA. We declined. And naturally, we didn’t get the business. The experience led us to an internal discussion about NDAs which in turn led to a discussion on Twitter about NDAs and there was no consensus. The question posed was, “If a potential client wants you to sign an NDA before telling you about their job, would you sign it?”

Here is our reasoning for saying “no thanks.”

We work on lots of projects for lots of clients. Along the way, we learn things about their business models, their software, and their ideas. We also have a bunch of ideas of our own that we’re working on, some public (Purple People Collective), some not. Through our interactions with our clients and our own internal projects, we gain experience that benefits our future clients. And each of our current clients benefits from the experience we’ve gained from others.

Imagine this hypothetical scenario. Pretend we’re working on a project for a client who is revolutionizing the way that pet food is sold on the internet. Now imagine a new potential client comes and asks us to sign an NDA. We sign it. They then proceed to tell us about this revolutionary new way they’re going to sell pet food over the internet. Turns out, some of their ideas are the same ones that our current client has. Where did the ideas come from? Did we steal anything? Did we violate the NDA? It gets murky.

Big Cos usually have policies on unsolicited ideas. They don’t accept them. The reasoning is that they’re working on lots of stuff that nobody knows about. Maybe even your idea. If you send Apple an idea for a new computer that has a giant wheel instead of a keyboard, they could very well be working on something similar already. Or planning to work on it. Or having discussions about it. Or brainstorming it. Why open themselves up to future lawsuits over the idea?

When we opened up the discussion on Twitter, we did a (very small) Twitter Poll asking for people’s opinions on signing an NDA before talking to a potential client. The results were split. Some people said they would absolutely sign an NDA and didn’t see a downside. Some said they’d never do it under any circumstance. Some said, “It depends.”

I think the best compromise came from Mark McLeod (@startupcfo), a startup veteran and CFO of Tungle, in his twitter reply: “Don’t sign. You should not give up rights unless you are getting something known in return. Tell them to say what they can without [giving up more than they want too].”

We believe that trust with our clients is of vital importance. Since a big part of our business is ideas, we need to weigh that very carefully against how we approach new ideas. We will not steal your idea. We will not give away your secrets. If we screw you, we know you’ll talk about it, blog about it, tweet about it, and stalk us with ALL CAPS COMMENTS on our blog. That’s not good for our business, so we make sure it doesn’t happen.

That being said, we’re more than happy to sign a FriendDA.

Take the poll here, and let us know your thoughts on NDAs in the comments.

by Kate Swanberg
Blog Post