What I’ve Learned: Week 6
All Sizzle, No Steak
“Sign an NDA and I’ll tell you more...”
While I was in Madrid I attended a networking event for AJE, the Asociación de Jóvenes Empresarios (Association of Young Entrepreneurs). It was a beautiful summer night, they had rented the terrace of the Casa de America, and there were a hundred or so ambitious young professionals milling around with a refreshing drink in hand.
The recipe was almost always the same:
1.) Hi, I’m [insert name]. What’s your name?
2.) It’s great to meet you — I’m [insert name].
3.) Add three sentences of politeness (e.g., “Is this your first time coming to one of these?” If they were talking to me, “Where are you from?” as I’m obviously not Spanish, etc.).
4.) Then, inevitably, “What are you working on?”
I think every single experienced entrepreneur was delighted to share their project or idea. And almost every single “new” entrepreneur or wannabe entrepreneur hesitated.
Then, with one lady came the magic moment:
“I can’t tell you anything more unless you sign an NDA.”
Thankfully, I didn’t have to say anything because someone else in the group (bluntly) said, “Well, that’s not going to happen.” She quickly retorted, “Well, I don’t want you to steal my idea or tell anybody else about it.” That launched a conversation on the difference between ideas and execution, how there are very few truly unique ideas, and what separates the winners from losers is almost always execution. We can call this Lesson 1a, and after hearing it from my VC colleagues, undergraduate and MBA professors, a few previous bosses, and preaching it myself, it was great to hear it directly from a batch of young entrepreneurs.
But the sad truth is, later in the summer, I heard a pitch from a supposedly seasoned entrepreneur. He had a business name. ZERO clients. ZERO revenue. ZERO product — not even a beta. Just an idea.
He wanted several million dollars of venture capital investment on a RIDICULOUS valuation. And, guess what else he wanted? The team and I to sign an NDA before he’d tell us anything else.
Here’s this week’s lesson:
Sizzle is nice, but I can’t eat sizzle.
I need steak.
Your idea isn’t worth a whole lot unless you can execute on it. And it’s super hard for me or any other VC to invest in your idea unless we are confident you can execute on it.
P.S. Here’s why VC’s won’t sign NDA’s (and probably why entrepreneurs shouldn’t either):
- Brad Feld of the Foundry Group, “Why Most VC’s Don’t Sign NDAs”
- Entrepreneur Magazine, “Why VCs Don’t Sign NDAs and You Shouldn’t Worry About It”
- Cooley, one of Silicon Valley’s most famous venture capital law firms, “Should You Require a Signed NDA from a Potential VC Investor?”
- Mark Suster of Upfront Ventures, “On NDAs and Confidentiality”
You can also check out what JME Ventures “learned” from me, via “What We Learned from our Summer Associate,” and what I’ve learned (or had reinforced) in Week 1, Week 2, Week 3, Week 4, and Week 5.
