Non Disclosure Agreement. A critical decision: Marketing or Product Protection

When I was finishing my degree program in Entrepreneurship and Innovation (MEEI), at McMaster University, I ran into a couple of my classmates. They were carrying parts of a prototype for their product, quickly one of them said “ Don’t look at it! … You need a NDA!”.

Indeed, the patent process and how to protect a business idea was one of the subjects, in fact we signed NDA’s at the beginning of the program for everyone benefits.

But, is it an strategy to request to everyone NDA’s. It is a critical decision to make, yet you should be able to distinguish between Marketing and Product Protection.

If the product is an artifact (a physical product) such as wearable technology a patent is a must along with its new business model. Innovation is unique and for competitors it will be difficult to copy your product and business without infringing your patent.

In the other hand, when entrepreneurs are dealing with software related services it gets delicate.

You must protect your business idea with potential partners, team members and mainly with competitors (if you are looking for selling your business). Competitors are way ahead of you and they have the infrastructure already. With a vast numbers of programmers, they can copy your business idea and put in place as a standalone with their business.

When talking with customers and investors, a NDA is not necessary and do not create an invisible wall between you and them. You should see it as a powerful marketing tool, where you are building your sales funnel and building your brand. What investors are looking for is return of investment (ROI), and it is impossible to execute your business idea. According with innovation hubs like: MaRS, TiE Toronto and Innovation Park, Hamilton.

Instead you are building a long term relationship either with your customers or the investors. Also, Lean Start-Up requires input from customers for your product and business development.

The funny situation between my classmates and I was sarcastic, but it shows how important NDA is in your Start-Up.

It is important to have NDA’s signed by potential business partners, competitors and members of your team. While with customers and investors it is not necessary.

Ruben B.

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