Why VCs Don’t Like Signing NDAs

Venture Capital Research
4 min readMar 10, 2019


Photo by Adeolu Eletu on Unsplash

The VC business has an unwritten rule on NDAs. And people who violate this rule risk losing credibility with investors even before meeting with them. The rule is simple: never ask a VC to sign an NDA unless your company absolutely needs one.

In the 2+ years I’ve been in the venture capital industry, and after having reviewed well over 300 deals and many hundreds of pitch decks, I’ve only ever signed 5 NDAs.

Exceptions to the rule are entirely possible and may include legitimate issues relating to a patent portfolio, unpublished technical knowledge, a yet to be announced corporate relationship, stealth mode companies, or matters of security. All these things sometimes need an NDA. But in all other cases and before a term sheet is signed, most VCs decline NDAs and move on. Why is this?

A number of VCs have blogged about this already so below I share excerpts from 3 well-known investors and their take on the topic.

Guy Kawasaki

“Before you even start addressing the hard stuff, never ask a venture capitalist to sign a non-disclosure agreement (NDA). They never do. This is because at any given moment, they are looking at three or four similar deals. They’re not about to create legal issues because they sign a NDA and then fund another, similar company–thereby making the paranoid entrepreneur believe the venture capitalist stole his idea. If you even ask them to sign one, you might as well tattoo “I’m clueless!” on your forehead.”

Brad Feld

I’d add a few things:

[1.] Even if I was inclined to sign an NDA, I’d have to go through the process of reading it and deciding if it had any problems (many of them do — they are usually overreaching for the information being disclosed), dealing with my lawyer to change it, and you dealing with (and spending time with your lawyer) to accept or reject my requests. In some cases, I’d probably spend more time dealing with the NDA then with the entrepreneur and his idea. How stupid.

[2.] I’d have to keep track of all the NDA’s I signed. It’s “yet another legal document” in the pantheon of documents we have to keep track of. Hmmm — maybe we should consider funding a startup to automate the creation and tracking of NDA’s. Nah.

[3.] In 20 years of high tech (as an entrepreneur, angel investor, and VC), I’ve never been involved in a situation where an NDA is enforced except in an M&A context. It’s simply a waste of paper and time for anything but M&A.

There is one type of NDA that I’ll sign. Some large companies — for some reason — want to show you stuff, but then don’t want you to tell anyone about it “until they are ready.” I can usually deal with this as it’s not worth the ensuing arguement. However, I don’t need to sign an NDA for this — all they have to do is ask me to keep my trap shut “until they are ready.”

As an entrepreneur, don’t think of this as “arrogance”, think of it as “practicality.” Your friend the VC is actually trying to save you time and money. If you think you have something super secret that no one else should know, just don’t tell me about it. Oh — and check your assumption in that case — especially since the value is in creating the thing, not simply having the idea.

Fred Wilson (he quotes blogger Dave Jilk while referring to Brad Feld’s post above…)

I have been in this business for 20 years and to my knowledge, I have never signed one.

Dave Jilk’s comment on Brad’s post is probably accurate as well:

– “Separate from your reasons, I think the underlying reason VCs don’t sign NDAs is that they don’t have to. They’re the ones with the checkbooks — simple negotiating power instantiated as a standard practice in the industry. ALL of us could claim your same reasons for not wanting to sign NDAs — I don’t like to sign them — but I don’t always have the negotiating power to say no.” — Dave Jilk

So if you are an entrepreneur or an advisor for a startup that is fundraising, think twice before asking VCs to sign an NDA. Breaking this unwritten rule can put investors off. And in any case, NDAs are unlikely to make or break an early-stage company.



Venture Capital Research

quenching curiosity. team @CIRCA5000 | angel investing a bit | learning a bunch | views my own