Startups don't need NDAs: 5 reasons why nobody will steal your idea

By Elena Mazhuha, partner at F1V

Startup founders keep asking my colleagues from Flyer One Ventures and me to sign non-disclosure agreements (NDAs) before they start sharing any metrics.

It's easy to spot founders who are likely to want an NDA: These ninjas send investors decks without numbers, implying that everything they work on is classified information.

In reality, however, your idea is no secret, and no one will steal it — especially not VCs. You don't look cautious when asking to sign an NDA; you look weird.

From a legal point of view, NDAs significantly increase the time for due diligence and costs for lawyers, as all NDAs are different and often nonstandard. Add to it a non-compete clause, and nearly every investor I know will likely turn away.

So take a deep breath and stop worrying. Here are five reasons why nobody would copy your idea.

When investors hear a good idea, they don't think about leaving their VC firms to launch a similar startup. They spend years building their reputation, trust, Twitter following and media presence to raise a fund and start investing. Quitting the job is not an option.

In most cases, venture firms don't have any spare employees to copy a random product: everyone is busy solving current problems – helping portfolio companies with fundraising, doing due diligence for new startups, and spending hours on social media.

Also, investors can't patent your idea when they hear it: It takes up to 3 years to obtain a patent in the U.S. and up to 5 years to register it in Europe. VCs won't just spend three years getting a patent for an early-stage startup's idea, which they just heard about.

Theoretically, investors can leak your idea to your competitor. But signing an NDA with a VC doesn't prevent your rivals from understanding what and how you do. If they want to copy you, other founders can pretend to be potential clients or hire someone to do it for them.

Even if a VC leaks your idea to friends or colleagues, it will take 6 to 12 months to bring it to life. It will take even more time to get the first clients. Your startup will already be way ahead in raising Series A.

It takes months for startups to research, build a minimum viable product, fix bugs, do customer development, find the first clients, and actually make money. Plus, budget some time for founders to cry when one of these stages doesn't go according to the plan.

Even if other founders have endless financial resources, they still need time to hire motivated people, mentor them and have them build a decent product that fits the market's needs. Potential copycats will need a lot of time, financial resources, and motivation to do the same.

The probability that the copied idea will be better than the original and that everything will go smoothly is lower than your chances of becoming a unicorn.

Besides, there's no guarantee that your idea will always work, even a good one. Building a startup is a process of iterations. You don't just come up with one single idea and use it forever — you adapt.

In 2020, Alphabet earned $258 billion; Meta made $118 billion and Netflix — $30 billion. Even if you're building a business intending to make $100 million in seven years, that kind of revenue will add less than 1% to a big corporation's financials.

The big tech companies would better buy your startup in seven years instead of spending time and cash to build something similar.

Why then, do large businesses often ask their employees to sign NDAs? In their world, the rules are different. Amazon, for example, may have the resources to take a huge market share before anyone knows about it, while startups usually don't have the same pace and scale.

The monetary value of the losses for Tech giants is huge if their idea is stolen by other corporations. It's not just a verbal idea — it is hundreds of millions of dollars of market share. Startups often don't have the same scale, especially in the early stages.

All ideas are untested hypotheses, which need years of validation, and thousands of iterations, and might not work eventually. Even if you have tested the idea and think it's the one to work in your market, there's no guarantee that this recipe will work elsewhere — for every client and every startup.

Plus, potential copycats can copy only the most obvious things.

Yes, they can make an identical product. Yes, they can hire people with the same qualifications. Yes, they can set the same price. But they can't copy your thinking, communication with clients, management skills, and network. If someone dresses like you, tries to talk like you and dyes his hair like yours, they don't automatically become you.

Suppose someone left their job to launch a business, hired a small team with their savings, and spent months convincing their families not to leave them for good. In that case, they already have more motivation to turn an idea into success than a person/company which only wants to make money by copying one's product.

People driven solely by the wish to make money give up when they face problems. Why bother if, nowadays, they could make a picture of a funny ape and sell it as an NFT for half a million dollars? (not anymore, but still)

By contrast, people with deep personal motivation could only be stopped if they tried everything and nothing worked. In most cases, they never stop because they can pivot, raise more money, convince first employees to work for free for a while, and finish what they've started.

If you want to cement your startup idea for yourself by forcing people to sign NDAs until you find inspiration to execute it, no NDAs will help you. Running a startup is about hard work, stress, problems, and only then success.

And sharing ideas with investors, potential buyers from large corporations, or other founders will bring you closer to succeeding. Sharing is a good way to collect feedback and brainstorm together. Having someone unbiased to listen to the hypothesis may provide even better solutions to the problem.

Not sharing, in turn, is a good way to get stuck and have no fresh hypotheses to move on with. It may be hard for you to trust strangers with your ideas, but don’t forget that VCs are supposed to trust you with other people’s money and reputation.

This story originally appeared on HackerNoon titled "Startups Don't Need NDAs: 5 reasons Why Nobody Will Steal Your Idea."

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