Posts in General Software
NDAs for startups

We hear a large number of pitches here at DeveloperTown. Some weeks we only hear one or two, and other weeks we can hear up to twenty pitches. It’s one of the more enjoyable parts of my job. Everyone is excited about his or her idea. And it can be contagious. I love it when by the end of the meeting I’m excited about their idea too.

One of the most common questions we get asked before someone comes in to pitch is what (if anything) the entrepreneur should do to protect themselves and their intellectual property before the pitch. The most common way entrepreneur’s are advised to manage this risk, is to get people to sign Non-Disclosure Agreements (NDAs) before they share their ideas. There are several reasons why we believe this is a bad idea. 

You’re already not getting enough feedback.

Most entrepreneurs don’t get negative feedback. We live in a polite culture (especially here in the Midwest), where people are supportive and want you to be successful. They also don’t want to be the one to crush your dreams. So most of the time, if you pitch someone an idea, they’re going to say something like, “You should do that, follow your dreams!” or “I’m sure there’s a market for that somewhere. I just don’t know enough about it to give you valuable advice.” Or they will pick out the two or three most positive things, and focus on those.

Most people don’t want to be critical. They won’t challenge the idea with the goal of making it a better idea. If you want valuable feedback on your idea, in many ways you have to go to the people with an economic incentive to tell you both the good and the bad. Those are (in priority order): your potential customers, the team that will have to build or deliver that service, or your potential investors.

NDAs create a barrier between you and those groups You don’t want that barrier. You need the feedback. Anytime you ask for someone to sign your NDA, you’re giving them an excuse to not talk to you about your idea. But more importantly, you’re less likely to even ask them in the first place because you’ll be afraid about sharing and talking about your idea. Talk about it.

You’re protecting against one of the least likely reasons you will fail

A lot of technology ventures fail. We have seen a number of our own portfolio startups fail. One of the least likely reasons you will fail is because someone else steals your idea. It’s more likely you:

  • won’t get funded;  
  • will never actually get the product built correctly and successfully launched;
  • won’t find product market fit fast enough and you’ll run out of money;
  • will get into a big fight with your co-founder(s) and the team implodes;
  • get traction with a small segment of the market, but can’t break through and end up failing anyway due to market competition.

I know, right? This isn’t a feel good blog post. Sorry.

Bad people do steal ideas. We think we’ve seen it happen to one of our customers. But it happens very rarely. And even in the case where we think we saw someone steal a client’s idea, the person who stole it (and built it) failed. That business is gone, and they’ve pivoted into something completely different. And as harsh as it is to hear, to me that sounds about right. You need a good idea, but you need way more than an idea to be successful. 

Some people can’t sign your NDA for liability reasons

You should do an internet search for the phrase “Why VCs can’t sign your NDA.” You get a lot of results. My personal favorites are from Feld, Kawasaki, and Startup Lawyer. I love the phrase from Startup Lawyer, “Asking a VC to sign a NDA is tantamount to splitting 10’s at the blackjack table.”

If a company makes its living hearing pitches for startups, it hears a slightly different version of the same pitch anywhere from 2 to 20 times a year. Most ideas aren’t new, aren’t unique, and aren’t proprietary. Sometimes they are, but those are the exception. In cases where your idea isn’t unique (which no one can possibly know until they’ve already signed the NDA), then that firm has opened itself up to potential liability if choose someone else’s version of the pitch over yours.

That means each time an investor (or a firm like ours), signs an NDA, they are leaving a small trail of liability behind them. Regardless of if they end up working with that prospective client.

How are entrepreneurs protected in these situations? Because the person you’re pitching to in these situations is putting their public reputations on the line. We’ve build a nice successful business at DeveloperTown. It’s already a multi-million dollar idea. Trust me… we don’t need another one to manage. This one is enough. We aren’t going to jeopardize this business by stealing someone else’s idea. Not only am I fairly sure the idea isn’t unique; we’d be starting over again with all the risks a startup has. (See that uplifting list of reasons for failure five paragraphs up.)

You need to work on your elevator pitch anyway

All of that means you need to be able to talk about your idea at a high level – with a bunch of different people. In some cases just so you can get feedback. In other cases so you can hire employees or vendors. And certainly if you want to fundraise. You should always be able to talk about your idea – any idea – at a high level with out exposing the secret sauce.

If you can’t talk about your idea in 30 to 60 seconds without giving away what you think is the “magic” in that idea, then we would be very skeptic that someone else hasn’t already thought of it or could think of it relatively quickly. So think of this as your chance to get really good at telling people what you’re doing, without giving away the secret sauce. If you have something that you think is actually patentable, don’t talk about that in detail. Just give the exec-summary.  You can still go protect the IP. 

NDAs at DeveloperTown

So when do we like to sign NDAs? Once you become our client. As soon as you become a client, we include an NDA in every statement of work we send out. We absolutely want to protect your intellectual property. Because once you’re a client, there’s no longer a risk of you coming back to us years later saying we chose someone else’s version of your idea. Clearly… we chose you.

We will also sign NDAs when a large enterprise client approaches us to see if we can help them with innovation. The incentives are different for large firms. And the type of information and they way they share it is different as well.  In many cases, it’s not just a pitch. It’s real market data, proprietary data from their other existing products, and other rich sets of data we can apply to the problem they are asking us to help them solve. There are also (in most cases) non-IP related barriers to entry with the products being pitched that these companies can overcome that others couldn’t.

So schedule some time to talk with us, know that we put our reputation on the line each time we sit down with someone, and we’re excited to give you both positive and negative feedback. We love helping people start businesses. In many cases we view it as part of our role in the Indianapolis startup community to give feedback to startup ideas, knowing full well that we aren’t likely to be the partner you may choose to build with. It’s just part of what we do. 

How to become more offensive

Two weekends ago I listened to the Tim Ferriss interview of Chris Sacca. Sacca is an early-stage investor in companies like Twitter, Uber, Instagram, Kickstarter, and many more. He's a fairly well known dude. The best audio I've ever heard from him was of him crushing Alex in the Startup Podcast, where he perfected Alex's own pitch for him because Alex was too nervous, and then told him it was a horrible idea. 

In the Tim Ferriss interview, Sacca explained why he moved away from Silicon Valley. Sacca moved to Lake Tahoe at what many would have considered the absolute worst time for him to leave the Valley. He had just lost a ton of money, he was still relatively young and unknown, and he was leaving the most connected area in the world for software startups and investors (aka his job). 

While Sacca was living in Silicon Valley, he had to be defensive with his time. He constantly had people asking him to grab a cup of coffee, to hear their pitch, to give them feedback, or to attend an event. All of his time got sucked up by other people. Even if he said no to the obvious events and people that were a waste of time, his time still got consumed by "legitimate" events and meetings with people he knew and trusted. He was just too connected. While he was being defensive, he found that he wasn't actually getting anything done. 

Part of the reason Sacca moved away was to get the time back, so he could be more purposeful with what he did. He called it, "playing offensive." Instead of constantly defending your time, how can you make space in your life to move to a purposeful offense. If you had more time, what would you do with it? What's your highest and best use? 

Lake Tahoe is around three hours from the Valley. That turns out to be the perfect response to people asking for coffee, drinks, or time. Sacca still said yes, he just told them they needed to travel to him. It was the perfect filter. Most people won't be willing to make that type of commitment. So only the most serious people followed through on the trip out there. 

With his new found time, Sacca pulled himself out of dept. Doubled down on startup investing and advising, and is now running what might be the most successful investment portfolio in history. He's crushing it. And he points to figuring out how to "play offensively" as one of the most important factors. 

Since hearing this podcast, I've been thinking about this a lot. I'm very defensive with my time. I have a never ending stream of meetings, requests for time from clients, requests to pitch from prospects, meetings to explore partnerships, networking events to attend, etc. Never-mind the emails that go with all of that, the commute, and trying to find time to workout. 

I'm guessing I'm not alone. I can imagine you have tasks and activities that make you defensive with your time. I know you have emails, meetings, and I know each role has it's own set of tasks that take up time, but aren't the "core" way that you think you add value. It could be as trivial as time entry, or it could be a regular report you need to put together (ems), a pull request (devs), a regularly scheduled Twitter post (marketing), or something else.  (I just assume that the designers love everything they get to do.) 

We all play defense. It sucks. But it's certainly part of the job when we work as a team. As we continue to grow, the more defense we will all have to play. So how do we handle that? 

At the last Monday morning meeting at DeveloperTown, Aaron Lerch shared some of his strategies for how he manages some of his time and attention. It included tips for email, Slack, meetings, and the dangers of multiproject multitasking. (Side note, I just changed my preferences to disabled emails from Slack. Thanks Aaron!) 

As for me, I'm not sure yet. I've been thinking about it for two weeks now. I don't have the answer yet, but I have some ideas. Here's what I'm doing to try to become a bit more purposefully offensive with my time: 

  • I'm going to reread The Effective Executive by Peter Drucker. I first read this book over ten years ago. I remember the themes, but not the specific details. I think it's time for a refresher. The basic premiss of the book is that all knowledge workers are executives. And executives need to prioritize effectiveness over efficiency if they want to be successful. 
  • I'm going to only check email a couple times a day. While that turns out to be very difficult to do in practice, I'm trying out a new tool called Handle that I think will help me do it. It integrates with Gmail, and has a view that completely hides your inbox while still allowing you to work on tasks and priorities. I've been using the free version for a couple of days, and so far I really like it. I hit inbox zero for the first time in over two years, and I have a clear list of to-dos that have been prioritized and assigned due dates. 
  • I'm going to try to be more purposeful with my days. I'm planning to start each day by listing the top three to five things I want to accomplish that day. And then my plan is to not leave until those tasks are done. If I can't manage to that effectively, I'll shorten the list to the top one or two things. My goal isn't to end up staying at the office later, but instead to train myself to remain focused on those goals throughout the day so I become more protective of my time to actually get them done.
  • I'm going to experiment with sending my peers a short email status each week. No one has asked me to do it. But I think if I can come up with weekly goals, it will help me figure out what my daily goals should be. I'm thinking a short list of bullets - nothing fancy. If I have to take the time to report progress to my peers, then I think it will help me remain focused on those top priorities. Ideally, most of what I'm reporting on each week should roll up into the larger plans we set as a management team. 
  • I'm going to start to ask for help more frequently. I don't need to do everything myself, and in many cases I'm not the best person to do certain tasks. I'm going to try to be more purposeful in handing off tasks and responsibilities to the people who are best equipped to handle those tasks. This is very difficult for me. I suspect it's difficult for all of us to ask for help, and that none of us is doing it enough.  

So that's my starting plan for my new offense. I doubt I'll stick with all of those, but hopefully I'll make some progress in figuring out what works for me. 

If you have some techniques you use to better manage your time/attention/focus, you're welcome to share it below.