Last week on the VentureBlog, Naval warned entrepreneurs of the risk of not talking technology with VC’s and mentions the absence of an NDA as a common concern of presenting entrepreneurs. On the face of things, this seems unfair to the entrepreneur. But the risk of signing an NDA is much greater to the VC than the risk of presenting without an NDA is to the entrepreneur.
Most people over rate the value of the idea. If the idea alone was really that valuable, then it wouldn’t take years to turn the idea into a successful product. The devil is in the details. And you retain your knowledge of the implementation details that make the idea work.
People also don’t understand that having a competitor is often better than not having one. One of the biggest problems facing a young company is how to convince prospects that your market is for real (the business problem is real, the solution really exists, the solution yields a healthy ROI and your company will actually stay in business long enough for them to realize that ROI). Having healthy competition is a strong indication that you’re in a real market. Plus their marketing dollars will reinforce yours in establishing the market.
On the other hand, the NDA can prevent the VC from doing its job. If you’ve done your homework, then the VC has interests in this area. But your NDA will inhibit their ability to brainstorm with their portfolio companies in this same area. And VC’s have deep pockets, so they are rightfully leary of a litigious presenter.
Which is not to say that you need to shout your idea from the rooftops. Just that you need to take calculated risks in bringing your idea to market. You need the VC more than it needs you, so this is a risk that you need to take.