Why I Don't Sign Non-disclosure Agreements

By Andy Higgins | January 18, 2018

I like many other investors have made a deliberate decision not to sign any NDAs and my advice to a developer would be the same for similar reasons as outlined below.


Execution is far more important than the idea

I like the way Derek Sivers explains, “Ideas are just a multiplier of execution” based on the following formula:

AWFUL IDEA = -1
WEAK IDEA = 1
SO-SO IDEA = 5
GOOD IDEA = 10
GREAT IDEA = 15
BRILLIANT IDEA = 20
——————————
NO EXECUTION = $1
WEAK EXECUTION = $1000
SO-SO EXECUTION = $10,000
GOOD EXECUTION = $100,000
GREAT EXECUTION = $1,000,000
BRILLIANT EXECUTION = $10,000,000

And in order to make a business you have to multiple the two together. So a good idea with good execution is worth 10 x $100,000 = $1 million but a brilliant idea with weak execution is only worth 20 x $1,000 = $20,000.


I don’t want to steal your idea

Like the following quote by John Ramton explains, as an investor, I am actually not interested in stealing your idea. The whole point of investing in you is that you will handle the all important execution part:

Any entrepreneur knows building a business takes blood, sweat, tears and the hardest work they’ve ever encountered. Most investors already did the labor of love, and are not interested in doing it again. The whole point of investments is to make their money work for them, so they can sit back and enjoy the mentoring and curating process. Serial angels and VC’s have so many businesses on their plate, they certainly don’t have the time nor the passion to build it like the entrepreneur who started the company can.


The ideas that seem brilliant often are not

More often than not the ideas that initially seem brilliant turn out to be not so brilliant in the end (and as already mentioned depend far more on the team executing the idea than the idea itself). If you look at the first investors of now highly successful companies like, for example, Airbnb and Dropbox they will tell you about how they nearly never invested because at the time they felt the idea was so marginal. Many investors will also talk about how they “back the jockey and not the horse” meaning they may not be so sure about the idea but they have faith in the founder and will make the investment understanding that good founders are more likely to create a valuable business even with a so-so idea. Or they end up pivoting into a better idea as they go through the process of validating the initial idea.


Investors don’t want to build companies

Investors are not in the business of building companies. Due to the risk involved, they have to make many investments in order to get a return on their overall portfolio because they simply do not know which ones are going to be successful at the time of making the initial investment (no matter how good the idea seems). An investor is not in a position to pour all their energy into one idea, which is what is required to have a chance of making a success of a startup. Their business is to spread their bets by using their money to back multiple different companies.


Signing NDAs opens investors up to potential risk

The Uber for this industry, the Alibaba for that territory or the Tinder for such and such application. Investors come across many different ideas. Most ideas they come across they would have heard before or are at least some derivative of what they have heard before.

Should they invest in another similar idea, by signing an NDA, they open themselves up to potential claims from founders that they stole their idea when this was not necessarily the case. Therefore rather than having to deal with this potential hassle, most investors simply decide not to entertain signing an NDA at all.


Ideas are a dime a dozen

My advice to you is to focus on how you are going to execute rather than protecting your idea. The chances are you are not the first to have thought about a particular idea - you may however be the first to execute the idea well. I would also advise to share your idea freely with others especially those that can give you feedback.

I can’t tell you how often I have come up with an idea but after sharing it with many people I have realised it was not as great as I originally thought or I received constructive feedback allowing me to refine the idea further in a positive way.


So, I don’t want to steal your idea. I want to invest in some one that is cable of executing an idea well. If after reading this you still insist on signing an NDA before sharing your idea with me, no problem, I totally respect that but then I am not the right partner for you.

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