TLDR:
A Non-Disclosure Agreement (NDA) is a legal contract establishing a confidential relationship between parties to protect proprietary information shared during business discussions.
NDA Types
Major NDA types include: unilateral (protects one party’s information, typical for investor discussions), mutual or bilateral (protects both parties’ information, typical for serious M&A discussions), and multilateral (covers three or more parties, used in joint ventures). Each is appropriate for different situations.
Key NDA Terms
Important provisions include: definition of confidential information, permitted use of information, term of confidentiality (typically 2-5 years for general business, longer for trade secrets), permitted disclosures (employees, advisors, regulators), standard carveouts (already known, independently developed, publicly available), residual knowledge clauses, return or destruction of information, and remedies including injunctive relief.
NDA Practical Considerations
NDAs have practical limitations: enforcement is expensive, damages are often difficult to prove, and they can delay business momentum. Most VCs refuse to sign NDAs at pitch stage — they see too many similar ideas. Smart founders rely on NDAs for serious due diligence and partnerships, not for protecting basic ideas. Companies should combine NDAs with operational security and clear information classification.
NDA Negotiation Points
Common negotiation points include: definition of confidential information (what is and isn’t covered), exclusions (information already known, independently developed, publicly available, or required to be disclosed by law), term length (typically 1–5 years), non-solicitation provisions (sometimes embedded in NDAs but better in separate agreements), residual rights (whether general knowledge gained from the disclosure can be used freely), and governing law and dispute resolution. Founders should treat NDA review carefully — embedded non-solicits, broad non-compete provisions, or aggressive IP-assignment language can create unexpected exposure beyond the NDA’s nominal confidentiality purpose.