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When startups look for investors, it's essential that the company put forward its best ideas, but that's increasingly being done without legal protections that prevent investors from taking those ideas for themselves. A once-popular protection known as a Non-Disclosure Agreement (NDA), which prevented potential investors from revealing new companies' ideas to others, has fallen out of favor. It may come as a surprise that both investors and new companies often prefer the less regulated marketplace of ideas, but with sufficient self-control, new companies can protect their ideas and reach speedier business agreements without NDAs.
What's the Big Idea?
So what's the problem with NDAs? Observers of the venture capital world say that each signed NDA puts business negotiations on hold by a week as all the necessary forms are processed. "In the life of a start-up company," said Victor W. Hwang, chief executive of the investment firm T2 Venture Creation. "You might have to sign 30 to 50 NDAs. That’s a week each time and a year of holdups. The risk of going slow is bigger than the risk of being copied." Besides, venture capital firms must live on their reputation and startups, which come to the table looking for their next meal, are rarely equipped to fight the kind of legal battle that accusations over stolen ideas requires.
Read more at the New York Times
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