Occam's Razor

Dos and Don't of VC NDA

Good post from Brad Feld on Why VC do not sign NDAs. The comments below his post are also worth reading.

1. Even if I was inclined to sign an NDA, I’d have to go through the process of reading it and deciding if it had any problems (many of them do – they are usually overreaching for the information being disclosed), dealing with my lawyer to change it, and you dealing with (and spending time with your lawyer) to accept or reject my requests.  In some cases, I’d probably spend more time dealing with the NDA then with the entrepreneur and his idea.  How stupid.
2. I’d have to keep track of all the NDA’s I signed.  It’s “yet another legal document” in the pantheon of documents we have to keep track of.  Hmmm – maybe we should consider funding a startup to automate the creation and tracking of NDA’s.  Nah.
3. In 20 years of high tech (as an entrepreneur, angel investor, and VC), I’ve never been involved in a situation where an NDA in enforced except in an M&A context.  It’s simply a waste of paper and time for anything but M&A

This is a question I get on a weekly basis, and yes, Occam policy is that we do not execute any NDA when we talk to a potential investment.

The only NDAs that we take seriously are the M&A ones also, as there is a point to signing one in that case. Someone said why not sign a simple one. What is the point then? A simple one page NDA leaves way too much room for interpretation and margin for errors when it really comes down to it. I symphathize with the entrepreneurs' logic that what they are working on is indeed the most important thing to them and deserves protection. But if I have to negotiate an NDA for even 1/3 of the deals that I look at, I would spend my days reviewing NDAs and have to have an attorney on staff full time. That is not practical. I have had to leave a couple of times because the company insisted on an NDA before they would even do the elevator pitch. I never found out if they were a billion dollar idea that I missed....

Better than NDA are simple but real Due Diligence on the VC, What is their reputation? Have they funded companies in similar space? How do they work with the companies?

The Israeli model is back

For years, the israeli start-ups have perfected the model of local (Hertzlia based...) R&D with US based headquarter. The model is now applied more and more to European (here a French example) start-ups. Meiosys whose software is designed to make a virtual version of a computer application and keep it running while it is transferred to another server just relocated from France To California and announced a new D round of funding of $7.5M<.

Two good articles on the legal side of this transformation (the infamous Delaware Flip) can be found from SJ Berwin or Hale Dorr