After you’ve set off to raise money, talked to your friends and family, and heard the first of the many thousands of “no”s you’ll need to hear to become a success, you will want to branch out and approach many more potential investors about investing in your new company.
At some point, you may come to believe the idea that Non-Disclosure Agreements (NDAs) are an important part of the fund-raising process for entrepreneurs. This idea may be inflicted upon you by well-meaning attorneys, former work colleagues who have watched movies about startups, your mother, or any number of other people who love you and know absolutely nothing about startup success.
Regardless of who puts it into your head, once it is there, it is a very bad idea.
Not only do you not need an NDA, you, in fact, need something that does whatever the exact, polar opposite of an NDA is: a Bizarro NDA.
A Bizarro NDA requires that your future investor / employee / partner promise to tell as many people as possible about your idea, your role in it, and your plans for how you’ll get there successfully. It might cite the 2 or 3 specific key, confidential points that the counter-party must mention to others. And a really effective Bizarro NDA might even require a specific number of disclosures:
The Recipient agrees to disclose the confidential information obtained from the discloser to at least ___3___ other people within 30 days of meeting with discloser.
For every startup, buzz is your buddy, silence is deadly. In fact, the more novel, unique, or genius your idea, the less likely it is that normal people will understand it the first time they hear about it, and will need to hear it multiple times before they understand how world-rockingly awesome it is.
Entrepreneurial success does not come from keeping things a secret.
Entrepreneurial success does come from understanding a promising area for new product or new customer development better than anybody else, and then attracting the capital for you to execute on that idea. And it’s not just investment capital, by the way, it’s also human capital in the form of employees, and reputational capital in the form of press / blog / industry wags mentioning you in their speaking and writing.
The more your sources of capital identify the idea you are working on as an important / interesting / inevitable one, and you as the genius behind it, the higher the likelihood of your success. The more people you have talking about your idea and how you are the expert in a promising, burgeoning area, the better.
Not only is buzz your buddy, but silence is deadly: no stealth start-up has ever exited for more than $100 mm (and I am having a hard time finding examples between $10 mm – $100 mm, although I know they must exist).
Think about that: out of all of the hundreds and hundreds of companies that have grown to be worth more than $100 mm, not one started in stealth mode. Not only is secrecy “not important” to your success, it is actively detrimental.
That’s because the impediment to entrepreneurial success is ridicule, not ripoff: Scott Cook getting rejecting 225 times before he got funding for Intuit is just one famous example.
As you will discover as a CEO, the challenge is not preventing third parties from outside your company hearing your idea, understanding it in a flash, and implementing all the ideas, features, immediately and effortlessly. No, in fact, the challenge of entrepreneurial success is getting the people you pay to work on this idea full-time to understand it as fully as you do, the press that spends all day thinking about the industry to believe in your vision, the investors that make a career out of picking winners to understand that you’ll be a hit. You will discover that the reason “communication” is ranked so highly among the management attributes is that it is so damned hard to do.
I spend at least 40% of my time today on communication, and while TheLadders has had some success, one of the reasons I’ve decided to refocus some of my writing from my 4,500,000 subscriber weekly e-mail newsletter (which is really awesome and you ought to subscribe right now, by the way) to the much smaller audience that reads this blog is that you are important, influential, and essential to our success in a different way – the better the folks like you understand all of the great work going on at TheLadders today, and the inventive thinking that my colleagues are coming up with, the easier it is going to be for my company to explain to the rest of the nation why our latest and greatest stuff is important.
Getting the word out will never stop being your most important job. Investment, human, and reputational capital – getting them all to understand, and believe in, and chat about, your vision is critically important to your success.
So if you’re looking for a way to make your new startup a big hit, consider crafting a Bizarro NDA that does exactly the opposite of what an NDA is designed to do: get people talking.
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