Why VCs do not sign NDAs

There have been a variety of discussion and articles written on why VCs do not sign NDAs.

Canrock is no different.  Our logic is:

1 – Ideas are a dime a dozen, it is the implementation that is difficult.

2 – We see too many ideas and often there is some overlap.  Often the ideas are seen by different people in the fund.  Even tracking who has seen what is difficult.

3 – We invest in only a small percentage of the opportunities we see.  Our investment criterion includes way more than just the idea.  It includes the team, the probability of success, the terms, synergies with our other companies and the value we can add etc.  It is possible we like the idea and will invest in a similar company with a different value proposition.

4 – We already have over 100 investments (including those made by the partners).  Many are bound to have some overlap.

5 – Legal documents cost money and take time (and for people like me are a pain).   Any legal document needs to go to our lawyers and this only complicates things.

So will we steal your idea or give it to someone else?  No.

How to you protect yourself:

1 – Check out the VCs reputation.  Do not deal with any that you think might be stealing ideas (and I can assure you it would be very few).  Do not even approach people you do not trust.  And asking people to sign an NDA is a trust issue.

2 – Implement well. VCs want to invest in people and the team.

3 – Develop the idea.  A head start is worth a lot in the technology space (and Canrock only does Tech deals)

4 – Protect trade secrets.  Usually the VC does not need to know the tiniest of details on how you do things.  VCs need a conceptual sales.  We like companies to have good process around IP.  This means having trade secret procedures and patents.

Jim Estill

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