One expectation in the software development world is the Non-disclosure Agreement, or NDA. In my start-up operator days I had used NDAs for various distribution deals and other arrangements. Yet, when I was in the VC space, I rarely came across an NDA; and I definitely never signed one. In the venture world, you don’t ever sign an NDA. Investors end up hearing your “unique idea” at least 5 more times in the same week and eventually might end up investing in that idea, so signing an NDA would create the opportunity for an entrepreneur to go and claim the investor stole their idea if they went ahead and funded a different company with a similar idea. That’s why VC’s never sign NDA’s.
So, having come most recently from VC, receiving an NDA request on my first day in the software development game at Raster Media caught me off guard. On that day we were talking with a potential client and they asked if we would sign an NDA. For a split second in between their question and our answer I thought, “I wonder what’s going to happen”. To my surprise our response was “of course.” We printed one off, and signed it right there. I investigated further to see whether or not this was an industry standard and found that it was. It makes sense when you think about it, because unlike a VC who doesn’t have the time and immediate resources to implement your idea, a development shop has all the necessary tools, skills, and capacity under its roof to launch the idea quickly.
So to answer the title of this article, yes. It is very appropriate and normal for software development shops to sign an NDA. Most of the time they will probably have one on hand, but it’s always better to have one on your own just so that you can be 100% sure you know what you’re signing.
If you don’t have an NDA, make sure to review the following verbiage within the agreement before you sign it:
1.There is a clause that says something along the lines of “You can’t disclose any confidential information.” What’s key to look for about this statement is that it specifically defines what “confidential information” means. In the most basic form it should state that any information that is accessible through public domains or public directories is not deemed confidential.
2.Pay attention to the time period to which you are bound to the NDA. Usually it starts from the time you sign it until a specified period after that time. Once that time has passed you are no longer bound by the agreement.
3.Governing law. When I was in Brazil we actually never used contracts governed under Brazilian law, we specified Delaware law, or the venue as the San Francisco court system. This is something to be more aware of when dealing with international clients than with a domestic party, as the states laws tend to be similar for the most part.
4.Lastly, beware NDAs that are really lengthy. If they are longer than 2 pages, read the contract carefully. The longer it is, it’s more likely going to end up being shady or neurotic, and the other party will probably be difficult to work with.