I plan on seeking venture capital for a start-up social networking website should I have the venture firm sign an NDA?

Asked over 4 years ago - Mountain View, CA

Also if they decide to fund my venture how fast is the process typically?

Additional information

Do I need a lawyer present if any agreements and paperwork are involved on the day of funding?

Attorney answers (4)

  1. Pamela Koslyn

    Contributor Level 20

    Answered . Yes, and you should take whatever stpes are appropriate to protect your website before you disclose anything, such as copyrighting the site itself, registering the domain name in your own entity's name, filing for a trademark,. etc.

    You should have a lawyer involved at every stage of this proposed transaction. Every transaction is unique and this investor can move as fast or as slow as they see fit.

    Disclaimer: Please note that this answer does not constitute legal advice, and should not be relied on, since each state has different laws, each situation is fact specific, and it is impossible to evaluate a legal problem without a comprehensive consultation and review of all the facts and documents at issue. This answer does not create an attorney-client relationship.

  2. Joe B Stansell

    Pro

    Contributor Level 11

    Answered . I agree with the other answers: it is always a good idea to ask those with whom you share valuable business information to agree to keep that information secret. This goes for presentations made to venture capitalists, too. Except for one problem: most venture capitalists refuse to sign them as a matter of practice. Indeed, when you ask them to sign your NDA, they will look at you (and your plan) with even greater skepticism. Why? Because they don't want to have their hands tied in case they pass on your idea but later accept an arguably similar proposal from somebody else.

    What should you do? The very best idea is to hire a lawyer who has some familiarity with the local investment community and can introduce you to venture capital firms who have developed a reputation for respecting sensitive information even though they follow the standard practice of not signing NDA's. Also, when you do present, you should hold back as much critical information as possible, feeding the prospective investor only as much as needed to get a peak at the potential of your business idea. If you lure the firm into wanting to hear more, then you ask for the NDA.

    Good luck!

    Disclaimer: The answer to your question does not create an attorney-client relationship, and is for informational purposes only. You should consult your attorney for legal advice tailored to your individual circumstances. The answer is not, nor is it intended to be, legal advice.

  3. Dana Howard Shultz

    Contributor Level 20

    Answered . Please pardon my disagreeing with the prior three answers, but here is reality surrounding your first question:

    *** VCs do not sign NDAs. ***

    Your prudent approach would be, initially, to provide enough information to attract the VCs, but only reveal your "secret sauce" during due diligence.

    It appears that you need a lawyer right away - and you certainly will if you are fortunate enough to receive a term sheet.

    Regarding timing:

    - Most entrepreneurs seeking VC money never obtain it.
    - A super idea with a VC-proven entrepreneur might be able to get VC money within just a few weeks.
    - For most entrepreneurs who receive VC money, the process from initial meetings to closing the deal takes many months, at the least.

    Are you confident that VC funding is realistic and appropriate for your company? Please see the post at the link below for a potentially broader view of your financing options.

    Disclaimer: This post does not constitute legal advice and does not establish an attorney-client relationship.

  4. Theodore W. Robinson

    Contributor Level 20

    Answered . I agree with Ms. Koslyn's excellent answer. Always make sure you involve an attorney at all stages of the transactions so you are covered in some fashion and make sure you hire an attorney who is familiar with trademarks and copyrights so your site will be protected.

    Good luck.

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