October 14, 2026
A non-disclosure agreement (NDA) is a contract that stops the other side from using or sharing your confidential information. Use one before you share real secrets with a potential partner, vendor, customer or acquirer, but not with investors or advisors before a first meeting. Choose a mutual NDA when both sides share information and a unilateral NDA when only you do.
Key takeaways
When you need to share information that would hurt the business if a competitor or the public got it: technical details, source code, customer data, financial models, pricing or a proprietary process. Typical moments are partnership and vendor negotiations, enterprise customer pilots and acquisition talks.
You usually don’t need one if the information is already public, or if you already have a contract with the other party that includes a confidentiality clause.
Yes, or better still, file first. If what you’re sharing might be patentable, file at least a provisional patent application before the conversation, or make sure an NDA covers it. In the US, a public disclosure of your own invention starts a one-year clock to file. Europe, China and many other countries give no general grace period, so a disclosure made outside an NDA can cost you patent rights there before you’ve filed anything. This matters most with investors, who usually won’t sign an NDA: file before you pitch the technical details. See Startup Patents: Are They Worth It?
Many first-time founders try to protect an idea by sending everyone an NDA. But what makes a startup succeed is usually execution, not the idea. See How Do I Protect My Startup Idea?
The most common mistake is asking a potential investor to sign an NDA before a first meeting. Most venture investors see hundreds of companies and won’t sign, and the request signals inexperience. Instead, explain what the product does, how it works at a high level and why it beats the alternatives without revealing the proprietary details. If an investor wants to go deeper during diligence, an NDA is appropriate then. The same rule applies to potential advisors: once you engage one, confidentiality goes into the advisor agreement.
A mutual NDA protects both sides and is standard when both parties will share information, such as in a partnership, an integration or acquisition talks. A unilateral (one-way) NDA protects only the disclosing party and fits when only you are sharing, for example when a vendor or contractor needs access to your systems or data. Don’t sign a mutual NDA by reflex, though. If you don’t need the other side’s confidential information, especially a competitor’s, a one-way NDA keeps you from taking on obligations that could later support a claim that you used their ideas.
The definition of confidential information should be clear enough to cover what you’ll actually share, with standard exclusions for information that’s public, already known to the recipient, independently developed or received from someone else lawfully.
The recipient’s obligations should cover both non-disclosure and non-use. An NDA that only stops the other side from telling others still lets them use your information to compete with you.
The term usually runs two to three years from disclosure, with protection for trade secrets lasting as long as they remain secret. The agreement should also require the recipient to return or destroy your information on request.
Remedies matter more than founders expect. Damages from a leak are hard to prove, so the real remedy is usually an injunction. A good NDA says a breach would cause irreparable harm and that the disclosing party can seek an injunction.
If you’ll share controlled technical information, such as some defense, advanced hardware or encryption technology, with a foreign company or a foreign national, US export control rules may apply, and the NDA may need an export control clause. Ask counsel before you share.
Finally, any NDA or confidentiality clause with an employee or contractor should include the whistleblower immunity notice required by the Defend Trade Secrets Act. Without it, the company can’t recover exemplary damages or attorney fees from that person under the Act. Federal law also prevents pre-dispute NDAs from barring disclosure of sexual harassment or sexual assault claims, and the National Labor Relations Board has limited how broadly confidentiality rules can apply to non-supervisory employees, so keep employee confidentiality focused on business information.
Big companies often send their own form. Before signing, check that it’s mutual if you’ll be sharing too, that the term is reasonable, and that it restricts their use of your information, not just disclosure. Look for terms that don’t belong in an NDA, such as a non-solicit, a non-compete or an assignment of IP. Watch for a “residuals” clause, which lets the recipient use whatever its people remember from your information. That can swallow the protection for exactly the know-how you care about. If they won’t strike it, narrow it: limit it to what people recall from unaided memory without going back to your materials, exclude source code and trade secrets, and add a statement that the NDA grants no license to your IP or patents.
Yes. You can sign in your own name, and once the company is formed, have it adopt the agreement or take an assignment of it so the company holds the rights.
An NDA is for outsiders, such as partners, vendors and potential acquirers. Your own team, including founders, employees and contractors, signs a Confidential Information and Invention Assignment Agreement (CIIAA), which combines confidentiality with assignment of what they create to the company. See The CIIA Agreement.
Act quickly. Gather the evidence of what was disclosed or used, then send a written demand that the other party stop and return or destroy your information, citing the provisions they violated. If that doesn’t work, you can go to court, usually seeking an injunction first. Trade secret law may give you claims in addition to the contract. See What Are Trade Secrets?
Related: Startup Intellectual Property: Everything Founders Should Know · What Are the 10 Contracts Every Startup Should Have on Hand?
If you’d like help with an NDA, or a review of one you’ve been sent, contact us.
