From time to time, we come across investment opportunities where we are asked to sign a Non-Disclosure Agreement.  After quite a bit of debate internally, we have decided against signing NDAs, unless we have a signed term sheet and are entering the Due Diligence process.

Why not?

1. We receive about 1,000 pitches a year and engage with about 400 of these ventures.  Inevitably, many businesses are overlapping and adjacent.  Trying to structurally track and separate information and NDAs relating to these would be a nightmare.
2. An NDA is a legal document.  I would need to read and understand each one, and we’d need to run them by our lawyers, which is expensive and time consuming.

As VCs, we live and die by our reputations.  We take the confidentiality requests of companies that talk to us very seriously, and go to lengths to disclose conflicts and respect the sensitivity of the information we receive from entrepreneurs.  However, we can no un-know what we have heard.  So, when you share information with us, please keep in mind that we see many companies, probably including your competitors.

Essentially you need to decide on a trade-off: share with us the level of detail you are comfortable sharing, but also know that our decision whether to move on to the next level of conversation with you will be based on that level.

Brad Feld and Mark Suster have longer thoughts on this topic that would be worth a read.