No I won't sign your NDA, here's why.
blog.jpl-consulting.com
blog.jpl-consulting.com
Out of the ~15-20 project ideas that people have talked to me about, I've been asked to sign an NDA 4 times. I found something interesting about the people who asked for an NDA: they weren't very good at following up. For most of the other "pitches" (I use the word pitch loosely, because I'm not a VC or anything like that -- just a college student who likes to help friends and acquaintances with projects), I'd get follow-up emails and a lot of lengthy discussions in coffee shops about the idea.
The times I signed an NDA? Maybe a phone call once. Maybe a small conversation. The discussions always fizzled out. An NDA almost directly indicated (in my situations) that the person asking had a vision of grandeur without any idea of the work that would go into making that vision a reality. If the idea doesn't make me gasp when you tell me, it probably isn't worth an NDA. And the NDA always indicated that the person is just "looking for a techie guy" to crank out code.
The people who asked for an NDA were never really interested in what I had to bring to the table, because it seemed like they assumed that their idea was enough to make a product regardless of the team they assembled. I'm fine if I'm not qualified to build a product (I'll be up-front about the limits of my skills, because I already have enough work!) or a good match for the team they are looking for. I run as fast as I can if I meet someone who doesn't care who they're hiring. I'd rather be rejected than work for someone who doesn't appreciate my work.
If I'm going to partner with someone who isn't a hacker, I want them to at least appreciate the difference between good and bad execution on a technical level. If they can't effectively evaluate my work, the relationship is automatically dysfunctional. And that starts with the NDA -- if they prioritize the value of the "idea" over the value of the people, they are already headed in the wrong direction.
this sounds about right.
"MY IDEA IS EARTHSHAKING, I can't possibly just TELL it to you. I am totally going to revolutionize the ..."
Accordingly, I reckon that this idea is much more well-trodden for investors such as yourself.
Google's secret sauce included map reduce running on huge cheap server farms. They where not making financial decisions so if a machine took to long to respond they could skip it and still give you a fast response. They also built a highly redundant and salable infrastructure, but that they where willing to talk about.
Now, these where things that did not make the marketing copy, but where central to their ability to grow and adapt quickly and cheaply. It's also the type of incite that's shows up when you actually sit down and try to design a system and find out what the actual hard parts are and how to deal with them. AKA, what happens if we need to serve 10,000 requests a second now how about 100,000?
The market they address is another way. For example if a competitor is focussed on "premium" customers, it can be hard for them to support bargin-hunters well (or vice versa), because by doing so they lose their existing primary market - and all their expertise is in supporting their current market.
- Classic competitive advantages:
1. A strong sales force created by partnering which regional players that agreed to exclusively serve you (i.e. Groupon). In this case the barrier to entry is that, assuming you filtered your selections well, is very hard to get more or better seasoned/connected people to compete with an established player.
2. An algorithm that we developed and academia thinks is not going to work (Google). If academia thinks your algorithm is a good fit for the problem them that knowledge is public, well studied and been executed upon. (Google used secrecy, designed new systems and engaged in many partnerships with data centers initially to make their algorithm work at scale)
3. Network dynamics: Enlist developers and become a platform faster and better than the competition. This would create to barriers to entry: a spiraling viral growth curve that is hard to follow and the recognition and trust that developers will bring to your brand. Facebook won in part because of this and in part because MySpace, Ning and the other players couldn't execute as well as they did.
- Strong barriers to entry:
1. You already have 20M in VC, went global and have dominated most of the SERPS (search engine result pages) for your content network. This is a form of market share domination and you need to fight using guerrilla tactics in this case. For example, promote your site using social media, start in unexplored geographies or complete in the virgin mobile market. Some companies that fight using this technique are AOL, About.com, Demand Media and Mahalo.
2. A strong patent portfolio and the money and will to defend them. IP is not enough, you need good lawyers, the will to fight for your turf and a good set of Plan B's to execute when the competition infringes on you. Notice that you can't instantly avoid infringement, only deter it. Good examples of companies that use this include UStream, Apple and HP.
3. Brand and execution: People already know that DropBox is best to share files. But what if Apple created a new service to share files. They tried! But people are already familiar with the DropBox brand and prefer their execution: because now they can share files across platforms. Now, in order to win, the competition has to follow DropBox's model (which is the standard by which users measure quality) and then leapfrog them.
Business model design is a fascinating subject, if you which to answer most of your questions regarding this field and become a Jedi in the architecture of competitive advantages and barriers to entry, I suggest you do the following:
- Read "Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers" - Read Bill Gates Biography: Hard Drive (that has some fascinating stories about how Bill expanded Microsof to Asia and dominated the market!)
- Follow Clayton Christensen on twitter and read some of his papers. He portraits many, many strategies for startups to disrupt markets and compete in uneven situations. http://claytonchristensen.com/bio.html
That this an interesting thought. I am not sure it is really a classical competitive advantage, though. It's actually the first time I hear this. Is it really applicable in that many cases? You were giving Google as an example. Which algorithm were you referring to? I can think of these three from the top of my head: PageRank, MapReduce, Paxos. Of these only PageRank is what I would consider an substantial competitive advantage, but it had actually been published in an academic paper by Larry and Sergey.
I think Larry Page said on occasion that the early competitive advantage of Google was that the two founders were doing their PhD on how to build a search engine, so they simply knew much more about it than anyone else. Reading published papers about algorithms is all fine and well, but you having the intuitions to come up with them is much more powerful.
The secrecy they exercised was not only regarding to algorithms, but also to capacity, os design and infrastructure partnerships. They really did a good job at hiding the scale of their operations. Perhaps this secrecy was their biggest advantage, but take into account that they hid much more than algos. And still, the have a huge base of secret IP.
Actually this isn't why Google succeeded as a business. Sure, that made their search work, but the key was that no one else cared. No one realized just how much money Google was making from search until it was too late - and by then Google had built a classic two-sided market which is excellent protection against competition.
You have a new technology that is difficult to implement even with a really good team.
Your product already has strong and growing traction among a market or demographic.
You have a committed team of A+ people already doing customer development, product validation, prototyping, iterating, etc. Not easy.
http://www.exratione.com/2011/11/the-miserable-state-of-inte...
The topic for today is the sorry state of affairs that the intellectual property behemoth has brought to contracts between developers (programmers, coders, pick your word of choice) and companies that hire developers. The standard legal boilerplate incorporated into every consulting, contract work, or full time hire paperwork I've seen in my years in the industry included one or more of the following declarations:
a) All intellectual property I produce during the period of work belongs to the company, regardless of its nature, regardless of whether it has anything to do with the work I am performing for the company, and regardless of whether or not I produce it on my own time.
b) All intellectual property I produce during a period of time (commonly some months) after the work ends belongs to the company.
c) All intellectual property I have ever produced in my life belongs to the company, barring that which is listed in an appendix to the contract.
d) I may not create intellectual property on my own time and be remunerated for it by anyone other than the company during the time I work for them.
e) The onus is on me to prove that I own any of my own intellectual property.
I sent back every single one of these contracts with edits to remove the obnoxious and grasping provisions, replacing them with some variant clause to say that "what I produce for you while working for you on your software is yours, and everything else is mine."
As a graduating college student I've heard others getting similar wording to allow for the employee to work on personal projects outside of work and retain ownership. Maybe things are getting better?
We never reached any middle ground. This happened months ago, and they're still looking.
I assume they'll continue to have this problem, because they're trying to hire a senior level person, but they want that person to make junior level mistakes wrt to the contracts they'll sign.
I can't indemnify someone against patent lawsuits. I can't know whether the code I am writing that is coming out of my head is in a patent somewhere. Not only that, but the contract asked me to assign to the company any and all ideas/thoughts/previous work that may or may NOT be relevant to their line of business and that by signing I had agreed I had done so (not even to the best of my knowledge, so if I forgot to give them a text file that I wrote years ago with a great idea then I'd technically be in violation).
Under no circumstances am I going to sign over any part of my work prior to the employment contract, nor am I going to sign over work that is completed on my own personal equipment outside of company time that isn't for the company.
To me it just felt like they were overreaching, and the guy I was discussing this with told me that wasn't their intention and that I should just go ahead and sign it because they would never hold it against me, and I told him no, I told him to go fix it, then maybe I'd sign it.
This offer also came with verbal assurances that it was just a formality so I should just sign it.
I offered them two potential solutions. I had my lawyer modify their docs so they'd be acceptable to me, and I also offered my own docs which are specifically drawn up to be just about as even-handed as legal documents can get (I sign regularly as both buyer and seller), but they didn't find either of the options satisfactory.
I'm somewhat disappointed that it didn't work out, because the work was very well suited to my background and the other team members seemed great; but if that's how management treated me while trying to convince me to join their team, god only knows how they would've treated me down the road.
After that fell apart, I wound up with a new primary client who was much more reasonable. They passed me lousy docs, and I asked if we could use my docs instead. After a reasonably quick review from their legal counsel and some minor tweaks, we were off to the races.
This excuse is common, and is nonsense. If they don't plan to litigate based on it (or hold you to it) (which is what they are verbally telling you), then they would have no problem with you scribblying it out. Their answer to that tells you their intent.
if that's how management treated me while trying to convince me to join their team, god only knows how they would've treated me down the road.
And how would they have treated you down the road if you had signed away all your rights and given them a golden ticket in the NDA?
You want me to produce a work for hire, which you will own. Since you will own it, you will also own all the potential profits you may be able to derive from the work. Therefore, it is appropriate that you also own all the potential risk of losses. You are asking me to carry a share of the potential risks, but without any share of the potential profits.
They decided to look for someone else.
1. They are a bunch of jerks. 1a. Legal counsel within the organization is too strong. 2. Their counsel advised them to seek the most advantageous terms for the company possible. 3. It's something to haggle over that isn't money.
IP is a murky area from a litigation perspective. Its difficult to distinguish intellectual things created outside vs. inside, so the "solution" from a lawyers pov is to buy all of your intellectual property. (ie the lawyer version of "Kill them all, let God sort them out.") Since employers have a lot of leverage, and employees who aren't collectivelly bargaining are usually scared/too lazy to negotiate, it usually works out.
The question then is who has to prove company time and equipment were used? Employer or employee?
I ask because practically its going to be a grey zone. If you accessed your private gmail account during office hours and happened to see you have a potential customer lead for your out-of-hours project, are you in violation?
In your shoes, I'd keep them very separate. A friend has a work smartphone and a personal smartphone for just this reason. But beyond the technicalities, it's only polite to stay focused on your employer's work while you're at their place or otherwise on their dime.
Anything you do on your own time, with your own equipment, that is not related to your employer's line of work is yours, even if the contract you signed says otherwise.
Moreover, the value of a good idea is in that extra thought that was put into it, something that is well worth a bit of protection. This is not an abstract MBA point. I am involved with a project that can be fully described in just 4 words, and these are plenty sufficient to tip off the competition and loose the first-to-market advantage. Should we not have been careful with how we talked to other people about the idea, we might've lost it to the established players already.
(edit) I am not disagreeing that a lot of people asking for an NDA upfront are lunatics, because they are. It's the black and white take on the value of ideas that I have an issue with.
I'd imagine narrowing the idea down to 4 words took a lot of work.
Four words. Took me all day to come up with.
Now that I think about it, the transition from program to machine code is interesting. I guess design stops when you can turn the design into a finished product via a mechanical translation. Similarly, a physical engineer's work is done when their design can be executed by "commodity" factories, workers, etc.
First mover advantage is probably as overrated as the value of the idea.
(edit) The value of a head start depends on the market entrance strategy. The core idea may not be that obvious until later stages, when the first-mover advantage has been utilized.
If you squander your lead, yes. If you hang on to it it's worth a lot.
Genuine question - what examples are there outline of large money making businesses online that got there by being the first mover. I can't think of any off the top of my head...
To each his own, basically. First-to-market advantage, coupled with an innovative, actually useful idea and polished execution is a sure way to build large user following quickly, which is typically one of early-stage startup's top priorities. Large money making comes afterwards and it requires an established business, which is a different context where first to the market advantage is of a lesser importance.
It is precisely those “frighteningly ambitious” ideas, to borrow the term from PG, that can be succinctly described, have inherent value, and deserve to be capitalised on immediately. Specifically because it’s presumed impossible, there can be no established players to oppose you. Of course, there is always the immensely probable outcome that your edge is in fact not an edge at all…
Because I know someone will point out the number of businesses that were copies of other businesses, I feel it's important to note that most of these weren't "true" copies. For example, you can't really consider facebook to be a true clone of myspace. Clearly Zuckerberg had some original ideas of his own.
A person with a brilliant idea who can't execute well is almost certainly screwed. A company that starts with a bad idea and executes well can turn out fine, though. That's because in the startup context, great execution involves a lot of exploration, validation, and the now-ubiquitous pivoting.
Take PayPal. Their first idea was two-factor authentication for handhelds. That turned into money transfer via handhelds. Which turned into a web-based money transfer product. But that wasn't the real deciding factor; the IP that let them win was anti-fraud software. And the reason there's a PayPal Mafia is that the execution-focused culture kept creating successes long after the original idea was played out.
Even supposing that there's an occasional rare idea that actually has some value, I think we should still keep the mantra because it's inarguable that there are an ocean of chumps who think that the idea is the hard part.
It can take some time to undo a company's market share if they were first to market, but better products generally win out even if they're comparatively late (as long as they're not too late).
http://ilpubs.stanford.edu:8090/361/ http://ilpubs.stanford.edu:8090/422/
Of course, PageRank was only one of many relevant innovations. A key one was the open bidding for ads. Another was focusing on a high-quality user experience, which included no banner ads and highly relevant search results ads. Both of which were totally visible to competitors, and only came well after the business was underway.
They have kept two major sorts of innovation secret. One is their aggressive pursuit of very low cost computing infrastructure. The other is the relentless improvements to search quality. PageRank is only a small part of that now. That IP has a ton of value. Not because of some secret Big Idea, but because they have taken a lot of little ideas and relentlessly winnowed them, yielding actual knowledge.
"If you are capable of broaching your NDA in a couple of sentences, you had nothing NDA'able there in the first place."
I heard it at an entrepreneurship panel in 2004, so I don't remember the speaker. I think it might have been somebody from Broadcom.
Interestingly, the people who (misguidedly) asked me to sign an NDA are usually receptive to this explanation when I tell them why I won't sign their NDA.
I am not saying that there aren't cases where NDA can come into play. But what I'm trying to mention is that, just like the author of the blog, I'm very put off by people trying to protect their ideas. My reasons are very similar to the ones mention in the article, I'll add this:
By asking me not to disclose your idea, the client gives me the impression of someone undervaluing the execution part. She's establishing a framework where the "idea" is the core value and "execution" can be applied by some random code monkey she heard about through a friend of a friend; code monkeys are a dime a dozen, the "idea" is unique.
Who in their right mind would want to work under these conditions? I backed out, clearly. My point is, if you have an idea, and are looking for someone to help you code something, secrecy and NDA won't make you come off good.
Turning down freelancing contracts for such silly reasons is not going to go very far unless you are swimming in work.
Really, as such requests go that's about as nicely put as I've seen it, and even if it wasn't said I would think that you would do that anyway, so where is the loss?
Of course you don't go around disclosing the details of the work you do, that would make you absolutely unemployable as a freelancer.
Confidentiality is assumed by default between an employer and an employee, unless you're flipping burgers. Any serious freelancer should take that to heart and if and when you do decide to talk about what's going on at some employer or business relationship please remember that it is a small world and you only get one reputation to mess up.
This isn't my impression at all. Execution is the most important part. If you discuss the idea with someone who happens to have more resources than you do, they can execute the idea faster than you and possibly hurt your chances at gaining traction.
The funny thing is, I've done just this. People have discussed their ideas on forums and I beat them to the punch and made money. This is why I know it's important to keep your idea a secret until you are very close to launching (so your competitors have at least a couple of months before they could come out with your idea).
You don't really care because you are just the coder. You will get paid whether the app is a success or a failure. So it's you that isn't really taking the business aspect into consideration.
But it stops being funny when you consider how much it would suck to get not only your idea but your entire plan for a startup stolen.
I heard this story at TheFunded about how a certain well-known startup began in that way. The original founders pitched it to some investors who liked it, but had doubts about the team, so what they do? they give everything (biz plan, doc, mockups, etc) to their EiRs and they launch an exact copy of it, sans the domain name for obvious reasons.
For me it was just another story, until I talked to one of the investors at that fund and instead of flat out denying it he said "how do you know that?"
Consider that whatever verbal contract you got with investors or other entrepreneurs is not legally valid, so if they actually copy your ideas you are SOL.
Case in point: last year I took on a project for a personal fitness trainer looking to launch a web app where users could enter their weight, height, activity level and exercise goals (lose weight, build muscle, etc). With this input the app would return meal plans, exercise routines and supplements schedules.
Nothing I've mentioned so far is patentable - these features are obvious to anyone who has tried to lose weight and already exist online.
So what was the patentable bit? Well, the client had devised an algorithm that worked the inputs and emitted the diet recommendations & exercise plans. That he had created in an Excel spreadsheet. And I am more than happy to keep that confidential under the NDA.
I explain to these people that consulting is one of my services, and the price is on my rate card.
I make you sign an NDA to hear my TOTALLY REVOLUTIONARY idea. You sign it. And then I tell you, we're going to do [incredibly obvious thing related to your current business].
If you then go and do it (like I said, it was obvious) I sue you for taking my idea.
Oops?
Not wanting to sign an NDA is probably more about the way it makes you feel that someone thought of something so good they wont share without legal protection. The feeling that this guy thinks he is SO MUCH BETTER THAN YOU that you must sign a contract for permission for him to show you up with his latest spark of genius.
This is about ego, about flexing muscles and seeing who can best the next bloke.
Bottom line, I most likely wont ever ask you to sign an NDA and probably wont sign yours either, but lets be honest, it is about how you make me feel, not about protecting you or me.
It’s a well documented phenomenon how idea-havin’ first timers just need a programmer to bring their vision to life, as though the idea is somehow half the battle (or 90%, as folks like me often get offered sweat equity deals–10% seems to be a popular number).
I'm a developer and from my experience, coding=50%, timing+idea=50%.
The reason most idea guys are worthless isn't because ideas are worthless. It's because they usually only have a very general picture (I want to write a Facebook clone that does X) when the details are what really matter.
This w/o getting into the fact that: product == original idea == never happens ....
I hate to beat the 'all ideas are worthless, only implementation matters' drum, but a lot of ideas are pretty worthless. If I had a dollar for every time someone tried to get me to sign an NDA for an idea that was literally "Build a web page that we can charge people to list their website on.", well, I'd have a lot of dollars. People are generally a lot less clever thank they think they are.
That said, I don't think it is too terrible to sign a limited-scope NDA once you have a general idea of what information you might be coming into contact with and are ready to actually start working. There are very few ideas that are so powerful that you can't at least have some high-level discussion about prior to signing an NDA, but there are certainly a lot of details worth protecting in some cases.
He has plenty of work and talent, all I tried to do is explain myself clearly and try to spark his curiosity a bit. Then I built something on my side to be able to present to him and show that I'm also bringing something to the table. I don't want him to feel at any time as if he's working for me rather than with me.
Of course it helps that for him the task is <britishaccent>"Really fuckin' easy!"</britishaccent>. I'd deal the same way with someone I don't know as well and I think that openness and equally perceived work load are key elements to a successful working relationship where you might feel as if the other has a more useful skill set.
When I refused to sign it, the owner started screaming at me that I was trying to sabotage his business, and I'd sign it if I wasn't. I refused to sign and left.
Later that day, I returned with their CD with all their source code. They had lent me to the CD to determine if I'd be able to do what they wanted. I didn't have to sign anything to get that CD, and they didn't ask for it back when I left.
It was quite an eye-opener for me, and I'm vary wary of NDAs to this day. At the very least, they need to have a termination date and be very specific about what they cover.
Great point.
Had an odd variant: One of my students, enamored of some idea involving the then-new iPad, wanted me involved I his idea but would not give any hints until I signed an NDA. Not one to make spontaneous commitments, I said I'd look over the NDA and get back to him next class about it. He never came back to class. Point: if you're not even going to bother passing my class (much less assuring serious compensation for signing an NDA blind), no I won't sign.
I agree with author of this article fully and completely.
People who wrote even small business plan usually don't ask for NDA, yet they already have something tangible.
Therefore and NDA is pretty worthless when it's at the 'idea's stage. Most people seem to think it will prevent you telling anyone about it AND copying it. Or am I missing something?
That said, NDAs are important when protecting one's patent prior to filing. So if you have something novel that you want to patent, be sure to get NDAs before disclosing it.
nowadays i only sign NDAs that are shorter than one page, prohibit one or two specific actions and have a fixed expiration date (not to far in the future).
Realistically if there's some piece of information that needs to be kept secret, and that piece of information, if released, would significantly damage your business, there's no way a startup is going to reveal that information in an interview with a job candidate. The reason is, even with and NDA, the info getting out would do the damage long before they might be able to enforce the NDA.
Thus NDAs are essentially pointless on Job interviews. Back in the last decade, when I was still willing to work for others for a salary, I would refuse to sign NDAs that had terms that were too onerous (like many companies had a combo NDA & IP assignment, that they'd ask me to sign on interviews! Others had terms in the NDA subjecting me to potential audits, including inspection of my living space, for the next 12 months!)
I don't know what common practice out there is, but its time for job seekers to not sign NDAs.
In fact, I think being asked to sign an NDA, is a good sign that the people running the company are either of the "idea is %90" type or doing it just out of tradition.
I think most of the NDAs I was asked to sign on interviews were out of tradition-- somebody back in the day, made off with a customer list, so now its "best practices" to have candidates sign and NDA.
But this is a big clue itself: It tells you management just mindlessly follows "Best practices" without thinking about them and applying them intelligently. That tells you something about how... nimble... management is going to be (and whether they're ready to run a startup.)
Many of the startups that failed in my experience-- second only to fights between the cofounders and bad VC advice-- failed because they were started by people who'd gotten lucky and thought that meant they were brilliant. (EG: worked at Microsoft or Amazon at the right time and made a lot from their options, but didn't really actually know much about running a business.)
I remember, a decade ago, having such a brilliant idea that I asked my friends to sign these stupid NDAs I'd drawn up before they got the privilege of "Advising" me on it. It was absurd. I think I realized it almost right after, and I stopped doing that. Since then, I just don't talk about what I'm doing-- mostly because, I'd rather do something, then talk about it, and if you've not shipped it feels like bragging about what you're gonna do-- we all know the guy whose "gonna do" this thing that's so great. Don't want to be that guy.
If your business or startup is worth working for, it doesn't need candidates to sign NDAs.
Asking them to implies you're just an idea.