I talk with entrepreneurs regularly. Every one of them has a new idea or a twist on something that’s going to disrupt an existing market. Most come to Terralien because they need a development partner.

They’re super excited and want to tell me all about it. The conversation goes something like this:

Client: I want to get a quote on this idea I have. It’s a game changer.
Me: Great, tell me a little about what you you’ve got in mind.
Client: Do you want to sign my NDA or send me yours?
Me: We sign an NDA when there’s an intent to work together.
Client: Well how do I know you aren’t going to rip off my great idea? You are a development shop after all…

h2. It’s a commitment, not a ticket

An NDA sets up a long term relationship between two parties. It is, after all, a contract. Unfortunately, most entrepreneurs don’t treat them as such. Instead, they use NDAs like tickets. They tell potential technical partners:

“Sign this NDA so you can compete with other suppliers and maybe I’ll pick you”.

Fear is a powerful and potentially destructive force. It may feel right to give an NDA to every single prospect at the beginning of the process. It isn’t. It just creates more risk for you. You’ll end up:
giving information to people who don’t need it because they aren’t a good fit
increasing the number of long term contracts you have to manage
paying money for attorney fees that could otherwise go into development

Many developers encourage the fear by signing. After all, they don’t have a shot at winning the work if they don’t sign. To them it doesn’t matter what the NDA says – it’s just a ticket. The number of NDAs they sign become significant and they’re not likely to be keeping track of what they can or cannot say to other prospects. You end up in a contract with someone who may not be willing to live by the terms and conditions.

4 things before you take the plunge

You need to do 4 things before you ever offer an NDA to a developer:

  1. Find out about their process. How much control will you have? Can you stop development at any time? Will you get to see progress every day?
  2. See if they’ll tell you about at least one project where they realized they weren’t a good fit after they started. Find out why and what they did about it.
  3. Ask them what they do differently from everyone else and how, specifically, that will make you successful.
  4. Describe your product and unique value proposition generically. Find out if they can give you a ballpark idea for the cost and duration based on their experience

You can do all this without a Non Disclosure Agreement.

Find a developer who refuses to sign an NDA without a reasonable assurance they’ll win the work. You can trust this team because it means they’re keeping track of the terms and conditions within their contracts. Your intent to award business to them provides a long-term interest in keeping your information safe.

If you still think an NDA is required before you can award the business, narrow the list to the one or two teams you trust. Pick the one you feel best about and offer the NDA as a final step before putting a Statement of Work in place.

So, go ahead. Ask everybody right at the start if they’re willing to sign an NDA in order to provide a quote. It might be a great way to find out what teams to avoid!

Posted by Dave Bates on Jan 18th, 2011

You can still contact Nathaniel at nathaniel@terralien.com