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Getting Investors While Protecting Trade Secrets

Jesse Fulton

Getting good, quality investors can be the thing that gets your new business or business venture off the ground. You may not have the money, but you may have the business acumen and ideas to make money. So getting investors is one way to get that business out of your head, and into the real world.

A Real World Problem

But if you look for investors, you may find yourself with a problem.

No serious, professional investor is going to give your company or idea any investment funds, without knowing enough about it. They will want to know almost every detail about your proposed business, venture or idea.

But on the other hand, what is to stop this investor from using what you tell him or her, against you? That is, from taking your ideas, inventions, or the things you share with the investor, and just starting their own business—or worse, giving your ideas to one of your competitors?

What About an NDA?

The common answer to this dilemma, is the use of the nondisclosure agreement (NDA). But think again—many reputable and professional investors won’t sign any NDA, with you or anyone.

The problem is that investors hear a lot of business ideas. And if the investor doesn’t invest in someone’s ideas, there can be hard feelings. The investor doesn’t want an NDA out there that he or she signed, to be used against them. A good investor will limit his liability—not create liability by signing an NDA.

In fact, investors may invest with multiple businesses. The investor doesn’t want that to be an issue, because he or she signed an NDA with one of the companies she invested in.

And we live in a business world that is full of competition; there are many businesses that, right or wrong, won’t require the investor to sign anything.

So, from the investor’s standpoint, why risk liability by signing an NDA, just to hear your business pitch, a pitch that the investor may ultimately not want to invest in anyway? The investor will just give his or her money to whomever doesn’t require any NDA be signed.

Going Without an NDA

There is no easy workaround for this problem. The best thing to do, as a businessperson, is to create business plans and pitches that don’t involve the need for the disclosure of trade secrets. Think hard about what you could live with “getting out there,” and what is really and truly, a trade secret.

There are ways to inform investors about what you want to do, without giving them the details of how you’re doing it.

Remember, if anything you are doing is not patentable, once you get the business going, anybody else can steal your ideas anyway. And if you’re worried about the nitty-gritty day to day operations of your business getting in the wrong hands—most investors don’t need that level of detail anyway, at least not at first.

Let us help you with the legal issues surrounding your investors. Call the West Palm Beach business litigation attorneys at Pike & Lustig today.




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