If you’re in the world of fundraising, you’re probably already aware that VCs don’t sign NDAs before accessing fundraising pitch decks or listening to founder pitches.
If you’re a new founder, you may be worried about a venture capitalist potentially sharing your idea for a new company with competitors or other early-stage founders. It is, however, a fear you need to move past if you want to successfully fundraise from VCs.
In this article, we’ll address:
- Reasons venture capitalists don’t sign NDAs during fundraising rounds.
- Steps you can take to minimize the chance your pitch deck is leaked.
So, why don’t VCs sign NDAs for pitch decks?
There are a number of reasons why venture capitalists (particularly those in Seed or Series A rounds) justifiably decline requests to sign non-disclosure agreements.
You’re probably not the first one with your idea
The feeling of coming up with an exhilarating new business idea is unlike any other. In a sea of founders all daring to innovate, it’s exceedingly unlikely that you’re the first entrepreneur with this idea.
Ultimately, your idea is a primary component of your business—but it’s not yet your business. An array of other factors contribute to the success of an idea and the business model it becomes. (We’re talking team and founding experience, chosen target market, timing, and the distinct combination of different VCs and advisors involved, not to mention luck.
If your idea is one with legs, it’s probably one of these other factors that doomed founders before you. You have to be on the right founding team with the right solution and the right approach at the right time. Therefore, you should concentrate time and resources on perfecting this combination of business elements.
VCs are likely considering similar ideas in similar spaces
It can be easy to concentrate on your own worries during the fundraising process. What if my idea gets out? What if a VC shares my pitch deck without my consent? While convincing a venture capitalist to sign an NDA would placate your worries, it would undoubtedly raise an unsustainable set of worries for the VC.
To begin, since you’re not the first one with your idea, you probably won’t be the last one, either. Silicon Valley’s top VCs receive thousands of pitch decks per quarter. If your idea appealed to them, it’s logical to assume that a similar idea would, as well. It’s therefore all but an assumption that VCs are talking—or will (at some point) talk—to a founding team with an idea that’s very similar to yours.
If a given VC were to pass on your idea and then choose to invest in a similar business idea, you could arguably have the ability to create legal trouble for that VC. As famed entrepreneur Guy Kawasaki says, “[VCs aren’t] about to create legal issues because they sign an NDA and then fund another similar company, thereby making the paranoid entrepreneur believe the venture capitalist stole his idea.”
Furthermore, some VCs fund a group of similar ideas with the mindset that when one hatches, they will profit—even if the others never hatch, fail to launch, or fail to scale. At the end of the day, the risk is already high for early-stage venture capitalists, and schedules are already overbooked. The last thing a VC wants to do is risk complications from signing an NDA.
NDAs take away time from other deals—including your own
As we just reviewed, VC schedules are unsurprisingly akin to whirlwinds. Time is a precious commodity as is for a VC. Reviewing NDAs, consulting legal experts, negotiating, and reaching an agreement are all time-consuming processes. VCs cannot reasonably execute these processes without taking valuable time away from advising founders in their portfolios. These are the precise distractions that could take time away from advising you once you’re in a VC’s portfolio.
To be sure, while offering an NDA may seem like a quick and seamless way to limit a VC’s capability to spread your idea, it’s rarely so simple. In “Why Most VCs Don’t Sign NDAs”, Foundry Group’s Brad Feld argues that NDAs are very rarely acceptable for VCs in their original form, and usually require an extended back-and-forth.
Aside from the time and effort it takes to tailor an NDA to a specific founder’s preferences, there’s also the matter of document storage. Most VCs already have their own document management systems for storing pitch decks, term sheets, and more. The last thing VCs want is a more complicated document management system.
At the end of the day, VCs hold the checkbooks, and therefore maintain the leverage in most fundraising deals. You can and should take steps to level the playing field for your founding team. Is an NDA that, as we established earlier, probably won’t even protect your business from its biggest threats really be worth calling your credibility as a founder into question?
What can I do to minimize unauthorized distribution of my pitch deck?
So, it’s unwise to force a venture capitalist to sign an NDA during the fundraising process. That must mean that pitch deck security and fundraising success are mutually exclusive, right? Not quite.
Contrary to popular belief, it is possible to successfully fundraise while staying in control of your pitch deck. While sending your pitch deck as a PDF email attachment leaves it undeniably vulnerable (even if you send a password protected PDF!), sharing a pitch deck through DocSend is a fantastic way to protect your pitch deck with password protection, link expiration, and even viewer verification.
Unlike email attachments, you can turn downloading on/off with the click of a button—even after you share the deck. In this way, you can easily enable downloading only for those VCs who request a PDF of your deck. All you have to do is click “Allow downloading” in the link properties for that specific VC’s link. Downloading will remain off for all other prospective investors, just as it should be.
In fact, if a VC declines a meeting, doesn’t respond, or decides (after a meeting) not to move forward, you can disable access to your pitch deck with a few simple clicks—again, even if you’ve already shared the deck. This way, only interested VCs have the ability to download your deck and access it on a long-term basis.
Beyond simple pitch deck security
Finally, with DocSend, pitch deck security is just the tip of the iceberg. DocSend enables you to track investor engagement on a slide-by-slide basis, so you can identify:
- Which investors have viewed your pitch deck.
- How much time these investors have spent viewing your pitch deck.
- How many times these investors have viewed your pitch deck.
- With whom these investors have shared your pitch deck.
- Where in your pitch deck these investors have spent their time.
The benefits of applying these analytics to your pitch deck and outreach strategy should be clear. For one thing, you can distinguish interested investors from the rest. In addition, these document analytics oftentimes inform future directions for your pitch deck.
The time to prioritize pitch deck security and investor engagement is now. Click here to get started with DocSend for free—you can also click here to learn more about secure document sharing with DocSend. Happy sharing, and happy tracking!