Asked in Contracts and Business Law

Q: Signing an NDA a while after the meeting

I have had a meeting with an investor about my buisness in which I did not ask him to sign an NDA about 2 months ago. He was interested in investing and delayed it for over a month untill popping out of the blue that he is not interested anymore in investing for a certain reason (which there is no need getting into as the reason might be false).

I regret that decesion and would like to cover it up as I won't feel safe going to a different investor knowing there is someone who could steal my buisness.

Is it possible to do? Would a ragular NDA do assuming he agrees to sign it?

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1 Lawyer Answer
Will Blackton
Will Blackton
Answered

A: This depends on state law and a number of other factors. Without knowing what state you're in nor the circumstances of your situation, an attorney is not going to be able to offer you legal advice.

For example, in North Carolina and in most states, if an agreement lacks consideration, it's unenforceable. So, if an employer asks an employee to sign a non-compete agreement out of the blue, after that employee has already been working for the employer for several years, and the employer doesn't offer anything beyond continued employment to the employee, the non-compete agreement is probably going to be found to be unenforceable.

That being said, while many people with a business idea want potential investors to sign NDAs, an idea generally isn't worth much. The ability of a team and hard work associated with executing on that idea are what creates value. Your best protection is going to be building a great business that is difficult to compete with. Once your business starts gaining traction, you're going to have copycats, so an NDA with your potential investor, who without an NDA would have "stolen" your idea, only really gives you a few months before you're facing similar competition anyway.

That's not to say NDAs are worthless. The agreements are appropriate and helpful in many situations, and an attorney in your state will be able to assist you effectively using them. But what are you going to offer the potential investor in exchange for them signing an NDA? Why would a potential investor agree to sign an NDA, even for a few hundred or thousand dollars, after they've passed on the idea? The potential investor would create an annoying hurdle if they invest in any arguably similar company, because they've created a huge potential legal liability without much reason.

You pitched and an investor passed. If you're committed to your business, this will probably happen a lot. Focus on building your business, refining your pitch, learning what you can from the experience, and moving forward. Start to establish a relationship with a business transactional attorney in your state who works with entrepreneurs.

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