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Entrepreneurs with an idea for a product or startup company are often concerned about revealing information until they are far enough along that others can’t copy them. The concern is reasonable; the economy is globally competitive and entrepreneurs are looking to protect any edge they have.
One tool entrepreneurs often use is the nondisclosure agreement, or NDA. Nondisclosure agreements protect against the release of proprietary information and trade secrets. They are commonly used when outside technical expertise is required; when sensitive work must be outsourced; or when discussing the potential sale of the business.
But NDAs are increasingly rare. Many states do not enforce them; there are easy ways for those with malicious intent to circumvent them; and pursuing legal action is more expensive than most startup companies can afford.
In the venture capital business, hundreds of new business ideas come from entrepreneurs each year. In general, most venture capital investors will not review a business proposal if asked to sign a nondisclosure agreement. There are several reasons for this.
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