Recycled Ideas and the NDA

Even as I've been out of the traditional venture game for several months now I still tend to see b-plans with regularity. For some reason these plans seem to always come equiped with an NDA in tow. I don't want to spend too much time covering the reasons why VCs don't tend to sign NDA as Guy Kawasaki et al have ably covered this territory. For those that are new to entrepreneur/VC relationship, I'll spend a few sentences to explain our collective position. At any given time we are "reviewing" a dozen or more plans. Over the course of any quarter, we may may see 50-100. Although your new take on electronic medical records management or geospatial emergency management software may appear completely novel from your perspective, we may have seen similar offerings. If a VC decides to take a pass on your opportunity and instead chooses to invest in another, similar venture, you may think that the VC has stolen your idea. Clearly that isn't the case here. The second reason why we don't sign NDAs is related to resources and time. NDAs are legal documents. Before signing, we would have to retain the services of an attorney. After modifications from each side, we eventually are able to see the plan. Multiply that by 200+ plans each year and it is easy to see our reluctance. Understand that it would be virtually impossible to take your idea and commercialize it simply by reading your plan. And the entrepreneurial community is fairly small. If word were to get out that we stole the idea of an entrepreneur, our deal making days would be over.

That said, it's easy to see why entrepreneurs are so paranoid. This weekend, I took some time away from renovating my house to nurse a cold. In between sniffles and nose blows, I caught a little playoff basketball and hockey. Rather than marveling in the athleticism of LeBron James, Dwight Howard, Kobe Bryant and Sidney Crosby, I came away with a different thought. Hyundai a few months ago launched a program to combat declining sales. Hyundai Assurance essentially says, if you lose your job and are unable to make your car payment, Hyundai will allow you to stay in your vehicle without making payments for some finite period of time- say 9-12 months. They claim that they will do it for you. I doubt that. I'm sure they will simply extend the contract by the number of months missed. I think we can all agree that Hyundai Assurance was a fairly innovative idea. In the last few weeks, it seems Ford and GM have "stolen" the idea; I just saw a commercial for the Ford Advantage program. In span of a few months, Hyundai came up with and launched a truly innovative idea and Ford and GM reacted with similar programs. Is it any wonder why entrepreneurs want NDAs signed?