NDA for investors: when to ask and what to put in it

Should you ask investors to sign an NDA for your startup? Not for a first meeting or your deck: most VCs won't sign, and asking marks you as new to fundraising. It is fair to ask once you share genuinely sensitive material, such as customer contracts, detailed financials or code, and a short NDA shown before those documents open is often the easiest way to do it.

Who this is for: founders about to share a data room who are wondering whether to insist on an NDA.

Why most VCs won't sign an NDA

Investors see hundreds of companies a year, many working on similar ideas. If they signed every NDA, any later investment in a similar company could lead to a claim that they used confidential information. Their lawyers won't allow that risk for a first look.

There's also a practical reason. Your deck should sell the idea without giving away anything a competitor couldn't guess. If it can't, the deck needs work, not an NDA.

So: don't ask for an NDA to send a deck or take a first call.

When it's fair to ask

It becomes reasonable when you share things that would hurt if they leaked. Use this checklist.

By this point the investor is usually in diligence or close to a term sheet, and confidentiality is routine. Many term sheets also include a binding confidentiality clause covering both sides. Our post on term sheet terms explains which clauses bind.

The five clauses that matter

Keep the NDA to two pages. These five clauses do the work.

• What's confidential. Information you share for the investment, marked or obviously confidential. Exclude what's already public, already known to them, or independently developed.
• What they may use it for. Only to evaluate a possible investment in your company.
• Who they may share it with. Their partners, employees, lawyers and advisers who need it for the evaluation and are bound by the same duty.
• How long it lasts. Two to three years is common and acceptable to most investors.
• What happens at the end. On request, they delete or return the information, except copies their systems keep automatically or the law requires.

Make it mutual if you can. You'll see some of their documents too, and mutual NDAs feel fairer and get signed faster.

Leave out non-compete and non-solicit clauses. Investors won't accept a promise not to invest in competitors, and asking for one can stall the whole conversation.

A lighter alternative: NDA on view

Instead of emailing a PDF for signature, show a short NDA the first time an investor opens your data room. They read it, tick a box, and their acceptance is recorded with their name, email and time. Then the documents open.

This works well because:

• It takes the investor ten seconds, not a week with their legal team.
• You get a record of who accepted and when.
• You can show it only on sensitive folders, keeping the deck open.

Electronic agreements are generally recognised in India under the Information Technology Act. If confidentiality really matters to your business, have a lawyer review your NDA wording once, then reuse it for every investor.

What an NDA won't do for you

An NDA gives you a legal claim after something leaks. It doesn't stop the leak. Practical controls matter more:

• Share sensitive folders only with investors who are serious.
• Watermark documents with the reader's name.
• Turn off downloads where you can.
• Set access to end after a fixed period.

Our seed round data room checklist covers how to set this up.

Common mistakes

• Asking for an NDA before the first call. It slows everything down and signals inexperience.
• A twelve-page NDA. It goes to the investor's lawyers and comes back in three weeks with changes.
• Non-compete clauses. No professional investor will sign them.
• Relying on the NDA alone. Without access controls, the NDA is just a promise.

Questions people ask

Do VCs sign NDAs?

Most won't sign one for a first meeting or a deck. They see many similar companies and can't risk a claim that they used one founder's idea in another investment. Many will agree to confidentiality later, during detailed diligence, or accept a short click-through NDA before opening sensitive documents.

When is it fair to ask an investor for an NDA?

When you're sharing something that would genuinely hurt you if it leaked: customer names and contracts, detailed financials, source code or unpublished technology, and salaries. By that stage the investor is usually in diligence or close to a term sheet, and a short mutual confidentiality agreement is a normal request.

What should an investor NDA include?

Five things: a clear definition of confidential information, what the investor may use it for, who they may share it with, how long it lasts, and what happens to the information at the end. Keep it short. A two-page mutual NDA gets signed. A twelve-page one sits with their lawyers.

Is a click-through NDA enforceable?

Electronic agreements are generally recognised in India under the Information Technology Act, and click-through terms are widely used. Whether a specific clause holds up depends on its wording and the facts. If confidentiality is critical, have a lawyer review your NDA text once and reuse it.

Sources

• Entrepreneur: Why VCs don't sign NDAs (opens in a new tab)
• Mondaq: Why won't professional investors sign NDAs (opens in a new tab)
• Information Technology Act, 2000 (India Code) (opens in a new tab)

This is general information, not legal or tax advice. Check with your CA or lawyer for your company's situation.