Yesterday afternoon I met with two budding Berklee entrepreneurs who were excited to talk with me about their new idea for monetizing music. I’m not going to go into details because I know they aren’t ready for the conversation to go public. We talked about a variety of things from getting savvy with code to being open to sharing your ideas so you can receive feedback. The discussion turned to confidentiality and I explained why most people in the tech world avoid entrepreneurs that try to get them to sign an NDA. I thought this would be the first and last time I discussed non-disclosure agreements this week or maybe even this month.
Needless to say, I was taken aback when I learned that an entire class at Berklee College of Music had signed NDAs for another student’s startup earlier in the day. On top of that, the startup was barely past the idea phase - just some sketches in a notebook. This is bad. Really, really bad. It speaks to a lack of understanding by both Berklee and all students involved about the implications of an NDA.
NDAs: little good, much bad, very ugly
There is certainly an upside in guilting people into signing your NDA. If any of the signees had an idea like yours, or decide to do anything even remotely similar in the future, you can attempt to sue them and have a signed document to back your side of the story.
A non-disclosure agreement is armor for a person that irrationally believes someone else will steal their idea. It’s an attempt at protecting themselves against people that can execute better.
(Update 2/27 - to be fair, some entrepreneurs may not even realize this.)
The downsides for the entrepreneur asking someone to sign an NDA are numerous. Almost anyone who is in the tech business will immediately label you as a complete noob (yes, I just wrote noob) or someone that could be overly litigious and dangerous. Investors (VCs or angels) will almost always refuse to sign an NDA because they could very well have someone come in with the same idea as yours 5 minutes after you leave.
There is NO UPSIDE to signing an NDA, especially if you know nothing about the business to begin with. If you know nothing about the business, like the students in that Berklee classroom, you could be opening yourself up to all sorts of trouble. How do you know your notepad doesn’t have very similar sketches to what the entrepreneur asking you to sign an NDA is working on?
So why do people ask you to sign an NDA?
They could be scared someone will take their idea and make millions of dollars.
In reality, any idea is worth very little. Derek Sivers, founder of CD Baby and Berklee alum, writes that ideas are just a multiplier of execution. In fact, he believes a multi-million dollar idea with zero execution is worth $20. The reason these entrepreneurs are scared is because they know full well that as nontechnical people working in a technical space their chances of successfully executing on the idea are slim to none. There are certainly outliers, but a technical co-founder is incredibly vital to achieving a win. Even then, the vast majority of startups fail.
Your idea isn’t original
No, it really isn’t. Here’s a story from my time in elementary school:
A good friend of mine was an aspiring chef. He made a soup that everyone loved. It was tomato soup with mozzarella cheese and oregano. He called it pizza soup. One day, months or even years after he made his first pizza soup, we were getting food at our schools cafeteria and what do you think they were serving? That’s right, pizza soup. My friend freaked out. They had stolen his idea!
No, the lunch lady hadn’t stolen his idea. She didn’t even know he had the idea in the first place. There are over 300 million people in the United States alone. Chances are, hundreds of them had also thought up pizza soup before my friend had.
Jack Dorsey recently quoted author William Gibson who said, “the future has already arrived, it’s just not evenly distributed yet.” There are likely people who have been working for months or even years on the idea you personally just came up with. Does that mean you should not follow through with your vision? It depends. Do you think you are the right person to bring your idea to market? Do you have what it takes to distribute this product?
NDAs in the classroom are a terrible idea
Perhaps Berklee College of Music is just entirely new to the concept of discussing technology and startups, but NDAs should really have no place in the classroom. Berklee students should be wiser than to just sign anything placed in front of them. Berklee Professors should know better than to bring legal documents into a classroom setting. What’s worse is that at least one student said they felt as if refusing to sign the NDA would prevent him or her from staying enrolled in the class (though this was never stated outright).
Stanford University is a technology/startup leader. Let’s see what they have to say with regard to NDAs in the classroom:
"NDAs are generally NOT permitted for class projects at Stanford. Students should not be asked to sign an NDA in order to participate in a class project, and companies should not provide any information to project-based classes if they are not willing to permit the information to be made public." (link)
Berklee should take a note from Stanford, a school that should be looked to as an authority on these sorts of practices.
NDA… No Don’t Ask…
Non-disclosure agreements don’t belong in the classroom. In many circumstances they don’t even belong in tech startups. I can only hope that Berklee, the professors and students, will realize just how harmful NDAs can be to discourse, learning and innovation.
There they were, a classroom full of music business students who have heard time and time again how artists had been screwed by signing documents they did not understand. Had they just made the same mistake?
Let’s continue this discussion both online and in-person.
5 reasons why I won’t steal your idea
NDA == Fail
The Weird Economics of Information
UPDATE (2/27/13): This post has continued to garner attention. Since it’s being linked to directly I think it is important that readers also look at the follow-up post titled Fallout that further explains why I posted this and what I hope to see happen going forward at all learning institutions.