If you’re starting a business or have a business but want to expand, innovate, or reach out into new markets, you may be looking for investors. Investors are the lifeblood of your business, and you want to put your best foot forward in proving to them that their money is in good hands with you.
Our Chicago business lawyer at Ellis Legal explains more below.
What About Trade Secrets?
But how do you show an investor what your plans are, why you’re a good bet, or where their money is going without giving away your valuable trade secrets?
You may or may not know these investors, but either way, what’s to stop them from sharing the information you provide to them in your “pitch” to others, or worse—using that information themselves?
Using an NDA
Certainly, you could have every investor who hears your business plans and proposals sign an NDA. But that can be problematic; most investors won’t sign an NDA.
Real investors hear a lot of proposals. They may invest in multiple businesses. Some of those businesses and ideas may be similar to yours. They often do not want to sign an NDA that could even open the door to an accusation that they are misusing, disseminating, or misappropriating information that was protected by the NDA.
In many cases, investors don’t have to sign an NDA. If you won’t tell them about your business idea without an NDA, someone else will—they are the ones with the money that you need.
Practically, forcing an investor to sign an NDA can also give off an air of distrust or of being litigious, at least at the early stage of discussions, impressions that you’d be better off avoiding.
Keep It Simple, at First
All this means that you need to become skilled at providing a business pitch to investors that do not give away any kind of protected information or business trade secret.
There are ways to do this, especially if you work with your business attorney on proper wording and information that both informs the investor of what he or she needs to hear but also stops short of giving away any information that you may not want your competitors to learn about.
In fact, you have probably given friends or family general information about your ideas without divulging information that you consider to be proprietary or secret.
Later On, If There’s Interest
If your investors are interested and, perhaps, want to move on to a later stage of consideration and negotiations, where there will be some commitment, then there may be a bigger window to convince an investor to sign the NDA. At that point, the investor sees that he or she may get some benefit from the relationship, making an NDA much more palatable.
Speak with an experienced Chicago business litigation attorney at Ellis Legal by calling (312) 967-7629 today. During a free initial consultation, you can discuss the legal issues surrounding your investments and protecting your trade secrets.