Make Friends, Not Enemies: The Smarter Way to NDA

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1. Feature: Make Friends, Not Enemies: The Smarter Way to NDA (4 min read)

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If you've ever suggested an NDA (Non-Disclosure Agreement) before sharing a pitch deck, it can be a bit like showing up to a first date with a prenup. Tense. Awkward. Defensive.

Especially in venture capital and private equity circles, NDAs can trigger eye-rolls and outright objections. Why? Because badly drafted NDAs waste time, feel one-sided, and signal mistrust before a real relationship even begins.

Over and over again you will hear, “you don’t need an NDA with us, because if we don’t treat our client’s information as confidential, we wouldn’t survive in the private equity business very long.” That’s a brilliant response, but it might not be enough for you and your existing investors.

At The Co. Letter, we believe the right NDA should make you friends, not uncomfortable.

Here is the blueprint for doing it right:

The Big Mistake: One-Sided NDAs

When companies insist on NDAs favoring themselves, two bad things happen:

1. Negotiation quicksand. Everyone wastes hours lawyering up.

2. Broken trust. It suggests you're more interested in "winning" than collaborating.

That's why we strongly advocate for a bilateral NDA: one that equally protects both parties.

"Each party agrees to keep the Confidential Information of the other party strictly confidential and shall not disclose it to any third party without prior written consent."

Bilateral terms start the relationship on equal footing.

The Essentials of a Great NDA (and How to Get Them Right)

1. Mutual Protection

Why: One-sided NDAs are dead on arrival in VC and PE circles.
How: Use mutual language that makes clear both sides have skin in the game.

"The obligations of confidentiality and non-use apply equally to both parties, regardless of the nature of the Confidential Information exchanged."

Pro Tip: Many startups like to put their logos on documents—don’t on an NDA. One party’s logo is an immediate distraction from the mutual nature of a good NDA.

2. Clear Definition of Confidential Information

Why: Vague definitions cause future disputes.
How: Define tightly but fairly.

"Confidential Information" means any nonpublic information disclosed by a Party (the "Disclosing Party") to the other Party (the "Receiving Party") that is marked or otherwise identified as confidential, proprietary, or that should reasonably be understood to be confidential or proprietary given the nature of the information and the circumstances of disclosure. Confidential Information includes, without limitation, business plans, contracts, financial data, technology, trade secrets, proprietary processes, and customer lists and related information.

3. Reasonable Exclusions

Why: You can't make someone pretend they didn't know what was already public.
How: Build in standard carve-outs.

"Confidential Information shall not include information that (a) is or becomes publicly available without breach of this Agreement; (b) was known prior to disclosure; (c) is disclosed by a third party lawfully; or (d) is independently developed without use of the Confidential Information."

4. Limited Use Clause

Why: Confidential information should only be used to evaluate the opportunity.
How: Limit usage expressly.

“The Receiving Party shall not utilize, design, develop, reverse engineer, reproduce, or make copies, models, or replicas of the Confidential Information without the prior written consent of the Disclosing Party, except to the extent that such activities are required to accomplish the Purpose and in accordance with this Agreement.”

5. Reasonable Term

Why: Information doesn't stay sensitive forever.
How: Set a practical duration.

“This Agreement shall remain in effect for two (2) years from the Effective Date. Each Party's confidentiality obligations shall survive for three (3) years following termination or expiration; however, obligations regarding trade secrets shall survive so long as the information qualifies as a trade secret under applicable law.”

Pro Tip: Set an internal calendar invite for the anniversary of each NDA. That way, if you forget to ask for your information back, you will get a reminder.

6. Return or Destruction of Information

Why: You want your stuff back (or destroyed) if the deal doesn't happen.
How: State the procedure clearly.

“Upon written request, a Receiving Party shall promptly (no more than thirty (30) days after the date of the written request) return or destroy all copies of the Confidential Information and confirm in writing by a company officer that such return or destruction was completed.”

7. Equitable Relief Clause

Why: Money damages may not fix the harm.
How: Secure the right to an injunction.

"Each party acknowledges that a breach may cause irreparable harm for which monetary damages may be inadequate and therefore agrees that the non-breaching party shall be entitled to seek equitable relief, including injunctive relief, without the necessity of posting bond (to the extent permitted by law)."

8. Multi-State, Universal Language

⚡ Be Careful Here: Some states are unusually hostile to NDA enforcement, employee protections, or noncompete-type restrictions. If your counterparty is based in one of these states, consider extra caution.

Pro Tip: If the other party is based in one of these states, your best move is to keep the NDA short (duration) and extra clean, with limits to a very specific definition of “Purpose” for the NDA.

One More Pro Tip: Make sure that the effective date of your NDA is the date of your first discussion with the other party!

A Quick Note on VC and PE Objections

Most VCs and PEs still refuse to sign NDAs at the very early stage. Why? Because they see too many deals and can’t risk being sued for accidental overlap.

If you’re raising capital, sometimes a good compromise is offering a very light NDA—or none at all—until real due diligence begins. Always read the room.

Bottom Line

A well-done bilateral NDA doesn't feel like an ambush. It feels like a handshake: respectful, clear, and serious.

If you avoid the traps above and stick to fair, balanced language, you’ll build better relationships—and protect your ideas without picking a fight.

As Warren Buffett once said, "Honesty is a very expensive gift. Don’t expect it from cheap people."

The right NDA helps you spot who’s worth doing business with before you risk the real valuables.

Have an interesting business question and need a free bit of advice? Send your question to [email protected]. No confidential info, please!