How do you draft effective non-disclosure agreements?

1 Define the parties

The first step is to identify the parties involved in the NDA. Usually, there are two parties: the disclosing party (the startup) and the receiving party (the other entity that will access the confidential information). However, sometimes there may be more than two parties, such as when multiple startups collaborate on a project. In this case, you need to specify the roles and obligations of each party in the NDA.

2 Specify the purpose

The second step is to state the purpose of the NDA. This is the reason why the parties are sharing confidential information and what they intend to do with it. For example, the purpose could be to explore a potential partnership, to conduct due diligence, or to provide a service. The purpose should be clear and specific, as it will determine the scope and duration of the NDA.

3 Describe the information

The third step is to describe the information that is subject to the NDA. This is the information that the disclosing party considers confidential and wants to protect from disclosure or use by the receiving party. The description should be broad enough to cover all relevant information, but not so broad that it includes information that is already public or not confidential. For example, you can use categories, such as technical, financial, or marketing information, or examples, such as business plans, prototypes, or customer lists.

4 Set the obligations

The fourth step is to set the obligations of the receiving party under the NDA. These are the rules that the receiving party must follow to respect the confidentiality of the information. For example, some common obligations are to use the information only for the agreed purpose, to limit the access to the information to authorized persons, to return or destroy the information when the NDA expires, and to notify the disclosing party of any breach or threat of breach.

5 Establish the duration

The fifth step is to establish the duration of the NDA. This is the period during which the receiving party must comply with the obligations of the NDA. The duration can be defined by a specific date, by an event, or by an indefinite term. The duration should be reasonable and proportional to the nature and value of the information. For example, if the information is related to a product launch, the duration could be until the product is publicly released.

6 Review the exceptions

The sixth step is to review the exceptions to the NDA. These are the situations in which the receiving party is allowed or required to disclose the information without violating the NDA. For example, some common exceptions are when the information is already known by the receiving party, when the information becomes public through no fault of the receiving party, or when the information is required by law or court order. The exceptions should be limited and justified, as they can reduce the protection of the NDA.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?