Anyway, if he's asking you to sign NDAs, he's probably off his rocker. IMO, the NDA in the startup world is a red flag that somebody is clueless how little their idea is worth. It's execution that matters. (NB: my anti-NDA stance doesn't apply evenly. A biotech startup would be well served by one, but most startups should never use one in this situation).
You seem to have left your thinking about a lot of important issues to too late. You seem to have assumed that you would be equal business partners when the two of you should have been smart enough to work all this out in advance.
I don't see why you are concerned that you have signed an NDA. As you say it means you can't tell other people about the workings of the start-up, which is exactly what the NDA is designed to do. Why would you want to go and divulge information about the company to anyone outside it - thats really concerns me as a business owner. Your friend is working full time, and you might be capable of 3 hours a day five days a week by the sound of it so the relationship doesn't seem equal. Sure you have the technical programming skills, but the real value is in the idea and execution of the idea. He could just hire someone to do the technical parts but obviously he may not have start-up money to do this which is where your real value lies in being able to negotiate some equity for your work.
You shouldn't question trust in your friend because of the NDA, you should see that he is smart and looking to protect the start-ups ideas in the best interests of everyone (yourself included if you have an ownership share in the end). I am in a similar situation of executing an idea I have had for years, and its very scary to think about others stealing your ideas for their own benefit after you have put so much thought into something.
I think what he's getting at with the NDA point is the start of the conversation. As an ex-finance/NYC guy, you see this all the time in New York (thankfully its getting less frequent but I just had it happen again the other day): you meet a founder, he/she has an idea, and in order for him/her to share the idea, they ask you to sign an NDA. Just to hear the idea. Happens with alarming frequency.
I typically don't sign an NDA when it's just someone's idea. If they've already invested a significant amount of their own money and look to have traction, I may. If it's a situation where I'm more like just a contractor coming in to an established company, I'll sign an NDA (and have signed short-term non-competes as well too if need be).
When I don't sign an NDA, often (this doesn't happen every day, but on the order of 6-8 times per year) I'll get some line about how this is a great idea and I'm a fool to let it pass. Or that the other person has to do this to protect themselves because I could just steal the idea and make all the money. Or some variation of one of those. I simply state that if they're looking for a true partner, starting off on by distrusting me that much, and making the relationship extremely one-sided (based on the language in the NDA as it may be), is a recipe for failure.
Recently someone approached me with an NDA, and had a business for something that millions of people need (not a want, mind you, a need), and they'd each be willing to pay $100/year for it. I wasn't told what it was until I signed the NDA, which I didn't. But I asked "how will you deal with the competition?" and was told "there won't be any". "Really? You're creating a market that doesn't exist right now, and generating hundreds of millions of dollars in revenue within a few years, and you think there will be no competition at all?" "Correct".
I politely declined at that point, and pointed out that even if I'd signed the NDA, I wouldn't be able to 'partner' with someone that naive about business.
I agree. And even worse, once a guy refused to tell me what his idea is, even after I signed the NDA. He said, 'why don't you believe me and just join us? I quit my job to start the idea, isn't it convincing enough?'
The reason I ask you to sign an NDA is not because I am scared you're going to steal my idea. We can talk in depth about the business over coffee, dinner, long weekend ad nauseam. But if you want to see the code and hear about the non-public deals then you sign an NDA.
I'm pretty sure this post is not meant to apply to real companies, but there is a lot more going on out in the real world than this straw man of cold-calling wantrepreneurs.
I just had an idea man want to pitch something to me but he wanted me to sign an nda before he would even tell me anything about it. Sorry, i'm not going to put my projects at risk just to hear it.
The counter argument to that is "Great idea - what other value are you going to bring to the table?" For me, being asked to sign an NDA is often a signal that they don't have anything else unique to bring to the table, which is usually a recipe for failure. Instead, there should be some other reason why this idea will only succeed if you do it. Some good ones are personal domain expertise, access to partnerships, access to distribution channels, design/marketing skills, etc.
If all you bring to the table is an idea, than to be honest, the developer probably doesn't need you.
Aside from echoing what everyone else is saying -- that this is a blatant attempt to rip you off and you shouldn't go anywhere near it -- I just wanted to point out that it is in no way "standard" to have an NDA under these circumstances anyway.
In my entire career (over 20 years writing software for money) I have never signed, or even seriously considered signing, a full-on NDA. Doing so can be extremely dangerous to your future career, not least because potentially it will no longer be safe for you to work in certain fields, and you don't even know in advance what those fields are. At the same time, it has basically no upside for the person committing not to disclose. It's not unusual for employment or freelance contracts to include some clauses about not disclosing trade secrets learned during the gig, but even then there ought to be explicit limits on the scope of any restrictions, as well as other safeguards for the employee/freelancer.
If you're dealing with a really big player, and you're a little player trying to break into a market where you need access to their technology, then accepting their NDA terms might be an unavoidable price of admission where you have no real alternative if you want to play the game. I struggle to imagine why you'd consider signing one under less demanding conditions, though.
The situation described here is not even close to that kind of relationship. It seems more akin to the situation where Idea Guy thinks his idea is so amazing that Technical Guy should be willing to sign anything just to know about it. But try that on any veteran Technical Guy, or any serious investor, and Idea Guy will get laughed out of the room. In this case, it makes even less sense, because it sounds like any relevant information has already been shared anyway and there is literally no upside at all to signing anything like this.
There also seems to be some sort of presumption that OP would be the subordinate in any relationship and the other person would be senior. It's not clear why that would make sense from what we've been told so far, because it sounds like the OP has been the one doing most/all of the work so far. However, business people sometimes forget that good technical people aren't under any obligation to work for peanuts, and then they make unfounded assumptions about how they should obviously be the senior player in any deal. A counter-offer where they only get to have a minority share of the equity in a new company owned by both people, or even where they are reduced to being an employee of a company founded by the technical person, may provide an effective reality check in such situations, because without the technical person's work it's entirely possible that the business person has nothing of value to build a company around.
On the bright side, there is at least one useful lesson here, because it has provided an excellent demonstration of one of the most reliable indicators that you you don't want to engage in any sort of business relationship with someone. :-)
"The first step is to do a quick and dirty evaluation of whether your business idea has potential. [...] Find five people or companies who could actually be potential customers. [...] Have them sign an NDA and then tell them a bit about your product/service."
Right. How about a business that makes potential customers of startups sign NDAs? Ooops, now I've revealed my groundbreaking business idea! Consider yourselves under NDA! Please!
I'm not very familiar with the space yet, but despite a weak attempt to argue something along the lines of "nobody cares about your idea," this ultimately reads to me like "Don't ask for an NDA, because it would inconvenience me if I decided I wanted to build my own business based on your idea."
For me to sign an NDA, you need to have a heck of a lot more than an idea. If you have a bare minimum prototype, some market validation and potential customers lined up, may be then i might even consider it if I really believe in your product/business and want to be a part of it in the long run. Anything else, the answer is No.
I think in the context, a person with an idea and no code, it does come of a bit silly to want to sign an NDA. I'm not sure why a consulting company works with such people. I'm guessing they cater to people with ideas who have too much money?
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