What Is an NDA?
A non-disclosure agreement is a contract in which one or both parties promise to keep specified information confidential and to use it only for a stated purpose.
How it works
An NDA defines what counts as confidential information, who may see it, what they may do with it, and how long the duty lasts. It often lists exclusions, such as information that is already public or that the recipient already knew. It may be one-way, protecting one side, or mutual, protecting both.
An NDA is a contract, so it is enforced through the courts and the remedies depend on its terms and the governing state's law. It does not make information secret by itself. It creates a legal duty not to share it.
Example
For example, a founder is about to show a prototype to a possible manufacturing partner. Before the meeting, both sides sign a mutual NDA that says shared drawings may be used only to evaluate the partnership, and must be returned or deleted on request. If the partner later uses the drawings to build a competing product, the founder may have a claim for breach of contract.
Why founders care
Founders share ideas with contractors, advisors, partners and sometimes investors. An NDA helps support trade secret protection, because keeping information confidential is a key part of qualifying as a trade secret. It also matters for patents, because public disclosure can affect patent rights, and the rules differ between countries.
Many investors decline to sign NDAs at early meetings. That is common, and a founder should decide in advance what to share.
Common mistakes
- Defining confidential information too vaguely or too broadly.
- Leaving out an end date or a plan for returning materials.
- Using a one-way form when the exchange is two-way.
- Treating an NDA as a substitute for sharing less.
Frequently asked questions
What is an NDA?
An NDA, or non-disclosure agreement, is a contract that obligates one or both parties to keep certain information confidential and use it only for an agreed purpose. Its exact terms and enforceability vary, so have an attorney review important ones.
Do investors sign NDAs?
Often they do not, especially in early meetings, because they see many companies in similar areas. Practice varies. Founders usually decide how much detail to share before a deal is far along.
Related terms
Go deeper
- Trade Secrets for Startups: NDAs and Secrecy Steps IP guideTrade secrets for startups: what qualifies, what reasonable secrecy measures look like, when to use an NDA, and whether investors will sign one.
- IP Due Diligence for Startups Before Fundraising IP guideIP due diligence for startups: what investors ask about IP, a practical checklist, and why founder IP assignment should come before funding.
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General information, not legal, tax or financial advice. Reviewed 11 November 2026.