Brad Feld:  The following question appeared in my inbox the other day.  “As you
mention in this blog VCs never sign NDAs. Maybe you can also tell me
why actually not? If I follow your blog does it mean that in most cases
they simply want to check the startup out?”

For starters, I’ll restate the assertion.  Most VC’s don’t sign
non-disclosure agreements.  Guy Kawasaki had a good comment on it in
his Venture Capitalist Wishlist post.

“Before you even start addressing the hard stuff, never ask a
venture capitalist to sign a non-disclosure agreement (NDA). They never
do. This is because at any given moment, they are looking at three or
four similar deals. They’re not about to create legal issues because
they sign a NDA and then fund another, similar company–thereby making
the paranoid entrepreneur believe the venture capitalist stole his
idea. If you even ask them to sign one, you might as well tattoo "I’m
clueless!" on your forehead.”

That basically says it all.  I’d add a few things:

1. Even if I was inclined to sign an NDA, I’d have to go through the
   process of reading it and deciding if it had any problems (many of them
   do – they are usually overreaching for the information being
   disclosed), dealing with my lawyer to change it, and you dealing with
   (and spending time with your lawyer) to accept or reject my requests. 
   In some cases, I’d probably spend more time dealing with the NDA then
   with the entrepreneur and his idea.  How stupid.
2. I’d have to keep track of all the NDA’s I signed.  It’s “yet
   another legal document” in the pantheon of documents we have to keep
   track of.  Hmmm – maybe we should consider funding a startup to
   automate the creation and tracking of NDA’s.  Nah.
3. In 20 years of high tech (as an entrepreneur, angel investor, and
   VC), I’ve never been involved in a situation where an NDA in enforced
   except in an M&A context.  It’s simply a waste of paper and time
   for anything but M&A.

There is one type of NDA that I’ll sign.  Some large companies – for
some reason – want to show you stuff, but then don’t want you to tell
anyone about it “until they are ready.”  I can usually deal with this
as it’s not worth the ensuing arguement.  However, I don’t need to sign
an NDA for this – all they have to do is ask me to keep my trap shut
“until they are ready.”

As an entrepreneur, don’t think of this as “arrogance”, think of it
as “practicality.”  Your friend the VC is actually trying to save you
time and money.  If you think you have something super secret that no
one else should know, just don’t tell me about it.  Oh – and check your
assumption in that case – especially since the value is in creating the
thing, not simply having the idea.

More here.  To meet with a VC and ask questions click here.