Published on January 16th, 2022 | by Bibhuranjan

Why Non-Disclosure Agreements Are Important When Starting a Tech Company

When you’re starting a tech company, one of the most important assets you own is the technology you’re developing. Your software is valuable, and you don’t want it leaking out before it’s ready for launch.

As you’re getting your company off the ground, it’s essential you have your employees or business partners sign non-disclosure agreements (NDA), which are contracts that prohibit or restrict the sharing of information that is confidential in nature.

Non-disclosure agreements are important for companies starting out because new ideas and innovations can be easily stolen without them, which slows the growth of the company. Since new tech companies rely on their ideas to get off the ground, an NDA will protect these ideas by prohibiting disclosure.

Let’s dive into why NDAs are so important when you’re starting a tech company.

Photo by RODNAE Productions from Pexels

How NDAs work

NDAs are contracts between two parties. They are typically drafted by an attorney, legal team, or can also be drafted using an NDA template. NDAs outline what information is considered confidential and prohibits sharing such information.

If an NDA is broken, there can be serious consequences for the person who broke the agreement depending on the details of the contract. In most cases, court orders are given to help prevent further sharing of information, or monetary damages are awarded.

NDAs can keep former employees from leaking information

You’re bound to have some turnover in your company, so you need to ensure your employees don’t reveal your software to anybody.

You can have an NDA in place with your employees, so they cannot take information with them if they leave the company. Your employees are obligated not to reveal your technology to anyone else or risk legal action.

NDAs can prevent competitors from getting your information

If you have an NDA in place with your employees, that also means it will be harder for your competitors to find out how your software works.

Suppose a competitor is able to get any information about your business through one of your current or former employees or a freelancer. In that case, this could put the whole company at risk. An NDA will keep valuable ideas safe by prohibiting disclosure or use by any third party.

NDAs can prevent future conflicts with partners

Often, when you’re starting, you’ll need a business partner or investor to provide support. One of the main reasons you need an NDA is so there are no misunderstandings between your business and its partners.

If a partner signs an NDA, they cannot share the software or any proprietary information that’s not already publicly available. By having both parties sign an NDA before beginning a relationship, you’ll ensure there are no disagreements about what information is shared and remains confidential.

NDAs show you’re serious

Many businesses use NDAs as a way to show their ideas and intellectual property are serious. These types of contracts will let others know you don’t plan on sharing any information easily, which can help your company’s reputation and attract investors.

An NDA shows your software is valuable and worth protecting. If an investor sees you have an NDA in place, they might take it as a sign that your technology is innovative enough to bring in returns.

In order to ensure your ideas are protected, you need your information to be kept under lock and key. That’s why it’s important for companies to include NDAs when they start a business so they can keep their ideas safe from competitors.

Without these agreements in place, your start-up could face the consequences down the line as it grows and builds out its software. There’s nothing worse than spending all this time building out software only to find your competitors have beat you to market. You should do the smart thing and protect your ideas.

Cover Photo by RODNAE Productions from Pexels

Tags: lawyer, legal agreements, NDA, non disclosure agreements

About the Author

Bibhuranjan Editorial Officer, technofaq.org I'm an avid tech enthusiast at heart. I like to mug up on new and exciting developments on science and tech and have a deep love for PC gaming. Other hobbies include writing blog posts, music and DIY projects.