NDAs for entrepreneurs: protect your business idea from day one

The dilemma: share or protect?

No business idea comes to anything in isolation. You have to share it, with potential investors, with the developer you hire, with the possible co-founder and with the supplier who is to produce your prototype.

But what happens if they take the idea and make it their own?

That is the entrepreneur's classic dilemma: to test, build and finance your idea, you have to share it. But sharing it is also risking it.

An NDA (Non-Disclosure Agreement, in Danish a fortrolighedsaftale) is your primary legal tool for handling this dilemma. But it is not a magic shield, and it is often used wrongly.

What is an NDA, and what does it protect?

An NDA is a contract that obliges the other party to treat the information you share as confidential and not to use it for their own purposes or pass it on to others.

What an NDA can protect:

• Business plans and strategies
• Technical information and know-how
• Customer records and price lists
• Product pipeline and roadmaps
• Financial key figures
• Information about upcoming acquisitions or partnerships

What an NDA cannot protect:

• An idea already publicly available
• An idea the other party already knew before you shared it
• An idea the other party develops independently of your sharing
• A thought in your head; information has to be shared to be covered

When do you as an entrepreneur need an NDA?

Meetings with investors

Many investors, especially large venture funds, will not sign an NDA because they see many pitches and fear legal claims. That is a reality you have to accept.

But business angels, seed investors and strategic investors are typically more flexible. In cases where concrete technical details, product documentation or customer information are exchanged, rather than just an overall idea, it is reasonable to ask for an NDA.

Tactic: in the first pitch you share only what is needed to spark interest: your overall model, your market and your traction. The technical depth you share in a second round, ideally with an NDA in place.

Hiring freelancers and consultants

Is a freelance developer to build your MVP? A designer to make your brand? A consultant to map your strategy? Always use an NDA, either as a clause in the consultancy agreement or as a separate document.

They typically get access to:

• Source code and architecture
• Customer lists
• Financial data
• Internal processes

Without an NDA, they can freely use or share it.

Potential co-founders

Co-founder relationships are difficult. Before you decide to become partners, you typically share a lot of confidential information. An NDA protects you both in the initial phase.

When you formally set up the company and establish ownership, the NDA is replaced by the shareholders' agreement, but the NDA is important in the interim phase.

Suppliers and producers

Are you sharing technical specifications with a producer, a formula with a lab, or a recipe with a food producer? An NDA is decisive; production knowledge is one of the easiest things to copy.

Business transfers and M&A

An NDA is the first step in any due diligence process.

What should an entrepreneur's NDA contain?

1. The parties

Your and the other party's full names and contact details. If it is a company, state the CVR number.

2. A definition of confidential information

This is the most important point. Be specific about what is confidential.

Good wording: "All information regarding the Company's product development, customer records, technical specifications, financial key figures and business strategies, shared in writing or orally in connection with the collaboration."

Bad wording: "All information the Company shares."

Explicitly exclude:

• Information already publicly available
• Information the other party already knew before entering the agreement (they should state it in writing)
• Information the other party receives from a third party without a confidentiality obligation

3. The confidentiality obligation

What the other party specifically commits to:

• Not to pass it on to a third party
• To use the information only for the agreed purpose
• To protect the information with at least the same degree of care as they use for their own confidential information

4. One-way vs. mutual NDA

One-way NDA: only one party (you) shares confidential information, and only the other party is bound.

Mutual NDA: both parties share, and both are bound.

As an entrepreneur pitching to an investor, you will typically use a one-way NDA. In a business partnership where you both share information, a mutual NDA is more appropriate.

5. Duration

State how long the obligation applies:

• During the collaboration
• After the collaboration, typically a couple of years

Tip: certain types of information (for example source code and genuine trade secrets) should have a longer confidentiality period or even an open-ended obligation, as long as they remain secret. Consider differentiating.

6. Consequences of a breach

State that a breach of the NDA gives the right to:

• Damages for a documented loss
• Possibly a contractual penalty (a fixed amount per breach, easy to enforce without proving a specific loss)

7. Returning or deleting information

On the ending of the agreement, the other party must return or delete all confidential material. State it explicitly.

8. Legally required disclosure

If the other party is obliged to disclose information (for example to a court or a supervisory authority), it is permitted, but they should immediately inform you so you can seek to limit the disclosure.

Should you always use an NDA?

No. NDA fatigue is a real phenomenon in the startup world: if you ask for an NDA at every early conversation, it can signal uncertainty or a lack of experience.

Use an NDA when:

• You share concrete technical details, source code or specifications
• You share customer lists or financial data
• You hire a consultant or freelancer to work on your product
• You start negotiations about a formal collaboration

Consider not using an NDA when:

• You pitch an overall idea to a venture fund (it is often not achievable)
• These are early, non-committal conversations about a possible collaboration
• You are networking and exchanging ideas with mentors

Rule of thumb: the idea is rarely what is worth protecting. The execution is. Share the idea with care, and share the concrete details, code and data with an NDA.

NDA and copyright: two separate protections

An NDA is contractual protection; the other party cannot use your information without your consent. But it is not the same as copyright.

Copyright arises automatically when you create an original work (source code, design, text). The other party may have signed an NDA, but you can still find it hard to prove that they copied your specific expression rather than working independently.

For technical IP (software, inventions), you should in parallel consider:

• A patent application for inventions (it costs money but gives strong protection)
• Trademark registration for your brand

Conclusion

An NDA is an important but not all-encompassing tool for entrepreneurs. Use it when you share concrete technical details, code, customer data or financial information, and be precise about what is confidential, how long it applies, and what a breach triggers. Combine it with copyright and, where relevant, patent and trademark protection.

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The content of this article is for guidance only and does not constitute legal advice. Consult a lawyer for advice on your specific situation.