Key points
- A founder can ask an investor to sign an NDA before a fundraising round, but institutional investors generally refuse at early stage.
- Funds review many similar deals; signing an NDA for each one would create an administrative burden and a legal exposure that are hard to manage.
- A business plan, projections, a description of the team and a pitch deck generally carry limited risk if disclosed.
- Source code, proprietary algorithms, customer data and unpublished results deserve protection and must not be shared in a first pitch.
- Once discussions are advanced, a confidentiality agreement limited in scope and duration can be proposed, and some funds will accept it.
- Rather than making every discussion conditional on an NDA, it is better to calibrate what is shared at each stage and keep sensitive information for the advanced stages.
Almost every founder raising funds faces the question: can you, and should you, require a potential investor to sign a confidentiality agreement before sharing a business plan, financial data or technology information with them?
The short answer is that you can ask, but in most cases institutional investors will refuse, and the practice is not very effective in an early-stage fundraising round.
Why do VCs and investors usually refuse to sign NDAs?
Venture capital funds and business angels review many deals every year. Some deals concern similar subjects, in related sectors. Signing an NDA for every deal reviewed would create a significant administrative burden and, above all, a legal exposure that is hard to manage: how could they prove, six months later, that information seen in one deal did not influence a decision on another?
This position is not a refusal to respect confidentiality. It reflects an operational reality for professional investors. It does not mean that your information will be used unfairly, but that it will not be covered by a formal contractual commitment.
What is really risky to share without an NDA
You need to distinguish between what can be shared without real risk and what deserves protection. A business plan, financial projections, a description of the team and a pitch deck generally carry, in themselves, limited risk if disclosed. These are items you will share with many people during the fundraising process.
On the other hand, some items deserve specific protection: source code, proprietary algorithms, customer data, manufacturing methods, unpublished study results. These items must not be shared in a first pitch. They can be shared at a more advanced stage of the process, possibly under an NDA or within an organised data room.
What an NDA with investors can cover
When discussions are advanced enough to justify access to truly sensitive information (detailed financial data, technology information, precise commercial results), you can propose a confidentiality agreement limited in scope and duration. Some funds will agree to sign a targeted agreement at this stage of the process.
It is also useful, whenever you share information, to include a document stating the confidential nature of the material provided, even without a signed NDA. This does not create a contractual obligation, but it helps establish the context of trust in which the information was shared and forms part of the reasonable protective measures required to rely on trade secret protection (Article L. 151-1 of the French Commercial Code (Code de commerce) (in French)).
Practical alternatives
Rather than making every discussion conditional on signing an NDA, which can slow the process down and signal excessive distrust, it is more effective to calibrate what you share at each stage, keep a written record of what was shared and with whom, and keep the most sensitive information for the advanced stages of the process, within a more formal framework.
To prepare your fundraising round from a legal standpoint, see our article on legal preparation for a fundraising round and our confidentiality agreement (NDA) lawyer page.
