The best place to document software is in the code. In the same way, the best place to enforce confidentiality when raising capital is in the term sheet.

VCs and investors like Shearwater don’t typically sign NDAs. First up, confidential information really shouldn’t be shared in the first meeting with a VC (or anyone, for that matter). Second, there really are very few ideas which are truly groundbreaking that they need protection from the early meetings.

There is confidential material that may arise in due diligence (eg, terms of key contracts with suppliers), but that can be tackled in the term sheet stage if needed. Enforcing confidentiality in the term sheet is a little like documenting code in the software; it’s a closely coupled point of enforcement.

Finally, one of the key reasons why VCs don’t sign NDAs is that each one would need to be reviewed and adjusted to remove certain terms or constraints. Hundreds of NDAs being signed each quarter creates legal risk and business drag. It simply doesn’t scale.

Brad Feld puts the rational for why VCs don’t sign NDAs very clearly in this post.

At Shearwater, we’re in it for the long-game. We treat every entrepreneur with respect. We’ve been on your side of the table and we’ll keep your idea confidential.