Why we do not sign NDAs at Makalu | Dafacto

The personal website of Matt Henderson.

Why we do not sign NDAs at Makalu

29 September 2010

Recently, a potential new customer expressed surprise when I told him that we at Makalu usually don’t sign NDAs. Mentioning that he’d found plenty of other companies willing to sign his NDA, I restated commitment to our position, and acceptance that we’d unfortunately have to miss the opportunity.

There are others who don’t sign NDAs, and their reasons range from the philosophical, to the financial, to the practical:

  • It feels like an expression of distrust (though, I'm not fully behind that one; life has taught me that trust is something earned, not something granted by default).
  • It implies an immediate cost, as no serious company is going to sign an NDA without having a lawyer read through it.
  • For companies -- particularly VCs and services firms -- that meet frequently with potential customers wanting to discuss ideas, there's just too much risk of idea-overlap and inadvertently entering into a situation of legal liability.
  • Exploiting ideas and information simply wouldn't form part of a sustainable business strategy, because as soon as that happened, the whole world would know via Google, and the company's reputation would go straight down the drain.

While these are all valid reasons for not signing an NDA, for us at Makalu, there’s actually something far more important – that is, demanding signature of an NDA isn’t usually a characteristic of the right kind of client for us.

You see, we want to spend as much of our time as possible, working towards the creation of great products. That’s our objective. Working with the right type of client is essential to that objective, and those clients tend to share some common characteristics.

  • In our experience, the right type of client will tend to share our belief that ideas are cheap, and that successful execution is what's truly important, rare and valuable. They generally won't even ask for an NDA to be signed. If something's confidential, they'll just say, "Hey, keep this under wraps for now."
  • In a similar vein, the right kind of customer will share our beliefs about the process which leads to great products, and the ideal engagement model that derives from that process.

About four years ago, we decided to no longer compromise on our beliefs, and the results have been nothing short of amazing. We’ve been thrilled to discover that some of the companies we’ve most admired happen to share our views, and have even become our clients because of our beliefs. Time after time, we’ve confirmed that engaging those clients that share our beliefs is a general precursor to successful, enjoyable projects. And in the process, we’ve created some great products, delivered some major success and value, and have had a blast doing it.

I’m not suggesting that the Makalu way is the “right way” for everybody. And I’m not saying there’s necessarily anything wrong with companies that ask for NDAs. In fact, I’m not a fan of absolutes in any regard.

What I do believe though, is that decisions and policies consistently guided by a set of values, is likely to be the best strategy for anyone. Makalu’s decisions are no longer guided by potential for profit, or need of work, but rather by those conditions necessary for us to create great products, and that, for us, has made all the difference.

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