Legal costs are one thing that creeps up on startup companies and they can spiral out of control very quickly. To try and cut down on this cost a lot of early stage startups rely on pre-written templates for some of their legal needs. One of the most common templates that is used is a template NDA. Non-Disclosure Agreements (NDA) are legal documents that protect the exchange of IP or protected information between parties. They are a very common tool used in business to protect source code, innovations, and other sensitive information. However, when it comes to NDAs, there are a couple of ways to get one in place: template and custom. Both have their benefits, but it’s important to understand when to use a template and when to not.
Template NDAs are pre-written agreements that are widely available online. Even we have a free NDA template here. They are often free or low-cost and can be quickly downloaded and edited to fit your specific situation. These types of NDAs are best used for situations where the information being shared is relatively straightforward and the parties involved do not have any unique requirements. For example, if you are a SaaS or startup founder and want to protect your code or client list from being shared with competitors, a template NDA might be sufficient. These types of NDAs are also appropriate for one-off transactions or short-term projects.
On the other hand, a custom NDA is tailored to the specific needs of the parties involved. And there are a lot of circumstances when you should have this extra protection in place. They are typically drafted by an attorney (if you want to find a SaaS attorney check out our directory) and can be more comprehensive in scope. Custom NDAs are best used for complex or long-term arrangements where the information being shared is critical to the success of the transaction. For example, if you are a tech startup looking to partner with a larger company or bring on VC capital, a custom NDA would be more appropriate. Custom NDAs can also provide more clarity around what information is protected and can help prevent any disputes that may arise.
What to consider when you ask ‘Should I use a template NDA?’
When determining which type of NDA to use, there are a bunch of factors to consider. First, consider the sensitivity of the information being shared. If the information is critical to the success of your business, a custom NDA may be the best option. Custom NDAs can provide more comprehensive protection for your trade secrets and confidential information.
Second, consider who is involved. If the companies or people involved have unique requirements or expectations, a custom NDA may be necessary to address those needs. For example, if you are a contractor working with a government agency, there may be specific regulations that need to be addressed in the NDA.
Third, consider the length of the arrangement. If the information being shared will be ongoing, a custom NDA may be more appropriate. Custom NDAs can be drafted to account for long-term arrangements and can provide more protection for your confidential information.
Finally, consider the cost. Those dollars that you have to part with, ouch. Template NDAs are often less expensive than custom NDAs if not completely free, but they may not provide the same level of protection. So keep this in mind. Custom NDAs can be more expensive, a lot more, but they can be tailored to meet your specific needs and provide comprehensive protection for your startup intellectual property.
At the end of the day, NDAs are an essential tool for protecting confidential information in tech transactions. When determining which type of NDA to use, it’s important to consider the sensitivity of the information being shared, the parties involved, the length of the arrangement, and the cost. Template NDAs are best used for straightforward transactions or short-term projects, while custom NDAs are best used for complex or long-term arrangements where the information being shared is critical to the success of the transaction. Regardless of which type of NDA you use, it’s important to consult with an attorney to ensure that your interests are adequately protected. Also, as a final note it’s also important to consider whether you need an NDA or a MNDA.