Updated March 12, 2026

Originally published September 18, 2021

While nondisclosure agreements (NDAs) can’t protect you in every situation, they are an essential tool for protecting confidential information about your growing company.

In this guide, we’ll explain what NDAs are, when you need one (and when you don’t), and how to create a policy and process that will protect your proprietary information as your company expands.

You can also download our free NDA template to make the whole process even easier.

What's an NDA?

An NDA (nondisclosure agreement) is a legally binding document designed to protect your intellectual property (IP) and other proprietary information. NDAs typically forbid the signee from discussing stipulated information with others or using it for personal gain. In the event of a breach, you or your company can pursue legal action to prevent further breaches or recover damages.

What NDAs can (and can't) protect

NDAs protect private, confidential information such as:

• Proprietary algorithms and AI training data

• Technical processes and source code

• Business plans and financial projections

• Customer lists and pricing strategies

• Product roadmaps and unreleased features

NDAs cannot protect:

• Your basic business idea or concept

• Information already in the public domain

• Common knowledge in your industry

• Information you've shared publicly at events or online

Important context for 2026: With the proliferation of AI tools that can analyze public data, be especially clear about what constitutes "confidential information" versus information that could be reconstructed from public sources.

Why NDAs still matter

While NDAs are only as effective as your willingness and ability to enforce them legally, they serve crucial functions:

• Set expectations and establish a culture of confidentiality

• Provide legal recourse in case of breaches

• Demonstrate professionalism to partners and investors

• Discourage careless sharing in our hyper-connected world

Try our free NDA template here.

Who should sign NDA agreements?

All startups should have a standard NDA that they can use to protect proprietary information about their company. Deciding when and where to use it depends on your company and the information you are trying to protect. Anyone who interacts with or could be knowledgable of proprietary info should sign an NDA.

1. Independent contractors and freelancers

2026 context: The gig economy and remote work have exploded. You're likely working with contractors across multiple time zones and jurisdictions.

• Must sign: Any freelancer or contractor accessing your systems, code, data, or strategic documents

• Special consideration: With AI-assisted development tools, contractors may inadvertently expose your code to third-party AI models. Your NDA should address AI tool usage and data sharing.

2. AI/ML service providers

If you're using third-party AI model training, fine-tuning services, or AI-powered tools:

• Ensure NDAs cover data used for training or testing

• Clarify ownership of models trained on your data

• Address potential data leakage through AI systems

• Specify restrictions on using your data for model improvement

3. Partners and vendors

If your company partners with other organizations or outsources core functions:

• Strategic partners with access to roadmaps or financial data

• Vendors with access to customer information

• Technology partners integrating with your platform

• Manufacturing or fulfillment partners

2026 trend: Cross-border partnerships are the norm. Consider which jurisdiction's laws will govern the NDA.

4. Cofounders

Your founding team should sign NDAs, especially:

• Before the company is formally established

• When equity splits are still being negotiated

• If there's any possibility of team members leaving

Reality check: Situations change. Protect yourself early, even with people you trust.

5. Employees

Standard practice in 2026: Most employment agreements include confidentiality clauses, but you should still consider standalone NDAs for:

• Employees with access to core IP or trade secrets

• Engineering and product teams

• Sales teams with customer data access

• Executive leadership with strategic knowledge

Remote work consideration: With distributed teams, information can spread more easily. Clear NDAs help reinforce boundaries.

6. Prospective employees

Require NDAs from:

• Late-stage candidates who'll see internal processes or metrics

• Executive-level candidates from competing companies

• Technical candidates reviewing your codebase

• Anyone participating in paid trial projects or consulting arrangements

When you don’t need an NDA contract

Some startups overuse NDAs, which can make you look inexperienced or difficult to work with.

1. Common knowledge

You cannot enforce NDAs on information that's already public or considered common knowledge in your industry. If you've discussed your approach at conferences, on social media, or in blog posts, that information is no longer confidential.

2. Fundraising and VC pitches

VCs often don't sign NDAs when reviewing pitch decks.

Why? VCs review dozens of deals in similar spaces. Signing NDAs for each would be impractical and create potential conflicts.

Asking a VC to sign an NDA will likely kill your deal before it starts.

Protection alternatives for 2026:

• Use password-protected document sharing

• Add digital watermarks to track document sharing

• Use view-only access with screenshot blocking

• Track who accesses your materials and revoke access if needed

3. Initial networking and casual conversations

Don't ask people to sign NDAs at:

• Networking events or startup meetups

• Initial coffee meetings with potential advisors

• General industry discussions

• Casual introductions or exploratory conversations

Why? It creates unnecessary friction and signals insecurity. Save NDAs for when you're actually sharing sensitive information.

4. Information already disclosed

If you've already shared information without an NDA, you can't retroactively protect it. This is why having systems in place before sharing is crucial.

What if you forget an NDA?

You sent confidential materials without an NDA. Now what?

1. Don't panic. This happens, even to experienced founders.

2. Act quickly. Contact the recipient immediately and politely ask them to sign a retroactive NDA.

3. Be professional. Frame it as a standard business practice, not a personal trust issue.

4. Learn from it. Put systems in place to prevent it from happening again.

2026 tip: Use modern document sharing tools like DocSend that let you require NDA signature before access. This eliminates the risk of forgetting.

What’s the difference between one-way and mutual NDAs?

One-way (unilateral) NDAs

When to use: One party shares confidential information; the other party agrees to protect it.

Common scenarios:

• Contractors accessing your systems or code

• Employees handling proprietary data

• Vendors receiving customer information

• Investors reviewing your materials (rare, but sometimes accepted)

Example: You're hiring a designer to create your brand identity. You'll share strategic positioning, target customer insights, and competitive analysis. The designer agrees not to disclose or misuse this information. This is a one-way NDA because information flows in one direction.

Mutual (bilateral) NDAs

When to use: Both parties will share confidential information with each other.

Common scenarios:

• Exploring partnerships or joint ventures

• Potential mergers or acquisitions

• Technology integration projects

• Co-development initiatives

Example: Your AI startup is exploring a partnership with a healthcare company. You'll share your algorithm architecture; they'll share their patient data systems and regulatory strategies. Both sides need protection, so you use a mutual NDA.

Custom NDAs

Sometimes standard agreements don't cover your specific situation. Custom NDAs address unique business needs not covered by standard templates.

2026 examples:

• AI training partnerships with specific data usage restrictions

• Blockchain/crypto projects with token economics disclosure

• International partnerships with cross-border data transfer requirements

Building a startup NDA

Create a standardized NDA template you can easily customize and send. Here are critical elements to include:

1. Scope of the agreement

Clearly define what the NDA covers:

Must include:

• Definition of "confidential information"

• Obligations to keep information secret

• Prohibitions against using the information for personal gain

• Duration of confidentiality obligations

2026 additions to consider:

• AI and machine learning tool usage restrictions

• Cloud storage and data residency requirements

• Restrictions on automated data processing

• Social media and public communication guidelines

2. Exclusions from confidentiality

Specify what's NOT covered:

• Information already public before disclosure

• Information the recipient already knew

• Information independently developed by recipient

• Information disclosed under legal requirement

3. Duration/Term

Options:

• Perpetual: Information remains confidential forever (rare, hard to enforce)

• Fixed term: 2-5 years is standard (most common)

• Until public: Confidentiality ends when information becomes public

2026 reality: Most recipients will negotiate for a fixed term. Perpetual NDAs are difficult to justify given how quickly technology evolves.

4. Geographic scope

Critical in 2026: With global remote work, specify:

• Which country's laws govern the agreement

• Where disputes will be resolved

• How international data transfer laws apply (GDPR, CCPA, etc.)

5. Permitted disclosures

Allow for necessary sharing:

• To employees who need to know

• To legal/financial advisors under confidentiality

• When required by law or regulation

6. Return or destruction of information

Upon termination:

• Recipient must return or destroy all confidential materials

• Includes paper documents, digital files, and copies

• 2026 addition: Address information cached in AI tools or cloud backups

7. Remedies for breach

Specify:

• Right to seek injunctive relief

• Potential damages for breaches

• Attorney's fees provision

• 2026 consideration: Liquidated damages clauses for quantifiable breaches

Potential negotiations

Be prepared for recipients to negotiate:

Term/duration

• They want: 2-3 years maximum

• You want: 5 years or indefinite

• Compromise: 3-5 years, with perpetual protection for trade secrets

Definition of confidential information

• They want: Narrow definition, only information marked "confidential"

• You want: Broad definition covering everything shared

• Compromise: Information marked confidential, plus information that would reasonably be understood as confidential

Scope of restrictions

• They want: Limited to direct use/disclosure

• You want: Broad protections including reverse engineering

• Compromise: Standard protections with reasonable exceptions for independent development

Carve-outs and exceptions

• They want: Broad exceptions for prior knowledge

• You want: Minimal exceptions

• Compromise: Standard exceptions with burden of proof on recipient

2026 tip: Most professional contractors and partners expect to negotiate NDAs. Don't be offended—it's standard business practice. Have your "must-haves" vs. "nice-to-haves" clear in your mind.

Parties can streamline NDA signing process and secure access with DocSend

After creating your NDA (either with our NDA template or on your own) and decided how to use it, you’ll need to determine how you’ll distribute it. The fastest, easiest way to send an NDA is with DocSend’s One-Click NDA contract management on the advanced or enterprise plan.

You can easily add an NDA as a requirement for viewing any document, so you’ll never forget to put your company’s security first.