You know, I started to get suspicious around the time I read the phrase "gentleman's agreement". I can't think of any good motivation a person could have for wanting such a thing aside from the fact that the lawyers haven't drawn up a contract yet.
A Classic Startup Horror Story
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Re: A Classic Startup Horror Story
#12Dude, seriously, this isn't helping anyone unless you give some clues allowing people to figure out who The Company is.
Re: A Classic Startup Horror Story
#13Having seen a startup in Austin, TX go through this same kind of thing, I would guess its more common than the author makes it sound here. The best defense is to build a technology that isn't cheap to reproduce. There is no better moat than killer IP.
Most likely, technology is only expensive to build the first time, or, at least, the cost decreases from there.
Re: A Classic Startup Horror Story
#14Earlier quoted context omitted.
I'm having trouble following... how were they ripped off? There's some confusion about the NDA, but as far as I can see... The Company didn't disclose to anyone. It broke down in due diligence which could just mean that The Company looked at their financials, and found that they were a lot weaker than first presumed and thus not a good acquisition. I'm not sure they admitted that they weren't profitable (who does rea…
NDA's are normally written not only to prevent disclosure, but also to prevent the company receiving the information from using it to copy your product. If you're disclosing to a potential competitor, you don't want them sharing that information with anyone else, but you especially don't want them just stealing your codebase and using it themselves.
I went through this very same left-at-the-altar scenario a decade ago with a startup. It can be very difficult to prove that the company used the NDA information they had in their possession. Clearly the tech staff in the big company saw it, since this seems to be how they made the determination that they could do it in-house for less.
Re: A Classic Startup Horror Story
#15[deleted]
Re: A Classic Startup Horror Story
#16Having seen a startup in Austin, TX go through this same kind of thing, I would guess its more common than the author makes it sound here. The best defense is to build a technology that isn't cheap to reproduce. There is no better moat than killer IP.
Very few startups these days are building a technology that isn't cheap to reproduce.
Re: A Classic Startup Horror Story
#17Having seen a startup in Austin, TX go through this same kind of thing, I would guess its more common than the author makes it sound here. The best defense is to build a technology that isn't cheap to reproduce. There is no better moat than killer IP.
"The best defense is to build a technology that isn't cheap to reproduce."
Actually that's the single worst defense. What can possibly be so expensive to produce that it can't be cloned, yet cheap enough to be possible to sell with profit? The fact of the matter is that most software is quite simple, and when it solves a particular problem in an innovative way, there is no way to capitalize on that because there's no way to enforce exclusive use (give or take a few counterexamples left or right, like a super special secret server-side recommendation algo or something like that, but those are outliers).
Re: A Classic Startup Horror Story
#18Something doesn't smell right with this story. If a big company clearly breaks a contract, there's money to be had and the lawyers will work on retainer. NDAs are legal agreements. They can include terms that prohibit the creation of a similar product for a length of time. My favourite snippits are: "We shipped some amazing new products" and "Our systems handle load today that they wouldn’t project to have until 5 ye…
That is assuming that the big company in fact did break a contract. All we know is the other company might do so based on a phone conversation. That won't keep little company afloat long.
Re: A Classic Startup Horror Story
#19> “If you agree to these terms, we have a gentlemen’s agreement that you’ll stop talking to other companies?” ... We agreed.
It turns out that's an intelligence test: Anybody worth having a gentlemen's agreement with would be gentlemenly enough to put it down in writing.
The correct answer is: Put it in writing.
Edit: NDA's are another intelligence test btw. All of the entanglements without any of the enforceability.
Re: A Classic Startup Horror Story
#20> “If you agree to these terms, we have a gentlemen’s agreement that you’ll stop talking to other companies?” ... We agreed. It turns out that's an intelligence test: Anybody worth having a gentlemen's agreement with would be gentlemenly enough to put it down in writing. The correct answer is: Put it in writing. Edit: NDA's are another intelligence test btw. All of the entanglements without any of the enforceability.
So you're intelligent if you don't demand an NDA?