A trade secret is valuable because the information has economic value and the company takes reasonable steps to keep it secret, not simply because you consider it confidential.

That distinction matters because founders routinely share sensitive information with prospective investors, employees, contractors, vendors, strategic partners, and potential acquirers. Sometimes an NDA is signed. Sometimes the other party refuses. Sometimes the NDA is not enforceable, whether legally or practically.

The answer should not be to either disclose everything or refuse to do business. The better approach is to control the disclosure.

Don’t Disclose Everything Just Because an NDA Exists

An NDA not a substitute for judgment. Before disclosing sensitive information, ask:

What does this person NEED to know to accomplish my intended outcome?

You do not need to hand over your source code, proprietary processes, customer lists, pricing algorithms, or other sensitive information just because an NDA is signed. Disclose what is necessary to accomplish your business purpose. The less sensitive information you disclose, the less information you have to protect.

There is an Easy Solution if they Refuse to Sign

When a counterparty, especially an investor, refuses to sign an NDA, many founder think they only have two option:

• “We can’t talk.”
• “We need this opportunity, so let’s tell them EVERYTHING and hope for the best.”

THERE IS A THIRD OPTION: use your judgement, and calibrate what you disclose to what is necessary under the circumstances.

Does this investor need to know your source code to understand why people will buy your product? Probably not.

Can you instead provide a high-level description of the business without revealing the information that actually gives your company a competitive advantage? Often, yes!

In this third option, you can explain what your technology does without explaining exactly how it works. You can describe the problem you solve without handing over the proprietary process that solves it. You can demonstrate the product without providing the underlying architecture.

Then, in later stages, when the relationship is further developed and the other party is also incentivized to protect your trade secrets, you can disclose more fully.

Control the Layers

A useful way to approach sensitive information is to disclose it in layers.

Public: Information you are comfortable anyone knowing.

Confidential: Information you will share selectively, preferably subject to appropriate confidentiality obligations.

Highly sensitive: Information that could materially damage the company if disclosed and should be shared only when necessary, with appropriate protections and controls.

Keeping these levels in mind allows the business to keep moving without treating every conversation as an all-or-nothing decision.

Plan Ahead to Avoid the Dispute

Trade secret protection is a business practice, not something you establish when a dispute arises.

Take intelligent and necessary precautions by limiting access and marking and handling sensitive information appropriately. Use confidentiality agreements where appropriate. Make sure employees and contractors understand their obligations and sign confidentiality agreements as part of their employment and service obligations.

Protect the information that actually gives you an advantage. Disclose only what is necessary. Make the other party earn access to the deeper layers of your business. And always think about how you will disclose something before you disclose it.