Problem Solved: NDA or not NDA

Approach a bank, Business Angel, Venture Capitalist, etc. (I’ll call them Investors from here on) about funding and they will all ask to see your Business Plan. A good Business Plan is a working document written by and for the executives and managers of the company. It will have many company secrets in it; for example: accurate production costs; profit margins; “to market” strategy; sales targets; monetisation strategy; funding sources…  Clearly no executive would want this to fall into the hands of a competitor so they ask for a Non Disclosure Agreement from their Investor. As I discussed in my article 5 reasons BAs may not sign an Non-disclosure agreements (NDAs) many Investors will refuse to sign an NDA. But they want to see the document before they go further. You’ve reached an impasse. So what to do?

The answer: Write an Information Memorandum (IM).

The Information Memorandum is a document that is higher level than the Business Plan and provides the Investor with enough information to identify if they are interested and would like to know more. Typically the IM will be short, “glossy” document with diagrams and pictures explaining the benefits of the solution to customers. The aim of the IM is to demonstrate how good the company is, its product/service is and how successful it is going to be in the market place. It gives  clues as to the projected profit or Return on Investment but no hard evidence of strategy and process.

Did the recipient of the IM want to know more? If the answer is yes, then it’s on to the NDA and the real Business Plan.

To see the difference between these two documents, consider a company that is selling a product. The Business Plan is like the Technical Specification which shows how regulations are adhered to; where the component parts come from; how they are assembled; how features work; the costs and profit for each item and option; etc. The Information Memorandum would be like the colour brochure showing product pictures and giving an overview of benefits. The IM is a teaser, it’s just enough to make you want to buy the product… or a part of the company. It isn’t the product or company itself.


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