NDAs Signal Inexperience

Sam Parr shares his perspective on NDAs and equity management in startups, drawing from his experience as a founder. He emphasizes that while many startup mistakes can be fixed, equity decisions have permanent consequences.

Key Points:

• NDA Requirements Are a Red Flag:

  • When people insist on NDAs before sharing ideas, it signals inexperience
  • It's considered "silly" and shows proof they "don't know what you're doing"

• Equity Management is Critical:

  • Unlike most business mistakes, cap table errors are "irreversible"
  • Many founders are too "loosey goosey" with equity early on
  • Being careless with equity is "one of those things now where I look at people" similar to NDA demands

• Real-World Impact:

  • Cites example of founder who sold company for $980 million but only made $3 million
  • Attributes poor outcome to excessive equity distribution:
    • "We had 4 cofounders"
    • "We raised a lot of money"
    • "I gave so much equity to employees"

• Personal Experience:

  • Admits making this mistake with his first company
  • Describes it as a "horrible horrible mistake"
  • Emphasizes it's something "you cannot recover from"

The key takeaway is that while most business mistakes can be corrected, equity decisions have permanent consequences and should be handled with extreme care from the beginning.