Is your NDA a rookie mistake? Lessons from 12 years in tech - Building MarsBased #7

Signing a non-disclosure agreement just to have an initial coffee or hear a pitch is often the ultimate "tell" that you’re a rookie in this industry. 

In this episode of Building MarsBased, our CEO Àlex Rodriguez Bacardit breaks down why we stopped signing NDAs "left, right, and center" and how we transitioned into using them as a qualification tool rather than a barrier to entry.

After 12 years of running MarsBased and talking to over 1,000 potential leads, we’ve found that the most "secretive" inventors often have the least to show. Àlex dives into the red flags of the "revolutionary" solopreneur and explains why established clients with significant budgets rarely demand an NDA upfront.

We also share the behind-the-scenes story of how we simultaneously worked for rivals Real Madrid and FC Barcelona by understanding that real business secrets rarely live in the software itself. 

Finally, we discuss how we use AI to spot predatory clauses in seconds, ensuring we remain business partners rather than just another service provider.

Get in touch:Send your questions to hola@marsbased.com for future episodes of Building MarsBased.

Transcript

Welcome And The NDA Setup

SPEAKER_00 0:07

Hello everybody and welcome to Life on Mars. Welcome to another episode of Building Mars Base, and in this one I'm going to be telling you all we know about NDA or non-disclosure agreements. Which is something that kind of proves whether you're a rookie or not in the industry, because non-disclosure agreements are that kind of contract that prevents one party from disclosing confidential information from the other party. Let's say in most of the cases you will be approached by your client or an entrepreneur, most likely, that comes to your company saying, I want you to build my idea, but before that, I need you to sign an MDA. And that is perhaps one of the most common mistakes we've seen in all of these years of running a company, of running Mars-based, is that at the beginning of the company, we signed NDAs left, right, and center because we didn't know any better. Because we also had nothing else to do, and because we had more to lose than to win. And that is one of the uh big reveals, one of the big uh tells of NDAs, is that they're able to tell you very rapidly who is the rookie in the conversation. Let me give you an example. When we started the company, we were approached many, many times when we didn't have many clients, we didn't have many contacts in the industry, and therefore, uh out of word of mouth, out of mutual referrals from from some clients and friends in the industry, they would they would introduce you they would introduce us to somebody with an idea, and they wanted us to develop an application, mobile or web or to bring that idea to reality. And more often than not, that person, that entrepreneur, was always requiring an NDA to be signed just to meet. And that is nowadays when I think of it, that is a big red flag. But back in the day it wasn't because we didn't know any better. So we agreed to that and we signed NDAs. And as a matter of fact, our we've got a folder and Google Drive with the NDAs, and most of them are from the first two or three years of the company. Over the course of the years, we've become more selective as to whether we sign an NDA or not, and I'm gonna be covering this as well. But to focus more on the first years, I would say that we would sign NDAs just to have an initial conversation, a meet and greet with that person, an exploratory session, or even just them telling us vaguely their idea. And most of the times they didn't have anything. Maybe they had a business plan, maybe they just had a few PowerPoint slides, maybe they just had an idea in mind, and they were binding us as a signatory party of that NDA for many years to not work for a competing party or for any company in that sector or other super predatory clauses that were super restrictive and had no sense at all, made no sense at all. Um that's why I said that that kind of proved who was the rookie in the conversation. Maybe they were rookie as well, but we were to um we were the absolute beginners here, and we were tying us to these kind of clauses that prevented us from working from with other people in the industry, which of course those never materialized. But if we had to follow all of the clauses that we signed in the first years, maybe we wouldn't have been able to work for anybody. Um but the resolution of the contract that's for later on, right? So let's say this entrepreneur came to us and said, Oh, I want you to build this platform. It's for, you know, uh it's a it's an HR tech um kind of company, and you sign the NDA, they tell you the idea, then they don't have funds for that idea, or you end up producing a quote or an estimate for them that is too costly, and then they go for another company, but you don't resolve the contract. And so the clauses and the, you know, all of these these prohibitions are there. Um and so they go with somebody else, but you're left with these restrictions, right? And you're not able to work for any company in the HR sector for five years, you're not able to work for any competitor of theirs for the next three to six years, something like that, which is very fucking stupid. But everybody does that. And my point precisely is that at the very beginning, we've all done that. If you're starting out, it's okay. I'm just saying everybody will tell you, don't do it, no one does it, it's a rookie mistake, it's just it it signals that you're starting out, but the reality is we all have done it. We sometimes do it nowadays in very different scenarios, but I'm gonna be covering this a little bit later on. But um, I talk to many agencies over the course of the of the week, of my week, and some of them, five years in, six years in, almost ten years in, they still do it. And in a case of extreme necessity, if we were to lose of all of our clients overnight and we had no projects and we encountered the situation and we didn't have anything else in the in the deal flow pipeline, maybe we would do it again. Why? Because then you don't have anything to lose and you have a lot to win. In our situation, twelve years into business, we have more to lose than to win. We don't work anymore for these solopreneurs with uh some like revolutionary idea that require an NDA up front of that. We have long left them because we have learned that they have never turned into not even a good client, they have never turned into a client. The data is there. These people that require an NDA up front and they have this revolutionary idea and they're super secretive about it, most likely they will never go anywhere. And I think, I speak off the top of my mind, but a hundred percent of the cases that we've signed this kind of uh super strict NDAs from the get-go, they've never turned into a client. And if they have turned into a client, they were never a good client. So I don't even remember them. But of course, the situation will evolve. And as you progress as a company and we started signing more clients, we could be a little bit more selective as to whether we're signing the NDAs or not. And we didn't have that much time to deal with these solopreneurs, these crazy revolutionaries, and all of that. And so we started turning more into companies. And so as you progress and you are able to have more negotiation power, when some of these people approach you, but you've got a stable, solid base of clients, maybe it doesn't cover 100% of your necessities, but you can go to them and say, Look, we don't sign MDAs for these kind of projects. We sign NDAs later on, but not for the exploratory session, not to meet you. And you can even go as far as saying, what happens if we don't end up working? Will you pay me for the compensation? Will we resolve the contract? And most of them will say no, because I will have already told you my idea, so the NDA needs to be in place. But they will not be working with you. Do you see where I'm going? It's never worth your time. And you've got more to lose than to win. So the idea here is to make it so that you don't have to depend on these people, on these solopreneurs or these crazy inventors, and you progress to working with companies that might or might not require an NDA. Actually, many, many people that we've encountered over the course of the years, they had bigger ideas, better ideas, larger projects, larger budgets, and they have never required an NDA. Not in the beginning, nor at the end of the process. Why? Because they understand that ideas are a kind of a commodity. They don't have anything super revolutionary, and their project was, I don't know, an e-commerce or a marketplace, something like that. It didn't have any kind of protective mode like uh that strategic kind of data or an algorithm that's super specific to what they do or a breakthrough technology, something like that. The reality is these kind of super uh innovative projects, they might be 1% of the market, um, giving you a random number. But uh people are usually overprotective of their ideas, and maybe what they could protect is like their logo, their brand, or something like that. But to build SaaS, you don't really need an NDA. An NDA is not government. And I'm not gonna go into the legal part of this where you know in the US maybe you can protect the ideas more, but in the EU, you cannot uh protect software that much, or like the brands go a separate ways. So I'm not that's not my specialization, that's not my domain. I'm not gonna be covering this, but I'm gonna be covering from the point of view of uh a service provider as an agency, what you should be and what you should not be doing. So, where are we now? 12 years in, but we've been operating like this since, I don't know, maybe like year two, three of the company, when we stop working for that kind of people and we turn to real clients, right? Um real clients, as I mentioned, it's a it's a coin toss. Maybe they require an NDA, maybe they don't, because it really depends on whether they what they feel about their project, whether that's an innovation project or it's kind of like a maintenance software or something like that, doesn't really require an NDA. Maybe they require an MDA just to put some provisions in place as to the protection of the data or the permissions or passwords and stuff like that, which you can cover with another kind of contract. But some people just do it uh with an NDA just because it's a standard in the industry. You sign in an NDA, you send there, you you sign a contract with the with your quote, with your estimate, or even some service level agreement and stuff like that. So it's sort of standard. What is not standard is to sign the NDA for exploratory session. When do we sign NDAs? Where have we been signing NDAs since year two, three, up until now, 12 years into the into running a business? We sign an NDA when we have met the company, when we have had some initial talks. They haven't disclosed much, but maybe they've shown the platform. They've taught us, they've told the idea, they have even like given us some documentation, not private access, nothing that is behind a password or in a private environment, but sufficient information for us to produce an estimate. Or if that estimate really requires delving into the details, going into the code, um inspecting a back office, uh entering their online premises and checking some of their business behind it, you know, monetization, algorithms, and stuff like that, that's when we sign in NDA. When there is a clear intent. So for us, the moment in which we have to sign an NDA is the client has qualified. I'm not saying they have to be an ICP, they don't have to be an ideal customer profile. They have to be a good client. If they are a good client, at least, and they have an intent, and you have explained, for instance, you you have introduced your company, you have said your services, you explained how you work, what's your availability and your prices, and they agree to that. If they qualify as a client, it's a good idea to sign an NDA because it will reduce the friction, it will bring you closer to the negotiation, and it will put you in a position where you have more to win than to lose if you don't sign that NDA, right? So here signing the NDA is a means to becoming a little bit closer to signing the contract. Before the NDA was sort of a qualification for them to see if you were a good client or like somebody serious, but they were not serious for you. Whereas with real clients, companies, normally they will require the NDA a little bit farther into the conversation. And that's when it's okay to sign MDAs. It's okay if you sign an NDA with a company, most likely they have a legal department and they willn't they don't choose you as a provider for whatever reason. You can go to them and say, like, look, um, I'm gonna be uh destroying all the information I have, but I need you to resolve this NDA because I might be uh looking to work for other companies in the sector, and your contract prevents me from doing that. They will do it. They will be okay with it. Maybe they don't respond, they say, like, oh, whatever, anyway, um, here, you know, no need to do it, but it's okay, you can just go work for uh for for other clients. Normally, clients they don't want you to be working simultaneously for them and their competitors, which is of course logical, but not everybody has got the same uh business ethics standards that we do, or for even for people or companies in the same industry just because they could be like some industry secrets, some trade secrets, which is okay. We've got we are not a company with uh let's say dozens of clients at the same time, we have a dozen clients at the same time, at most. And normally they are from different sectors. So if they're they're more or less in the same sector, say to fintechs, they usually know each other. It's okay. They don't have the same product, they understand that uh we disclose that we're working for them. At a certain point, we were working for Realmet Street and FC Barcelona at the same time. They knew about each other, but we were doing things that they were very separate from that, and they understood that there was little to no secret in the things that we were doing, because for them, for Realmet Street, we're building some front-end application to manage the renovation works of their stadium. For FC Barcelona, we're maintaining a very old legacy ERP. But they were completely separate business domains, separate technologies, separate teams at very far from each other. And in this kind of industry, the secrets reside in the software. The secrets they reside somewhere else, the constructs of the players, their youth development plans, expansion plans, marketing, and stuff like that, not in software. What else? Um as I mentioned, like uh the evolution is very clear. Beginning, you do what it takes to make your business take off. Then as you progress, you have more negotiation power, you sort of kind of negotiate your uh your way through this can the NDA, whether you sign it or not. And when you are a more serious and stable company, you just sign it with very serious players. And you are able to say, even like for many, many years now, when somebody approaches me and they say, uh, we need an NDA, I always say, like, no, we don't sign NDAs. For me, it's a way to qualify a potential lead. If I'm not really interested in that lead, and I know I'm disclosing too much perhaps here, but that is a way for me to see if these people are serious or not. Because I want to signal that we are in a strong position, and we are, of course. But I'm telling them we don't sign NDAs in this phase. We might sign an NDA later on if you sign us as a client, but you will not signing at this stage. If you want to tell us your idea, you're free to do so. If not, go somewhere else because we've got plenty of clients to choose from. We got more deal flow. We really don't need to waste time with somebody assigning paperwork that's gonna go nowhere. If you're really interested in working with us, you should disclose information to whatever point you think it's it's okay, so that we can initiate the conversations and maybe even produce a ballpark estimate and have some sort of initial discussion. If you're not able to do so, chances are you're not really good at business, right? We're not gonna get along, and we will prefer to work with somebody else. So that's what we do to sort of qualify and and and and prove that we are senior in this industry. We've been here for 12 years. We have signed over 150 different clients in 12 years. That means we've talked to, and and I know that that by heart, we've talked to 1,500 leads. Some of these leads are from the same clients, but I could guess that maybe we have done about a thousand different potential clients. So I know what I'm talking about. I really put the 10,000 hours that mastering this, so I know that um what makes a good client for Marspace, uh, whether that person has got a plan, whether that person has got funds or not, or whether just try to bluff or or stuff like that. Uh, we really don't not need them. Usually the the kind of person that requires an idea up front, we really don't need them, we would only take them as a in a in in an occasion of extreme necessity, which is likely and hopefully never gonna happen again. If in the event that a company, like a really big company, came to us, let's say a big corporation, uh, for instance, another big football club, Manchester City, for instance, came to us and said, like, look, we got a project for you, uh, but uh you have to sign an NDA first, we would do it. Why? Because we don't know when that opportunity will present uh itself again. And the credentials and the authority of that club is there. Maybe it just shows that uh they are being a little bit selective and restrictive as to whom they're talking to. But um I wouldn't perceive it, I would perceive it as something slightly negative, but not entirely negative. It's because the bigger they are, the more negotiation power they have to impose the rules on the other party. So it's okay. If we were ever that big or we required we wanted to hire somebody to do something and and we really had the negotiation power, we we could also do that. I'm not saying we're gonna do that, but for instance, when we are hiring certain freelancers to do um part of our projects or or certain projects that uh that we can do on our own, we impose certain rules, like safe security rules. You have to work on our terms, you have to invoice like that and stuff like that. These are the prices. And if they don't want it, fine, they just can go and look elsewhere. So it's a matter of negotiation. What else? The other aspect that we have to cover about the MDA is whether you use your template or their template. That was way more nuanced before the advent of AI and at the beginning of the industry, even though every everyone could have their own um MDA template because the the standard MDA template is very recognized across the industry. It's pretty standard, uh, so to speak. It's okay with that. Like you don't really need a really fancy NDA. Most people will not even read it. And a lot of people just run them through uh the AIs. We used to run them through our lawyers at the beginning. Um, then I started learning that that was like wasting the money because it's okay. Like if somebody wants to fuck you over an NDA, they will do it. But most lawyers just like skim through it and they'll say, like, yeah, that's standard. And if it's not standard, it's not a big deal. And so um, you can use yours, you can use theirs. Uh, it's not a big deal. Usually they they don't have very big differences. The differences maybe they are in the length of the validity of the contract, saying like how much time for what period of time you're not allowed to work for another company in the same industry, or some other very specific clauses as to the definition of the scope of the NDA. Like, does the NDA affect only the software you're gonna be working on, or everything else relating to their company and the people involved? Or what are the resolution clauses for these contracts? So that's why having an AI nowadays really, really helps. Because even though you can do this with a lawyer, it's gonna be taking more time. And um this kind of specific task is you can do it pretty safely, and that's not AI advice, but you can you can do it like that. Usually I ran through like I now I've read so many NDAs, I I know them by heart, I could write them by heart. Um, and I know whether the the clauses are standard or not. Sometimes I also I'm not a lawyer, so I I don't know all the technicalities, but I I could I could read and uh draft and negotiate with a 90 something percent confidence, uh, an NDA. And so what I'm doing nowadays is because I don't have the time to do that. Like I can skim through, but I just for safety, as I double check, I run it through an AI tool and ask them very specific questions as to whether that's a standard NDA, whether that is uh that is fair. If that is balanced, because some MDAs are really protective for the customer, but not so much for the provider. A really good MDA should be protective on both sides. It should be equal, protecting equally both parts. Of course, they are biased, they're interested in protecting themselves more because there's this narrative in the industry that the service provider sometimes fuck you over. And they do a really terrible job as a client. You can lose your IP, you can lose your code, you can use your lose your business and stuff like that, which is in a lot of cases that's bullshit. But you want to make sure that the NDA isn't overprotective for them and it's uh it can be a burden on your company. So, you know, in the maybe I've run in the last last year, I ran probably about 20 NDAs through ChatGPT or Cloud and other tools like that. And only one, only one in in one case, the AI tool gave me the uh some alert sign saying, hey, look, this NDA is extremely unbalanced. And here's what you ought to do. Like this class negotiated this, this class needs to be eliminated, this class needs to be rewritten, here you need to add this and that. And lo and behold, I did that. And the client was like, Yeah, fine. So they accepted 100% of the changes that we did. So had we not done that, we would have signed an extremely, extremely negative NDA for our company. And that NDA could have been detrimental to our provision of the project, and maybe that would have given them more chances to give a shit if the project went south. The project hasn't gone south. We don't expect that that it will happen, but it might happen. We never know. And so by signing a much more a much more fair NDA, now I feel like if we should uh come down to indulging in illegal action, it would be also more fair. It would be evenly distributed and equal for both parts. So we would be speaking more on the partner levels, not so much on client and provider levels. The right NDA, as I mentioned, has to put you at the same level or a very, very similar level to the other party. That's all for today. So before you leave, make sure to hit the like and subscribe to the channel if you haven't already, and send questions to Ola at Marspace.com for future episodes of Building Marspace. And see you in the next episode. Bye.