Confidentiality vs Non-Compete for Founders
How confidentiality and non-compete clauses differ, and what founders should look for before signing.
As a founder, you'll often sign confidentiality (NDA) and sometimes non-compete clauses—with co-founders, investors, or partners. They're different: confidentiality is about not disclosing or misusing secret information; non-compete is about not competing or working for a competitor for a period. Both can limit what you do next, so it's important to understand what you're signing. Here's how they differ and what founders should look for.
Confidentiality (NDA)
Confidentiality means you agree not to disclose or misuse the other party's "confidential" information. For founders, that often applies to: (1) With co-founders—company ideas, customer data, financials, technical plans. (2) With investors—pitch decks, financials, strategy, often in the context of a term sheet or due diligence. (3) With partners or acquirers—business and technical information shared during negotiations. The key is scope: what counts as "confidential"? Too broad ("all information disclosed") can trap you. Look for a clear definition, exclusions (e.g. public info, what you knew before, what you develop independently), and a time limit (e.g. 2–5 years after disclosure). Duration: indefinite is harsh; push for a fixed term.
Non-compete
Non-compete means you agree not to work for a competitor or in a similar business for a period after you leave. For founders, this might appear in: (1) Co-founder agreements—e.g. if you leave, you won't start or join a competing company for 1–2 years. (2) Investor agreements—e.g. if you leave the company, you won't compete for X years. (3) Acquisition or partnership agreements—e.g. if the deal falls through or you leave after a sale. Non-competes are heavily regulated in many places: in California they're largely unenforceable for employees and often for founders too; in the EU they must be limited in duration, scope, and geography and often require compensation. So even if you sign, it may not hold up. Still, look for: short duration (e.g. 1 year max), narrow geography, narrow definition of "competitor," and carve-outs (e.g. passive investment, advisory roles). BeforeYouSign can highlight confidentiality and non-compete language so you know what you're agreeing to before you sign.