All startups are built on ideas and the execution of these ideas always involves sharing these ideas with others. An NDA is a contract entered into to protect the confidentiality of information shared between parties. It restricts third party access to the information shared and is enforceable in court when breached. An NDA could be mutual (for circumstances when information is to be exchanged by both parties) or one-sided when only one party is to disclose information.
Every startup should have a template mutual and one-sided NDA to suit any business situation it may find itself. NDAs could be entered into with business partners, colleagues, employees, service providers, consultants, investors etc. Practically, anyone whom you would be sharing confidential and/or proprietary information with.
Sometimes, a non-circumvention clause may be included in an NDA. A non-circumvention clause is a clause which restricts the use of information shared for any other purpose or transaction other than the agreed business use/transaction. So say I reveal details about my supplier to you, a non-circumvention clause prevents you from transacting, without my consent, with my supplier other than for the purpose for which I revealed the information to you.