Legal Tips For Startups

Legal Tips for Startups

Andy Stack

T: @andystack

E: andy@andystack.com

My legal adventures

• Started 4 companies; sold 2, other 2 are still running

• Was operational contact with 13 different law firms

• LLC->C Corp

• IP: Patents, Trademarks, Copyright

• Employment: Hiring/Firing, Stock Plans

• Deals: Angels, VCs, Acquisitions

Legal Issues are Everywhere

• But what is really important?

• Andy’s Top 3– 83b Election– Do your IP assignment and protection

correctly from the start– Know when to call in the experts..BUT Don’t

let your lawfirms run your business• Referees vs coaches

IP

• What and when to protect?– Patents, Trademarks, Copyright– Assets, code, ideas, documents

• What documents are needed with team members?– Standardize forms, but consider heavy/light

versions

• Why focus now on protection?– Save future time, hassle, valuation

Employment

• Stock plans, stock issuances,

• 83b elections

• Maintaining a clean cap table

• Contractor classification as employees

• What are main questions you have?– stock for out-of-state and out-of-country

employees or consultants?

Deals

• Financing: priced rounds vs convertible notes

• Acquisitions: what really matters in due-diligence?– IP– Contracts– Licenses– *Tip: document and save all records of 3rd

party legal issues

Choose your lawfirms

• Considerations– Experience in your industry– Deep bench of resources for specific

expertise – Cost deferrals– Additional services: funding contacts, etc.

• Andy’s big 2– “Street-smarts” of team– Flexibility with needs and issues of a startup

Manage Your Lawfirms

• Understand your costs!– Know when you are being billed and when

you aren’t– Review first few invoices with partner in detail– Everything is negotiable– Prepare ahead of time before picking up the

phone– Know all team members and delegate work

appropriately• Should a partner, assoc, or paralegal do this work?

Legal Hacks/Tips

• Modify existing legal docs yourself; just ask for a blessing

• Don’t freak out at first Delaware tax bill• Minimize non-employee shareholders• Stock: RSPAs vs ISOs vs Non-Quals• $ Spent on US utility patents is worth it• Consider asking forgiveness vs permission• Litigation happens

– Generally it isn’t worth the distraction or cost– Keep communication open and show you are being

reasonable to avoid it

Typical Costs(from my experience)

• $10-12k US Patent, $3k Trademark

• $25k per lawfirm for Series A financing – Less than $1000 for convertible note instead!

• $250k per lawfirm for small/med acquision

• $3k/mo for general legal costs ongoing

• $100k Patent Litigation

Resources

• Venture Hacks– http://venturehacks.com

• Startup Exchange– http://andystack.com– Startup Kit link

Andy StackE andy@andystack.comT: @andystackC: 650-468-3349