3. DON’T INCORPORATE A HOBBY.
• Incorporatewhen you and your team are ready to make the
startup a business.
• Spending cash to incorporate (via yourself, legalzoom or a
lawyer) is a waste unless you are a business.
• Reasons to incorporate sooner: (a) IP assignments, (b) Ability
to issue cheap founder’s shares, (c) Start long-term capital
gains holding period.
4. CO-FOUNDER RUNWAYS:
KNOW THEM.
• Pre-funding, your startup’s runway likely equals the a co-founder’s shortest runway.
• Do your diligence on prospective co-founders. And keep it up, as co-founder
runways can be highly volatile.
Founder 1
Founder 2
Founder 3
Startup
0 100 200 300 400
Runway (Days)
5. FOUNDERS SHOULD ALL
WEAR VESTS.
Typical vesting schedule is “4 Years with a One-Year Cliff ”
“...25% of the total number of shares shall be released from the Repurchase Option on the
one-year anniversary of this Agreement, and an additional 1/4th of the total number of Shares
shall be released from the Repurchase Option on the corresponding day of each year
thereafter...”
(Example of annual vesting after the cliff; other option is monthly vesting after the cliff)
100%
75%
50%
25%
0%
May 1, 2010 May 1, 2011 May 1, 2012 May 1, 2013 May 1, 2014
Vested Share Amount
7. DON’T PAY TO PITCH*.
• Big in Japan (ShopSavvy
mobile app) asked to pay
$4,500 for “Top Wireless
Innovator” award and
potential VC intros.
*Paying Nominal Admin Costs OK.
8. TELL “FINDERS” TO GET LOST.
• There is a 99% chance the finder should be registered as a
broker-dealer with FINRA and the applicable state securities
board.
• Penaltiesfor using an unregistered broker-dealer start at the
rescission of all investment (i.e. your startup pays back the
investors).
9. A STARTUP LAWYER IS NOT A
LEGAL DOCUMENT GATEKEEPER.
• Ifyou do not seek counsel from
DOCUMENTS
your lawyer, you aren't using
your lawyer right.
• Read available documents to get
COUNSEL
educated on terms, etc.
10. STARTUP LAWYERS SHOULD
NOT CHARGE YOU FOR:
• Initial Consultation
$
• Drafting Your Engagement Letter
• Multiple Lawyers on a Conference Call
• Investor Introductions
• Happy Hours, Meals, etc.
11. OTHER STARTUP LAW RESOURCES
Blogs
• Startup Company Lawyer (startupcompanylawyer.com)
• A View From the Valley (mattbartus.com)
Model Docs
• Orrick Startup Forms Library (bit.ly/3eQz7f)
• TechStars Series AA Preferred (bit.ly/nMXl)
• YCombinator Series AA Preferred (ycombinator.com/seriesaa.html)
• The Founder Institute’s Plain Preferred (founderinstitute.com/posts/69)
• Series Seed (seriesseed.com)
• WSGR Series A Term Sheet Generator (bit.ly/hUhUo)
• NVCA Model Series A Docs (bit.ly/OAVRf)
