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Bootstrappers Guide to Not Screwing Up
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Transcript of Bootstrappers Guide to Not Screwing Up
A Bootstrapper’s Guide to Not Screwing Up
(too badly)
The Gillespie Law Group
Representing Startups and Growth-Stage Businesses
Dave [email protected]
614-344-4842@GillespieLaw
www.thegillespielawgroup.com
Our goal
To create alarms that will be triggered when opportunities to screw up arise.
Don’t form your entity too late
Ideally: Use a lawyer. But if you cannot…
You probably are not screwing up if you:
File LLC papers with Secretary of State. Don’t need written partnership agreement. Until later stages, it’s not too hard to convert later.
You are probably screwing up if you:
Use Legal Zoom. Bad written agreements are usually worse than no written agreement
Don’t use fully vested stock for founders’ equity
Ownership is based on the work that you do in the future not an agreement you make today
Don’t Pay a “Finder”
• Who is a “Finder”?
• What are the consequences?
• What is the worst case scenario? criminal charges
Don’t Talk in Percentages
Why? Equity Grants require very precise language.
Correct: “Company will grant you X shares of [type] stock, at Y time, for $/work.”
Incorrect: “You’ll own X% of the Company.”Really? When? Forever?
Don’t tweet about your “private” offering
General Rule: You can’t sell stock without registering with SEC.
However, startups typically rely on “private offering” exemptions.Publicizing your “private” offering can ruin the exemption!!!!
Don’t EVER promise “no dilution”
1. Dilution isn’t always bad.
2. Anti-dilution ≠ no dilution.
3. Anti-dilution provisions are for down rounds only.
Don’t forget about your current employer
Rule of thumb: Don’t use company property or work on your idea during work hours.
Bad: Non-competition clauses.
Worse: Assignment of Inventions Clauses. You’re probably going to need to quit first or get a written exemption from your boss to be really safe.
Make sure your boss and your cofounder’s
boss don’t end up owning part of your
company.
Don’t use third-party developers or designers without a written agreement
Copyright must be assigned by a written
agreement.
Without one: your developer owns the
work product. Period.
SO….
1. Don’t form your entity too late.2. Don’t use fully vested stock for founders’ equity.3. Don’t pay a finder.4. Don’t talk in percentages.5. Don’t tweet about your private offering.6. Don’t promise “no dilution”.7. Don’t forget about your current employer.8. Don’t use third-party designers or developers
without a written agreement.
A Bootstrapper’s Guide to Not Screwing Up(too badly)