Bootstrappers Guide to Not Screwing Up
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Bootstrappers Guide to Not Screwing Up

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Don’t form your entity too late....

Don’t form your entity too late.
Don’t use fully vested stock for founders’ equity.
Don’t pay a finder.
Don’t talk in percentages.
Don’t tweet about your private offering.
Don’t promise “no dilution”.
Don’t forget about your current employer.
Don’t use third-party designers or developers without a written agreement.

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Bootstrappers Guide to Not Screwing Up Bootstrappers Guide to Not Screwing Up Presentation Transcript

  • A Bootstrapper’s Guide to Not Screwing Up
    (too badly)
  • The Gillespie Law GroupRepresenting Startups and Growth-Stage Businesses
    Dave Gillespie
    dgillespie@thegillespielawgroup.com
    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”
    Dilution isn’t always bad.
    Anti-dilution ≠ no dilution.
    Anti-dilution provisions are for down rounds only.
  • Don’t forget about your current employer
    Make sure your boss and your cofounder’s boss don’t end up owning part of your company.
    Rule of thumb: Don’t use company property orwork 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.
  • 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….
    Don’t form your entity too late.
    Don’t use fully vested stock for founders’ equity.
    Don’t pay a finder.
    Don’t talk in percentages.
    Don’t tweet about your private offering.
    Don’t promise “no dilution”.
    Don’t forget about your current employer.
    Don’t use third-party designers or developers without a written agreement.
  • A Bootstrapper’s Guide to Not Screwing Up
    (too badly)