The speaker will highlight and discuss of a number of case stories which illustrate frequent missteps made by entrepreneurs and startups. Topics will include: when and how to document your deal capitalization raising funds attracting investors and more! The discussion will use real case stories to illustrate each topic in a meaningful and easy to understand manner. By understanding these common missteps, entrepreneurs and startups will be better able to more successfully navigate the pitfalls and traps that can keep their startup from getting off the ground. Please come with your questions, comments and scenarios. About the Speaker Alidad Vakili is an attorney in the Palo Alto office of Foley and Lardner, an international law firm. He regularly represents startup and emerging growth companies at every stage of the company lifecycle—from startup to liquidity. He frequently advises clients on a variety of strategic growth issues including venture capital and private equity financing, private offerings, joint ventures and M&A transactions. His work includes not only advising on major corporate milestones but also significant involvement in day-to-day operations and strategic business issues, such as formation, governance, and commercial agreements.

1. How to Avoid Big
Startup Mistakes
Alidad Vakili, Foley & Lardner LLP
July 20, 2023
Silicon Valley: Idea to IPO
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2. Foley & Lardner LLP
OVERVIEW
 Introduction
 Overview
 Documenting the Deal
 Capitalization
 Good Corporate Hygiene
 Preparing for Your First Deal
 Diligence
 Q&A
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3. Foley & Lardner LLP
BACKGROUND
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 Corporate attorney with a practice focus on
Emerging Growth and Venture Capital.
 I work out of our San Francisco office and
have worked with companies throughout the
US and the world.
 I enjoy working with and helping
entrepreneurs on startup adventures from
startup to liquidity.
Alidad Vakili
Of Counsel
+1.415.438.6421
avakili@foley.com

4. Foley & Lardner LLP
Overview
“Learn from the mistakes of others.
You can’t live long enough to make them all yourself.“
~Eleanor Roosevelt
“Mistakes are a fact of life. It is the response to error that counts.”
~Nikki Giovanni
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5. Foley & Lardner LLP
DOCUMENTING THE DEAL
The Napkin Deal
 Co-Founder invited friend to join company as equal owner
 Co-Founder promised services
 Signed a one-page agreement
 Co-Founder couldn’t deliver
 Relationship soured
 Co-Founder left with 50% of company
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6. Foley & Lardner LLP
DOCUMENTING THE DEAL
Resolution:
– Founder had to buy out Co-Founder
Key Takeaways:
– Do your diligence
– Troubleshoot (ask the “what if questions”)
– Seek legal advice
– Document the deal properly
– Resolution cost much more than paying to have it done right
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7. Foley & Lardner LLP
DOCUMENTING THE DEAL
How to Document the Deal (properly):
– Some Key Issues to Consider
 Outline relationship
 Parties
 Key terms
 Ownership
 Timetable and obligations of parties
 Confidentiality
 Limitation of liability
 Indemnification
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8. Foley & Lardner LLP
CAPITALIZATION
Cap Table Chaos:
 Corporation formed with minimal authorized shares
 Forward stock split
 Documentation handled internally by company
 Company issued shares based on split numbers
 Certificate of Incorporation never amended:
– Share splits never authorized (i.e., never happened)
– Company exceeded authorized number of shares
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9. Foley & Lardner LLP
CAPITALIZATION
Resolution:
– Had to clean up the capitalization
– Had to disclose problems to existing stockholders
Key Takeaways:
– Capitalization structure and changes requires proper planning and
guidance
– Documentation needs to be prepared and effected properly
– Resolution cost significantly more than necessary
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10. Foley & Lardner LLP
CAPITALIZATION
To Give or not to Give?
 Striking the right balance when allocating equity
 Capitalization
– Think backwards when planning
 Ownership
 Control
 Economics
 Dilution (plan for it – it’ll happen)
 Incentivize your team
– Proper documentation
 Vesting
 Repurchase rights
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11. Foley & Lardner LLP
GOOD CORPORATE HYGIENE
Missteps for the Unwary:
 Proper Documentation is Key
– Invalid or defective shareholder actions
– Invalid or defective board actions
 In some cases can be fixed by having board or stockholders ratify
action.
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12. Foley & Lardner LLP
GOOD CORPORATE HYGIENE
Missteps for the Unwary :
– Waking a Sleeping Devil: Stock and option pricing:
 Company issues options to employees and consultants – not priced
properly creating 409A issues.
 Issue discovered during M&A diligence
 Employees cashed out and paid extra to cover the additional tax from
options being priced too low.
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13. Foley & Lardner LLP
GOOD CORPORATE HYGIENE
Missteps for the Unwary :
– Contract (mis)management
 Not keeping track of agreements or important terms
 Investors expect good corporate governance
 Can lead to expensive mistakes
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14. Foley & Lardner LLP
GOOD CORPORATE HYGIENE
Missteps for the Unwary:
– Protecting the Crown Jewels:
 Key consultant (software engineer)
 No proper IP assignment agreement
 Agreement contained fine print giving rights to discoveries by
consultant to consultant and not company
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15. Foley & Lardner LLP
GOOD CORPORATE HYGIENE
Missteps for the Unwary:
Resolution:
– Negotiated settlement with consultant
Key Takeaways:
– Protect the Crown Jewels – Document rights
 Confidential Information and Invention Assignment Agreement (aka CIIAAs or
PIIAAs)
 Read the fine print
 State laws differ (be careful in using a form from a prior deal or from the
Internet)
– Resolution cost more than necessary
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16. Foley & Lardner LLP
PREPARING FOR YOUR FIRST DEAL
Prepare before you start preparing:
 Organization (right entity, right jurisdiction)
 Anticipate investor questions
 Organize company documents
 Create a data room before you sign your term sheet
 Use advisors efficiently
“Preparation is everything.”
~David Robinson
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17. Foley & Lardner LLP
PARTING THOUGHTS…
Do your homework
Spend the time upfront to organize your startup and establish good practices
and organizational habits that will make future transactions more efficient,
less costly and more likely to succeed.
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18. QUESTIONS / COMMENTS
Alidad Vakili
avakili@foley.com
July 20, 2023
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19. Foley & Lardner LLP
About Foley
Foley & Lardner LLP is a preeminent law firm that stands at the nexus of the energy, health care
and life sciences, innovative technology, and manufacturing sectors. We look beyond the law to
focus on the constantly evolving demands facing our clients and act as trusted business advisors
to deliver creative, practical, and effective solutions. Our 1,100 lawyers across 25 offices worldwide
partner on the full range of engagements from corporate counsel to IP work and litigation support,
providing our clients with a one-team solution to all their needs. For nearly two centuries, Foley has
maintained its commitment to the highest level of innovative legal services and to the stewardship
of our people, firm, clients, and the communities we serve.
ATTORNEY ADVERTISEMENT. The contents of this document, current at the date of publication, are for reference
purposes only and do not constitute legal advice. Where previous cases are included, prior results do not guarantee
a similar outcome. Images of people may not be Foley personnel.
© 2023 Foley & Lardner LLP
FOLEY.COM
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