I’ve seen my fair share of entrepreneurial mistakes over the years. And not all of them had to do with building the right product or assembling the right team.
Just a few days ago I was reading a story about an entrepreneur that decided to jump on a project with a friend.
They co-founded a startup with equal equity and then onboarded a third person, who would angel invest in the project.
He worked every day for nine months, doing all kinds of jobs — planning and designing the app, recruiting, preparing sales pitches for clients, etc.
The startup was growing rapidly, and they were gaining some traction.
One day, he noticed that the angel investor had registered the company in his own name. Then it occurred to him, he did not have his name on anything except matters related to sales and admin.
When he told his friend, he replied everything was fine. Eventually, everything would be on paper.
Unsatisfied with the reply, our entrepreneur insisted he wanted clarity on his role in the company. And he asked to have everything in writing.
Eventually, the investor agreed to sit down and talk with him. However, he refused to settle for equal distribution of shares. The conversation ended on a sour note.
The following day, his friend called telling him he was out. For his nine months of work, they offered to pay three months as an intern and the rest as a decent salary.
When he asked his friend to keep his word, he simply shrugged, saying he was not liable in the absence of a written agreement.
The lesson here is clear:
“Get a startup lawyer to help you put everything in writing – even if your co-founders are your friends.”
This is just one example of what could go wrong without decent legal advice.
As a startup founder, before you know it you’ll need to: Incorporate your startup; create contracts; Issue equity; protect your intellectual property (IP); draw up investment agreements.
To help you avoid some of these costly mistakes, our team reached out to Ryan Shaening Pokrasso, the Founder of SPZ Legal, a boutique law firm specialized in legal counselling for startups.
Read the full conversation here, where he shares the importance of onboarding the right startup lawyer for your business, as well as tips on how to go about filling this crucial startup role.
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