After the success of startups like Facebook, Amazon, Snapchat, and Instagram, many aspiring entrepreneurs – in tech and other thriving industries – are hoping to think of the next great idea to launch their own careers as successful business owners. An entrepreneur like yourself needs the help of an experienced startup attorney to help ensure your startup is properly set up, so you can make your business a raging success.
This is where a skilled startup attorney can be the difference between another failed startup and a successful, scalable business. Tech startups have unique needs that distinguish them from other, more conventional businesses such as marketing agencies, restaurants, retail stores, manufacturing companies, or consulting firms. Forming a tech startup the same way you would form one of these conventional businesses is exactly the wrong way to do it. With our experience and guidance, many startup founders have taken their dreams and turned them into reality.
Formation and Governance
We represent individual entrepreneurs in entity formation and ongoing governance issues. After listening to and critically evaluating our clients’ business plans and short term and long term objectives, we will develop the optimal legal structure for their business based on considerations of liability, tax, and securities law issues. Generally, a tech startup that intends to raise venture capital and scale quickly needs to be set up as a corporation. We can craft the formation documents, shareholder agreements, bylaws, and other documents to suit the unique issues presented by our clients’ business plans.
Equity and Debt Financing
Most start-ups and emerging technology companies will require outside financing to grow. To raise external funding, a company will need to issue debt or sell shares to investors. This venture financing process follows a particular set of rules. Deviating from those rules and guidelines could mean the loss of financing opportunities and the start-up’s failure. However, even though the process follows a particular set of rules, that doesn’t mean the financing terms and documents have to. We can help you craft terms that will serve your needs, and customize the complex financing documents (such as convertible notes and SAFEs), to protect your company’s interests.
When our clients need initial or additional operating capital, we can structure and document private placements, provide counsel regarding debt and equity financings, and assist with commercial loans, including negotiating favorable terms and conditions and advising on securities law compliance at the federal and state levels. We can assist start-ups with our knowledge of SAFE, KISS, and Preferred stock financing terms from angel and venture investors, as well. We have helped numerous clients with friends & family rounds, seed rounds, and Series A financings.
Tech startups have unique needs and challenges that set them apart from conventional businesses like restaurants, consulting agencies, fitness studios, etc. For most tech startups, the company will be a Delaware corporation. We have set up many Delaware corporations for tech startup clients, and have the expertise to provide you with the structure that venture capital investors are looking for.
We will prepare and file a Delaware Certificate of Incorporation that has been proven successful for many tech startups, and provide you with important post-incorporation documents such as stock purchase agreements and intellectual property assignments. We will explain how stock vesting works, and provide all founders with 83B election forms and instructions. We also provide a corporate governance subscription service, so that after your company is formed, you’ll have a resource for properly running your corporation.
Most founders surrender management control long before their companies go public. Noam Wasserman found in his research, that by the time their ventures were three years old, 50% of founders were no longer the CEO; in year four, only 40% were still in the corner office; and fewer than 25% led their companies’ initial public offerings. Other researchers have subsequently found similar trends in various industries and in other time periods. If you are starting a new business, you need someone to advise you as a business owner and as an employee of the business. Angel investors may allow entrepreneurs to retain control to a greater degree than venture capital firms do, but in both cases, outside directors will join the company’s board at some point. Once the founder is no longer in control of the board, his or her job as CEO is at risk. The board’s task is straightforward if the founder underperforms as CEO, although even when founders are floundering, boards can have a hard time persuading them to put their “babies” up for adoption.
In addition, understanding how to compensate and attract a top-tier team will require experience with giving ownership to new employees in the form of options or restricted stock.
Beginning Your Startup Journey
Deciding to run a startup is a momentous and exciting moment in your professional life. To become a successful entrepreneur, you will need an experienced startup attorney who can assist you at every stage of launching your startup venture while ensuring you are complying with any applicable statutory or regulatory requirements.
Paul Spitz is an experienced startup attorney. Contact us today to learn how we can help you on your journey to successfully creating your startup. As a 2x entrepreneur himself, Paul will be able to empathize and understand the blind-spots you have in regard to legal issues surrounding the company and your employees. We will be here to help you at every stage of your startup journey. Schedule your initial consultation today.