Category: Employees and Consultants
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409A Valuations: Why They Exist and What They’re Not
409A Valuations are Safe Harbors for Startup Companies
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When a Founder Is Also a Professor: Customizing a Confidential Information and Inventions Assignment Without Tripping Over University Rules
If you’re a startup founder who’s also a professor at a university (or several), a standard confidential information and inventions assignment agreement—your CIIAA—can quietly become one of the riskiest documents in your early legal stack. The short answer is simple: you almost never want to sign a plain‑vanilla CIIAA without customization if you hold an…
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Importance of Using Exact Share Numbers Instead of Percentages
Startup founders love talking about equity in percentages. It’s intuitive, fast, and sounds fair: “We’ll give you 2%.” The problem is that companies don’t legally issue percentages. They issue a specific number of shares or options, approved by the board and reflected on a cap table. Vague percentage promises are one of the most common sources of avoidable equity…
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Outsourcing Software Development: Riding the Elephant
“Technical co-founders are hard to find.” This is a phrase that is likely said daily in any startup ecosystem. Thus, many startups choose or are simply forced into outsourcing software development. But a startup’s outsourcing software development at such an early stage is like riding an elephant in a horseback polo match…sure, you are on a big beast, but…
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The Contract ROI Trap
Several weeks back, 37signals asked “Employment Contracts: What are they good for?” on Signal vs. Noise. Basically, they questioned the value of their employment contracts since they have never had an employment dispute: “Why have we become so dependent on lawyers to control every relationship inside our companies? Why is “just in case” the default…
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Knights In Shining Armor & Wolf Tickets
Why does it seem like those who claim to be the “miracle solution” for your startup end up letting your startup down? Of course, as a service provider to startups I’m in a bit of a quandary writing this post. (Your startup might need a lawyer; it might not.) But if a lawyer or any…
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Saks Does Not Take Restricted Stock
It’s no secret that a good founder team is an essential step for a successful startup venture. You hope that your co-founder has the mental toughness to stay strong through the bootstrapping process where short-term milestones typically go unrecognized and bank accounts dwindle. But what about your co-founder’s wife, husband, girlfriend or boyfriend? Your Partner’s…
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What is Four Years With a One Year Cliff?
Four Years with a One Year Cliff is the typical vesting schedule for startup founders’ stock. Under this vesting schedule, founders will vest their shares over a total period of four years. The one year cliff means that the founders will not get vested with regards to any shares until the first anniversary of the…
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You Can’t Polish a Sneaker
Why your startup may have the right employee incentive plan but the wrong employee