Between being the founder of two startups myself and spending a considerable amount of time in Silicon Valley with other entrepreneurs, here are some general mistakes I’ve noticed due to a lack of legal support:
- Not spending enough time figuring out your name. Your job is to find a name that is available to trademark, which means doing a thorough search for any names you consider, as well as any similar names.
- When you are establishing your startup, it’s vital that you obtain any relevant trademarks, patents, or copyrights before your intellectual property is in the public domain.
- Your choice of business structure should be informed by a thorough and honest appraisal of your company, and of your own strengths and weaknesses as an owner. Included in this analysis should be the appropriate state to form in.
- Not being strategic when asking friends and family for capital/equity. Moreover, not documenting investments from family/friends. It helps to find a middle ground between getting an attorney involved when accepting seed capital from family/friends, and not documenting anything formally at all.
- Not showing the progress you’ve attained, in terms of milestones/prototypes. By showing family and friends that you put your blood, sweat, and tears into a product, with some kind of prototype, and clear goals, you generate trust and the feeling that the potential investor is investing in something other than just an “idea.”
- Not speaking to attorneys about drafting proper seed capital financing contracts.
- Not having an ironclad Co-Founder agreement. Similarly, not requiring Co-Founder equity to vest.
- Not making a Section 83(b) election
- Failing to be flexible. When you start a new enterprise, it’s easy to think that you’re the only one who knows exactly how things should be done. Failing to listen to the feedback of other members – as well as to outside colleagues, peers, advisors and others with valuable insight – is one of the most prominent mistakes that first-time business owners make.
I hope the answers to your question have convinced you to seek some legal advice. Look no further than, a startup created to help other startups. We launched because there was a clear void in the legal market: a place for startups to find sound, affordable legal advice. Now, startups no longer have to decide between “do it yourself” websites and traditional “big law” firms. Stop by our site to see how unique and accommodating our legal platform is. Good luck!