Our Law Firm also offers early stage startup companies a Delaware incorporation startup legal package for $950.00 which includes bylaws, (1) shareholder agreement, (1) IP assignment and confidentiality agreement and an 83(b).
Clients are also required to pay all of the fees and costs charged by Delaware to incorporate and for applying for a tax ID EIN number.
Each additional shareholder included in the Startup Package is charged $250.00.
Andrew is also an experienced SaaS entrepreneur that has launched, built and scaled a Delaware startup company with his partners as the General Counsel.
Why should you hire Andrew’s Tech Law Firm to help you incorporate or get your startup off the ground legally? Besides thirty years of legal experience and having also been an entrepreneur, you can contact Andrew via text, day, night and on weekends and within 30 minutes he will call you back.
Why should you expect any less from your Startup Lawyer?
Here are some things to think about before starting a capital raise:
- Get Your Corporate Legal Structure in Order
There is no faster way to push away investors than if you have not incorporated or done all of the corporate legal work to get your business house in order. This means if you are an LLC you should have an operating agreement drafted. If you incorporate as a Delaware C Corporation this means you should have bylaws drafted and founders’ stock agreements put in place. No matter what type of corporate entity you are you should have all of the founders sign IP invention and assignment agreements. No serious investor is going to want to invest in a startup if there is a possibility that a co-founder could quit and walk out of the door with all of the intellectual property.
2. Don’t Issue All of Your Company’s Stock To The Founders After You Incorporate
You also need to think very carefully amount of the stock that is issued to the founders in the first round and when it vests. If you issue all of the stock to the co-founders at the beginning you are going to have a tough time attracting serious investment monies. A shrewd investor will view the co-founders as immature and having no business sense if they take all of the stock for themselves.
3. Make Sure All of The Co-Founders’ Stock Vests Over Time
Another stock related issue to think about is vesting. No serious investor is going to give your startup a second look if all of the stock issued to the founders vests immediately. The reason being is that an investor does not want to see a situation where he or she invests in a startup and shortly thereafter one or two founders leave with all of their stock. No, an investor wants to see that the founders have skin in the game and if they quit before all of their stock vests they will leave their remaining unvested stock behind which should go back to the company.
4. You Need To Create Financial Books and Records To Track Costs, Expenses and Revenues
Another area that you need to familiarize yourself with and there is plenty to read online is the need to create financial books and records. You need to create digital spreadsheets to track present costs and expenses and project future costs, expenses and capital expenditures and revenues at a minimum a year out. No serious investor is going to give you money if you don’t have both control of and a fundamental understanding of your costs and expenses and how, when and what type of revenues you project to earn over the next one to two years.
The significance of good corporate and financial policies and records grows as startups start to get serious about raising money from investors. One of the first things any startup should do is to create a financial budget which should track all monthly costs, expenses, capital expenditures and revenues. This budget should project out monthly and quarterly over a two year period. If you do sit down with an investor they are going to want to know financially how you believe you are going to grow and what costs and expenses will be incurred and affect the bottom line. You can be sure that any investor will also ask you how their investment monies or “use of proceeds” will be allocated.
5. Startups Should Look Into Obtaining Insurance Sooner Than Later
One of the things that startups should do immediately is to look into purchasing general liability and errors and omissions insurance to protect the assets of the company from lawsuits from customers and third parties. If a software startup intends to market its products to enterprise companies it will be very difficult to get signed contracts without first obtaining sufficient coverage amounts for both general liability and errors and omissions insurance.
Your Product Must Solve For a Problem
If you speak to a successful entrepreneur they will tell you that they will come up with an exit strategy before they even build their product. How do they do this? They do it by creating a product that solves for a problem that no other product has figured out how to do. They make something that people need to use or because it greatly improves productivity in the workplace.
Don’t assume that just because you built something great and everyone you know loves it that it will translate into sales. It doesn’t work that way. There is a really good chance that when you pitch your product to potential customers that the feedback will be positive but if the product does not make their workplace better or more efficient or solve for their customers’ problems you are not going to make a lot of sales.
You have to understand that if a potential customer is using a competing SaaS product and their employees are invested in using it, it will be very challenging to convince this company to stop using the other product and use yours. Think about all the time you have devoted to building your product. Now think about all of the time that a potential customer has spent integrating this competing product you want to replace into its back end and all of the time they have also spent training their employees to use the competing product.
The Importance of Developing a Go-To Market Strategy
Assuming you have built your product and its ready to go to marketplace or you are one to two months away from marketing it to the public. If you are sitting in a meeting with an investor who knows your industry or vertical you can be sure he or she will ask you these questions: How does your product add value in the marketplace? What makes your product better than your competitors? What is your go-to market strategy for selling your product? If you cannot answer these questions in a concise and effective manner you will likely not get the attention of a sophisticated investor.
Andrew provides Tech Startup legal advice to entrepreneurs located in Phoenix, San Diego, New York City, Washington DC, Brooklyn, Dallas, Denver, Chicago, Silicon Valley, Austin, Long Island, Houston, Charlotte, Miami, San Jose, Las Vegas, Atlanta, Nashville, Orlando, Tampa, Fort Lauderdale, Jacksonville, Hartford, Kansas City, Los Angeles, Cleveland, Cincinnati and Baltimore.
This post is for informational purposes only and is not being offered as legal advice.