Startup Life— How to Legal
Recently, my co-founder and I started a mobile e-commerce company called Selbi (Sell-Be) which will launch in the second week of November. This was our first startup so everything was an adventure. Building a product people want, marketing that product, and raising funds that will last long enough for you to survive (still working on that one, but maybe someone will write a medium post about how to do it!). These are some of the things every startup goes through. First, you have an idea. That’s a start. You have a few friends to help build your idea. That’s a better start. As time goes on, your idea begins to take shape and you realize it could become a real viable product! It’s time to rejoice, because now you’ve gone from ‘start’ to potential ‘startup’ (cue the music)!
Now that you have an idea for a viable product, you start driving into potential roadblock. Marketing, Finance, Accounting, Legal, those are all buzzword rhetoric to you. You begin to reach out to your network of friends on Facebook and LinkedIn. Turns out your friend Lauren, aside from being a great engineer on your team, also happens to have a boyfriend who knows a bit about Marketing. Check. Accounting? You have a calculator and are already detail oriented enough to keep track of the few expenses you have on an excel spreadsheet for now. Check. Finance? Your small team of entrepreneurs has agreed to put in some of their own money for the time being. Check. But legal, now that’s something you know nothing about.
What do you know?
You know that you need to form a company and that you have to give out equity. But is that it? And if that’s it, how the heck do you even do that.
It doesn’t help that every Quora article you read or email introduction received, has given you completely different answers. Anyone in the legal world will tell you how prudent it is to make sure all your t’s are crossed and j’s are dotted.
You can’t possibly be a successful business without spending 10’s of thousands of dollars on great startup lawyers, they say. Not to mention any mistakes you make in the process now will be compounded 10x later on when you need to raise funding or hire employees, they explain to you. Heck, even the people you work with that you consider your friends are public enemies (They are all potential thieves of your great idea. Think ‘The Social Network’ and intellectual property).
Finally a Solution
It’s at this point that you’re sufficiently scared and wonder if having a business is even worth it. Well fear not, because it is worth it. And truthfully, in the beginning it’s not nearly as hard as you’re led to believe. Turns out 99% of people starting companies (this is non-scientific data to emphasize that no one knows shit) are in the exact same boat as you. Luckily, there are plenty of answers out there as we found out.
We took the exact same approach noted above. Checked all our contacts and made connections to anyone and everyone who knew anything about legal. Googled as much as possible, reading every relevant Quora post. We went out to lunch with lawyers and talked to other startup founders (unsurprisingly, founders and lawyers mostly disagreed on the importance of legal advice in a soon to be forming company). And ultimately, after we waded through all the material we discovered that we spent a whole lot of time fumbling around making this much more difficult than it actually was.
Which is exactly why I am writing this blog post to let you know what we did. That way you can skip all the hoopla and get back to what really matters, building your business. So, are you ready for the perfect answer? Well there is no perfect answer, but we found that another startup called Clerky was the best solution for Selbi (And full disclosure: I am not sponsored or paid by Clerky — though I would love to be. This is what you call free advertisement).
There were other online solutions out there (legalzoom, etc), but in one of our lunch meetings with a lawyer, he recommended Clerky for our vanilla needs (Y Combinator suggests them as well). What we thought was going to cost thousands with lawyers ended up costing much less. They don’t have a huge selection of legal documents but we were able to form a company, create founder equity, and add a co-founder (oh, and their customer support is incredible). We were cash-strapped and just needed the basics at Selbi. If you have significant money or want very specific terms then your best bet is real legal advice from a firm specializing in startup law. Everyone’s situation is different, and I absolutely encourage you to make your own informed decision on what is best for you and your company.
We leave you now with a quote that Abraham Lincoln never said but that we find quite apropos: