
YC Open-Source Sales Agreement - rachbelaid
http://blog.ycombinator.com/yc-open-source-sales-agreement
======
tptacek
Note that .DOC is the industry standard for contract negotiation, whether you
like it or not (I don't!). A template sales contract that is going to be
redlined is going to be a DOC file, because it more or less has to be.

People suggesting that this instead be released on Genius or Github should
also remember that there are corner cases in contracts where formatting
actually matters. Not only is .DOC the most pragmatic choice for a high-
profile template contract, but it's also the safest.

~~~
will_brown
I concur. In private practice I have negotiated, drafted, and revised hundreds
of industry agreements and a redllined MSWord .doc is what I create and expect
from other attorneys. There is still a percentage (I personally find as much
as 20%) of _more seasoned_ attorneys that use WordPerfect. I can only describe
their unreasonableness about it as being brainwashed to believe using anything
but WordPerfect would somehow be a negative reflection on the firm/lawyer and
that Perfect has some functions Word does not that are specific to the legal
field and yet can never actually be named. Long story short, the formatting
between the two programs is the worst.

~~~
kemitchell
I cringe every time I get a WP red-line back, too.

In case you're interested, there are actually some legal use cases for WP that
make sense. If I'm not mistaken, the Office of the Reporter at the Supreme
Court uses WP due to its superior hyphenation, kerning, and other publication-
quality print readiness features. The clerks, justices, Reporter, and print
staff can all work in the same program from draft to distribution to GPO.

Historically, at least, WP HTML export was also much cleaner, lighter, and
more machine-readable than Word's. The Supreme Court of Texas has opinions
online, for instance. Last I heard (a couple years ago) that HTML was exported
from WP.

~~~
yuhong
Word's HTML export still is pretty much the same, even in Word 2013. Yes, you
can use Word 2013 to generate HTML that won't render properly in MS's own IE10
by default!

------
teachingaway
I help clients negotiate SAAS deals, and I like this as a template. It's
better than 95% of the contracts I see. But since this is the internet, I will
use the rest of this post to complain about things:

1\. Formatting: One column of text is better than 2. It's digital, we don't
need to cram words in to save paper.

2\. Information Architecture. Contracts longer than 2 pages should have a
_table of contents_. In most use cases, people are only looking for 1 or 2
specific terms in the contract. ToC helps.

3\. Naming is Hard. Names should suggest some unique aspect of the thing they
represent. In this contract, the parties are defined as "Company" and
"Client." _But both parties are companies._ Using "Company" to refer to only
one of the two companies invites confusion. Yes, it's defined. Yes, it's
standard practice. But a better defined term might be "ASP" or "Host" or
"Provider", etc.

4\. "Herein." I don't like herein. 4.1 Herein is stuffy. No one talks like
that. 4.2 Herein is ambiguous.
[http://www.adamsdrafting.com/herein/](http://www.adamsdrafting.com/herein/)
4.3 Instead, use "in this agreement" or "in this paragraph."

5\. Arbitration? Going to court is a hugely expensive distraction. Arbitration
is slightly less expensive and distracting. Any reason not too ask for
arbitration?

~~~
kemitchell
I have a personal rule never to throw MCSD at opposing's draft, but this is a
form, so I'm down. Ken Adams has a posse. We should make t-shirts.

On the other hand, from a practical point of view, all the nits you pick add
up to a certain kind of camouflage over the agreement. If the point is not
what the contract says, but that YC said it, now it's "standard", and you can
not think about it, then enlightened style is at odds with (facilitated
indifference to) substance. For a first sale in particular, the immediate
benefit of the fact of a sale probably outweighs probability times cost of any
conceivable drafting flaw that doesn't produce uncapped liability, a cloud on
IP, or some other existential threat.

When I look for a ray of hope, it's the number of blanks. If this thing has to
go back and forth, and nobody is going to sign it as presented, then by all
means make it as modern as possible. If it's going to be read and handled, it
ought to read and handle well.

~~~
bobbles
> it ought to read and handle well.

" For a first sale in particular, the immediate benefit of the fact of a sale
probably outweighs probability times cost of any conceivable drafting flaw
that doesn't produce uncapped liability, a cloud on IP, or some other
existential threat."

I had to parse this sentence about 10 times and still don't entirely get what
you're saying

~~~
kemitchell
Touche. Thanks for making such an effort to understand the sentence.

What I tried to convey is that the ability to say you've made a sale is worth
a lot. It's a milestone, and it comes in the vulnerable make-or-break days of
a company.

A flawed contract provision only hurts when circumstances force you to live by
or enforce that provision. The chance of that happening for any provision of
any particular contract is usually low. On the other hand, if the flaw in the
language can shut your business down, even a small chance of that bad outcome
is worth worrying about.

I assume that a very orthodox proposal will draw less attention, prompt less
negotiation, and get more deals signed quickly. My conclusion is that, because
the first sale is worth so much when you need it, you might be better off with
a traditional, error-prone form that's easier to get signed than a modern,
technically superior form that protects you in edge cases and after long
negotiations. Your business might fail because you never sold, long before
anyone has any reason to sue you.

In my defense, I don't choose to express myself personally in the style of my
contracts. You'd probably have understood me better if I did, but no one
should have to live that way.

------
HarveyKandola
At the risk of getting down-voted for self-promotion...

I see a lot of comments around Word being not the right format for
"distributing, sharing, commenting".

My startup Documize [1] is just a week old and is currently being tried out by
a handful of legal professionals and the like for handling what happens around
structured documents.

The premise is that MS Word is where structured documents are born in the
enterprise world. It's what happens after they come into being that is the
problem: network drives, file sync folders, email tennis, Word-track-changes,
manual consolidation, etc.

A real pain.

Documize aims to help people distribute documents, collate feedback, provide
version control and even allow for private notes. From a browser.

Working towards that vision at the moment -- just thought I'd throw this out
there.

[1] [https://documize.com](https://documize.com)

~~~
kemitchell
You may be interested in some open source work I am doing:

[https://github.com/commonform](https://github.com/commonform)

[https://asciinema.org/a/16221](https://asciinema.org/a/16221)

~~~
HarveyKandola
Many thanks -- will look into it!

------
mark212
James Riley works at Goodwin Procter (sp)[1] and kudos to him -- this is a big
contribution to the startup ecosystem.

Also, many thanks for not including an arbitration clause and class action
waiver as a default term. Not only is it incredibly sleazy (in my opinion) but
also many companies will have significant push-back on such a term. Usually
requires their own in-house counsel to look at it, and that's the last thing
you want.

[1]
[http://www.ycombinator.com/documents/#sales](http://www.ycombinator.com/documents/#sales)

------
kevin
Thanks for all the comments everyone. We're currently looking into getting
these documents on git. Because Word Docs are not ideal for versioning, we'll
probably convert them to markdown and use Pandoc to offer Word and RTF
versions.

We'll probably also attach an explicit license as well. We've similarly
described the Series AA and Safe as open sourced documents and honestly didn't
really think too much about it after that. Mostly, it's to efficiently tell
you that the documents are free to use and change as you see fit.

Obviously, we're not trying to trick anyone. Suing founders is not part of our
business model.

~~~
bad_user
I don't think anybody assumed you're out to trick people, however "open
source" has a very clear definition [1] which implies that the work in
question must be accompanied with a license respecting that definition, in
order to modify the work and further distribute it. We as software developers
have learned to search for and take note of permissive licenses and are very
cautious of fake open source, like for example Microsoft's infamous "shared
source" initiative.

My disappointment is when people are diluting this term, because it doesn't
mean just free as in beer and it doesn't mean just having access to the source
code. It's much more than that and the definition couldn't be clearer. Many
companies have tried capitalizing on this term without delivering and this has
left a sour taste amongst many of us. And YCombinator amongst all
organizations should be aware of this, let alone the lawyer that drafted this
document.

But anyway, thanks for sharing.

[1] [http://opensource.org/osd](http://opensource.org/osd)

------
bthomas
This is great, but would be much more helpful as an annotated doc that
explained why the various phrasings were chosen, as well as what was left out
and why.

What's the best platform for that? It can't be Word comments...

~~~
HockeyPlayer
Casetext?

They already did a annotated SAFE: [https://casetext.com/contract/simple-
agreement-for-future-eq...](https://casetext.com/contract/simple-agreement-
for-future-equity)

~~~
miket
+1 for Casetext, it's designed for this.

------
rsp1984
Is there any difference in it being "open sourced" as opposed to just being a
free sales agreement template?

------
borski
This is, almost word for word, our sales agreement from Gunderson Dettmer.
We've added a number of company-specific (to us) provisions, but the /vast/
majority of it is all entirely the same. Furthermore, there are a few clauses
in here I plan on stealing for our own contract.

This is incredible for YC to do. We spent almost $3000 getting our first draft
contract. Lawyers are expensive. :(

~~~
grabeh
Hey, at least you can sue GD if they have been negligent in their drafting and
you suffer loss as a result. Although of course the likelihood of this
happening in the context of a basic sales contract is negligible to non-
existent!

~~~
borski
Oh, don't get me wrong - I /love/ our counsel. He has saved us, fought for us,
taught us and walked us through negotiating with investors, customers,
partners, etc.

I'm incredibly glad we have him on our side, and I would recommend him to
anyone - startup or otherwise.

I just wish, sometimes, that he weren't $500/hr. :)

Re: the lawsuit, for this type of contract you're right that it's pretty safe
to say there isn't much to be negligent about, especially as they're a
reputable firm. The fact that YC's docs were almost word-for-word our docs
makes me much more comfortable too. Granted, we had it 3.5 years ago, and YC's
docs came out today, so not like we had any other choice. :)

------
reubenswartz
Really nice contribution. Especially for companies who are starting from
nothing. Note that if you have big customers, they will probably want to
negotiate every last thing. Smaller companies may or may not care about the
details, as long as the software works as promised and support is good.

This is a contract, without any of the "this is why you should use this
awesome sauce", which I generally like to include before going into the nitty
gritty, but just for fun, I created a sample proposal in my app (Mimiran
Online Proposals) from the doc, incorporating @teachingaway's feedback that 1
column with decent sized text is more readable, especially online (you can
always generate the PDF version).

[http://www.mimiran.com/sample-proposal/ycombinator-sales-
agr...](http://www.mimiran.com/sample-proposal/ycombinator-sales-agreement-
proposal/)

------
guipsp
Google docs version: [https://docs.google.com/document/d/1kUm03Zr3QsmX3SRT-
Xv3-i67...](https://docs.google.com/document/d/1kUm03Zr3QsmX3SRT-
Xv3-i675h4Z55u_PwlEmTlQ25Y/pub)

------
mcos
This is a great move. Unfortunately it's still in Microsoft Word format and
there's no license associated with it. Would love to see this somewhere like
GitHub, where it could be forked and changed by others.

~~~
joewadcan
I'm guessing it's in Word format because most procurement departments use (and
expect a Word document) for terms. But I very much agree, that it'd be great
to have it on GitHub for collaboration. I'd even suggest this tool
([http://ben.balter.com/2015/02/06/word-
diff/](http://ben.balter.com/2015/02/06/word-diff/)) my colleague (@benbalter)
made to collaborate on Word docs using GitHub.

~~~
HarveyKandola
That looks good. We're doing something a little more at Documize -- see my
comment above.

------
ar7hur
Kudos for sharing this.

Only caveat: I've sold SaaS to large enterprises (like AT&T, Coke, etc.) for
ten years, and unfortunately most of them insisted that we use THEIR template,
which was a huge pain point for us.

~~~
greattypo
Great point. Once you start to sell to companies past a certain size, all the
rules go out the window.

------
bendyBus
I've had to spend money at various points getting documents drafted which,
like this, are pretty much cut & paste anyway. I would just like to see MORE
of this. Recently came across lawbite
[https://www.lawbite.co.uk/](https://www.lawbite.co.uk/) which looks useful at
least for UK based companies. Haven't used the service so cannot endorse.
Basic employment contracts, vesting schedules, t&cs, keep them coming!

~~~
kemitchell
As with programmers, it's often hard to tell the lazy from the great, because
economy of motion runs with competence. Sometimes copy-and-paste gives you the
wrong agreement for your deal, but it's cheap and easy for the lawyer. A
different lawyer may glance dozens of alternative precedents in their mind's
eye before choosing which form (or pieces of forms) to compose into an
agreement for you.

When you dress for an occasion, you start by picking items out of your closet.
If you don't have what you need, you may go to the store and buy off the rack.
If the occasion or your needs are very special, you may have ready-made items
tailored, or may even have something made for you. Good lawyers work
similarly.

------
macmac
Firstly: The idea of open sourcing docs like this is great.

Secondly: 4 columns of approx 25 characters - that has to be the most annoying
layout ever applied to any legal document.

Thirdly: The document could be significantly improved. If enough people are
interested in a markup + comments from a customer and vendor perspective based
on 15+ years experience drafting, reviewing and negotiating docs like this, I
am happy to provide such within a few days. Please indicate your interest
below.

~~~
greattypo
Thanks for the feedback (I helped create this document).

1\. The formatting should be 2 columns per page of ~50 characters, not 4. Do
you see something different than this?
[http://screencast.com/t/SnkQDCeO](http://screencast.com/t/SnkQDCeO)

2\. We'd welcome comments + markup to make it better -- drop me an email
(tyler at clever dot com) if you're up for it.

~~~
lostsock
I'm using LibreOffice Writer and I also see it as four columns

~~~
kefka
How peculiar. I've also been noticing in my classes that Libre office is
outputting files that are mangled when opened with MS office.

I'm not sure if its an Open source fail or MS up to their usual tricks again.

~~~
davidgerard
If you can report it as a bug, _please do so!_ Compatibility issues like this
are the sort of thing they dive upon to fix.

------
notahacker
When selling to larger enterprises, particularly high-value company-wide
licenses, it's also often worth having a section in there defining who the
customer is for the purposes of the agreement. (Do wholly or partially owned
subsidiaries generally [or by express permission] get access? What about their
subcontractors/joint-ventures/acquisitions?)

I'd be surprised if many larger enterprises agreed to 30 day payment terms and
a late payment penalty clause - particularly one with interest compounding
monthly - since they regularly take more than 30 days to pay invoices (the
standard hack is to offer a _reduction_ for payment within a certain time
frame instead)

If I were the customer I'd also be extremely reticent about signing a contract
which gives the vendor the right to increase the renewal rate thirty days
ahead and also obliges me to _automatically renew for the next period if I don
't give thirty days notice_. That could be an expensive decision to make in
the space of an afternoon...

~~~
slgeorge
But, as a small company/start-up you should absolutely stand firm on 30 day
payment, 45 at the most. It's completely ludicrous that large companies cannot
pay in reasonable time-frames - it's just bullying, and is only done so that
the large company can conserve cash. Most small businesses fail because of
cash, and failure to pay by large customers is a big reason they get
overstretched.

------
minimaxir
A 99.9% SLA by default? That seems overly ambitious for a startup. :p

~~~
macmac
If you factor in the carve outs, notice requirements and the calculation
model, it's not that bad :-)

~~~
greattypo
:-)

------
4714
I've been waiting for this since Tyler Bosmeny mentioned it during the startup
lecture series. Thank you for sharing!

------
sogen
YC Open-Source Sales Agreement _with eye pleasing formatting_ :

[https://news.ycombinator.com/item?id=9036635](https://news.ycombinator.com/item?id=9036635)

------
thebyrd
As founder of an early stage SaaS company, this is amazing. Thank you!

