
Top Ten Legal Mistakes Made by Entrepreneurs - nickb
http://hbswk.hbs.edu/item/3348.html
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"Can entrepreneurs be sued by their funders for fraud? Yes."

Are they ever? No.

This article is a strangely mixed bag. Some of these points are right and some
are wrong. Like worrying about being sued by investors; I've never once heard
of that happening to a tech startup doing a series A round.

The number one legal problem for early stage startups is unclear title to
their IP-- e.g. because they took code from a former employer. That is the
only really fatal mistake. Most other things can be fixed later.

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timr
_"Many venture capitalists say that they often rate the judgment of
entrepreneurs by their choice of legal counsel."_

Really?

Perhaps we should start rating the judgment of venture capitalists by the
things they choose to emphasize.

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NSX2
Well, considering that these day's your VC's law firm probably also represents
South American drug dealers and Eastern European arms dealers, not to mention
many law firms are in a fit of M&A, so it doesn't really who you've been
picking because they'll wind up integrated into some other firm, what is the
point of judging somebody by their law firm?

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timr
I can respect the need to question an entrepreneur's judgment if they insist
on retaining Uncle Bob for their legal counsel, despite the fact that Bob is a
personal injury lawyer in Kansas City.

That said, I don't understand why it's so darned important for a zygote
entrepreneur to retain counsel at Perkins Coie or Davis Wright Tremaine,
especially when most of the early-stage legal work is boilerplate, and thrift
should be a top priority.

Where I live, (Seattle) investors seem to place disproportionate emphasis on
your ability to hire an expensive firm, and I was reading between the lines of
the article a bit to assume that's what the author meant when she wrote about
the value of your choice of attorney.

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rp
The probable answer is that there is an existing business/financial
relationship between the VCs and the law firms. I bet if you examined the VC's
past investments, you would see the paw marks of specific big Northwest "white
shoe" law firms like Perkins Coie, DWT or Stoel Rives all over them.

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NSX2
That just means that those firms are more loyal the the VC funds than to you
because that's where they get most accounts from. If I was a VC I'd think any
entrepreneur who thinks he has an advantage hiring a firm that I've kept on
retainer for a decade is a complete moron. I recall a certain Silicon Valley
law firm with the usual "beyond reproach" ... "our reputions are the
foundation of our business" stuff ... which at the end of the dot-com boom got
into tons of lawsuits when it was discovered that despite "client
confidentiality" the partners would pass along information of new startup
clients to VCs they knew that invested in competitors.

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staunch
The 1 year US grace period on patents is something a lot of people don't
realize. I was glad to see it mentioned. Once you release something
("commercialize") the clock starts ticking. If you don't file then your own
work essentially become prior art to be used against you and you're legally
obligated to disclose it in your filing.

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redorb
# 9: Issuing founder shares without vesting.

\- this makes perfect sense, What do fellow y.news people think about a (4)
year plan for vesting? too long?

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sgoraya
4 years is too long, IMO

We setup our vesting schedule at 2 years

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sanj
I've made 6 of these.

Anyone else care to 'fess up?

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cstejerean
more importantly, which 6?

