mefi july 9 startup legal and ip - colmenares.pdf
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10 Questions Founders shouldask their law rm. !
And possible answers. !
Alan Colmenares
Medellin 2013
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the best time to start meeting and getting to know lawyersis long before you ever start your company.
Mark Suster, Both Sides of the Table
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Since were mentioning Mark Susterhere in Medellin
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He grew up inColombia !In Medellin , actuallyI grew up withPlatanos and Arepasas well as tongue andbrisket. !
Mark Suster, writing abouthis father (2013).
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First, general thoughts
Best to choose a rm that is known as aleader in working with startups.
Do it right the rst time (SuperTrendiexample). Firm knowledge is important, but chemistry
is also important. Mistakes can be costly.
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Launching the company
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1. Where should I incorporate?
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Possible responses
Colombia Panama Offshore US
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2. What rights should stock holdershave?
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Possible responses
CommonStock
PreferredStock
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Other options?
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Class F !
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3. What other documents do Ineed?
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Possible responses
Incorporation agreeement Employment contract Employee Stock Option Plan (ESOP) Terms and Conditions/Privacy Policy Trademark ling IP Rights Assignment / Vendor Agreement Mutual Non-Disclosure Agreement (NDA)
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4. Should I have advisors sign anagreement?
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5. What tax considerations should Ibe aware of?
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Example 83(b) Election
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Make sure those initial 5 questionsare answered and taken care of rst.
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Now, a small taste of possible TermSheet questions
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7. What are anti-dilution Provisions?
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Pro rata
Full ratchetWeighted average
ConversionPrice
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8. What is Right of FirstRefusal?
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9. What are Drag-Alongrights?
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Majority of common stock or preferred stock?
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10. What is a convertiblenote?
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Beware hidden liquidation preferences andother things.
Cap
Discount
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Resources http://www.startupcompanylawyer.com http://venturehacks.com/
http://www.bothsidesofthetable.com/ 2010/01/21/how-to-work-with-lawyers-at-a-startup/
http://www.wsgr.com/WSGR/Display.aspx?
SectionName=practice/termsheet.htm http://www.docstoc.com/docs/10303638/
FFI-Plain-Preferred-Term-Sheet