Startup Legal – A good lawyer is key!

 

Great session last week as Joe Daniel, Yavi Yashchin and David Rose gave us the rundown on Startup Legal and IP. Everyone in the room knew that one slight legal mistake could mean millions of dollars or even the end of your venture.
Listen up folks, legal is important!

 

Joe Daniel works as a startup lawyer at Sheppard Mullin. Sheppard Mullin is a sponsor of FI and as result grants us discounts on legal fees. Joe, along with Yavi, Founder and CEO of CleanEdison (acquired by Kaplan), shared some insights.  By the way, Yavi uses Joe as his lawyer and as a result, answered some popular questions asked based on his experience:

 

What does a new founder need to know about the law to launch a successful startup?
Whatever you do, get out of the gray area. Not a good place to be.

 

How do you pick a law firm to work with?
Don’t go with divorce lawyers or “Bob’s Law Firm” no matter how cheap they are or if they are a family member or friend. Go with the experts!

 

How do lawyers help set up a company and help with financing and exits?
Investors will only invest in S-corp / C-corp so make sure you get setup with one of those.

 

Common legal mistakes?
Don’t go with small firms. Having a great name (law firm) is important!
Also, have lawyers review any big transactions.

 

Then David Rose joined us for a discussion. If you don’t know David, he is one of the country’s leading angel investors, is the author of the New York Times best seller “Angel Investing: The Gust Guide to Making Money & Having Fun Investing in Startups”. He is the founder and CEO of Gust, which operates the standard collaboration platform connecting entrepreneurs and investors. David shared the estimated funds invested from the different types of investors:

 

  • Friends and Family – $100k and up
  • Angel Investors – $500K and up
  • Small Business Innovation Research (SBIR) – $900k and up
  • Angel groups – $159K to $1.5M
  • Strategic Partners – $50K – $50M
  • VC – $1M and up
  • Banks – you get their money when you are profitable
Finally, David gave us the inside scoop on the secret economics of angels.
In other words, when an angel investor invests in you, what is he or she thinking???

To them, it is simple:

  1. Your business must return 30 times on their investment
  2. They expect your company to return all their money invested even if the other companies they invested in fail
Yikes! I hope you’re ready.
Thanks for reading,
Carlton Bennett
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