Top Ten Startup Legal Mistakes

# 10: Failing to incorporate early enough.

# 9: Issuing founder shares without vesting.

#8: Hiring a lawyer not experienced in dealing with entrepreneurs and venture capitalists.

#7: Failing to make a timely Section 83 (b) election.

# 6: Negotiating venture capital financing based solely on the valuation.

#5: Waiting to consider international intellectual property protection.

#4: Disclosing inventions without a nondisclosure agreement, or before the patent application is filed.

#3: Starting a business while employed by a potential competitor, or hiring employees without first checking their agreements with the current employer and their knowledge of trade secrets.

#2: ...failing to comply with state and federal securities laws.

#1: Thinking any legal problems can be solved later.

Read more in this HBS Working Knowledge article

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Razzle Dazzle 'em with the Chewbacca Defense

"The Chewbacca defense is a fictional legal strategy used in the South Park episode "Chef Aid", which premiered on October 7, 1998 as the fourteenth episode of the second season. The concept satirized attorney Johnnie Cochran's closing argument defending O.J. Simpson in his murder trial. "Chewbacca Defense", meaning a defense consisting solely of nonsensical arguments meant to confuse a jury, has since been occasionally applied outside of references to South Park...

Spoiler warning: Plot and/or ending details follow.

In the episode, Chef discovers that Alanis Morissette's (fictional) hit song "Stinky Britches" is the same as a song he wrote years ago, before he abandoned his musical aspirations. Chef contacts a "major record company" executive, seeking only to have his name credited as the composer of "Stinky Britches." Chef's claim is substantiated by a twenty-year-old recording of Chef performing the song.

The record company refuses, and furthermore hires Johnnie Cochran, who files a lawsuit against Chef for harassment. In court, Cochran resorts to his "famous" Chewbacca Defense, which he "used during the Simpson trial", according to Gerald Broflovski.

'Cochran: Ladies and gentlemen of this supposed jury, Chef's attorney would certainly want you to believe that his client wrote "Stinky Britches" ten years ago. And they make a good case. Hell, I almost felt pity myself! But, ladies and gentlemen of this supposed jury, I have one final thing I want you to consider. Ladies and gentlemen, this is Chewbacca. Chewbacca is a Wookiee from the planet Kashyyyk. But Chewbacca lives on the planet Endor. Now think about it; that does not make sense!

Gerald Broflovski: Dammit!

Chef: What?

Gerald: He's using the Chewbacca Defense!

Cochran: Why would a Wookiee, an eight-foot tall Wookiee, want to live on Endor, with a bunch of two-foot tall Ewoks? That does not make sense! But more important, you have to ask yourself: What does this have to do with this case? Nothing. Ladies and gentlemen, it has nothing to do with this case! It does not make sense! Look at me. I'm a lawyer defending a major record company, and I'm talkin' about Chewbacca! Does that make sense? Ladies and gentlemen, I am not making any sense! None of this makes sense! And so you have to remember, when you're in that jury room deliberatin' and conjugatin' the Emancipation Proclamation, [approaches and softens] does it make sense? No! Ladies and gentlemen of this supposed jury, it does not make sense! If Chewbacca lives on Endor, you must acquit! The defense rests.'"

From Chewbacca defense - Wikipedia. For a similar take on the application of Chicago(the musical)-style courtroom strategy see Bush Administration Reveals Core Strategy: Razzle-Dazzle 'em

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A Coloring Book for Lawyers

A friend sent Coloring Book for Lawyers to me. Because a pain shared is halved and joy shared is doubled, I thought I would share this with you.

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Adam Bain’s “Framework Triangle for Acquisitions”

This The Gong Show by Andrew Parker post explains Adam Bain's Framework Triangle for Acquisitions. Basically the points of the triangle are:

"Technology Advantage
New Audience or New Revenue Streams
Long Term Strategic Influence (Does it help you for the long term by enabling some larger end goal down the line? Sometimes this may also mean: an acquisition to stop the technology or product from falling into a competitor’s hands)

Once set up in the triangle, you get a framework that companies can be judged. When acq targets hit all three points on the triangle, it’s an easy decision. Usually the tough decisions come when you only have two out of the three points. So here’s what happens when you see just two points:

Tech + Long Term Strategic Value (and therefore lacking Audience) = The company is an Enabler. These are potentially undervalued by the marketplace...

Audience + Long Term Strategic Value (and therefore lacking Tech) = At best case, a Network Effect. Worst case: it’s an overvalued company...

Tech + Audience (lacking Strat) = At best Case: A Category Expander. Worst case: Non-core. Or…a sign that the acquiring company may be in trouble– because the acquiring company is looking at a business which has unique technology AND audience or revenue (thus traction) BUT it doesn’t currently fit into their world view of long-term strategy."

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The "Big Four" Advisors

Pamela Slim writes "about the 'big four' professionals every entrepreneur needs to run an effective business:

A lawyer
An accountant
A banker
An insurance specialist

These professionals can ensure that you set up a solid foundation for your business. Often, entrepreneurs try to "bootstrap" everything and only call in an expert when they are in trouble. Investing in the right professional advice early on can save you headaches, or worse, in the long run."

Via this startupspark.com post.

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Primer on Choice of Business Entity

Attorney Imke Ratschko writes: "Articles on choice of business entity are a dime a dozen. Here is one that stands out from the crowd." Please see her post for an active link to an excellent resource.

Technorati Tags: business, management, entrepreneurship, startup, legal

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