[dsacco]

1. Talk to an attorney. Good attorneys will usually be happy to have an initial consultation with you for no cost unless you decide to move forward.

2. The next time a member of the C-Suite in a VC-funded startup calls you to try and draw a false equivalence between them not getting paid and you not getting paid for sympathy points, call them out on it by reminding them 1) that they have equity for that risk, 2) that you don't, and 3) that you're insisting on restitution. Be forthright and assertive about the terms they agreed to in the contract (since you'd been at this, I assume you have contracts in place), but do not be the one to escalate the situation further.

3. Make sure you're communicating in writing everywhere (email is fine). For calls, send follow-up emails summarizing the calls while they're fresh in your memory. Take notes on the calls. Prefer written communication to calls where possible. Record calls if you're in a one-party state (based on another comment, you seem to be).

4. Don't be antagonistic and don't be passive aggressive. Especially don't do anything that makes you feel good emotionally but causes your client to become a more sympathetic party, and potentially sever some of their contractual obligations. For now, consider the remaining invoice balance a loss and be dispassionate about it.

5. Going forward, make sure your contracts have the following clauses, if they do not already: 1) all work is exclusively owned by you until the last invoice has been successfully deposited in your account; 2) invoice payments are required for your time according to the agreed fee schedule regardless of ultimate deliverable completion, while both are true: a) the deliverable is being developed in good faith, and b) neither party has yet provided a clear and explicit communication that the work must pause.

Point 5 is important. If you are working on the project and they do not tell you it needs to pause until mid-way through your next invoice cycle, they are contractually obligated to pay for the time they didn't intend to use but for which they did use and failed to notify you. Even more importantly, the work is not transferred to them until they pay you, which means they legally have nothing until their obligations are paid.

In the worst case scenario under this template, you will not recover your money. On the other hand, they won't have your intellectual property and they won't be able to sell it off to pay other creditors. You should realistically prepare for the possibility that you're never going to see the money your client owes you.

[samfisher83]

Even if you get an attorney if the company has no money you probably won't get anything. The employees of the company have a higher priority then you. Also the attorneys that handle their bankruptcy will have a higher claim. Also if their customers gave them money for stuff they didn't deliver they would have a higher claim.

[throwawayz]

great tips and terms!

luckily I had the the IP ownership > full payment one in our contract. But i like the 'full-coverage' option too. I will even add an extra penalty for last minute pull-outs/or just ask for a 25% retainer.

Having never dealt with the CEO, i sent him a VM to his home, which i heard later he was shocked to get.. which kindly asked him to respond to my email that went:

    This is Joe, CEO of XYZ, the studio which has been faithfully working on your new products since last year.

I’ve tried inquiring with Patricia as to when we could expect payment of all our outstanding balances to-date ( see below ) -- only to have been repeatedly given various specific dates which have come and gone.

Her last update to me was “Sorry I have no more info..thanks for your patience”.

Please understand we are a very small operation which relies on timely payments to stay in business.

We only have a few select clients we honorably service with the highest standards and transparency, as we value the long-term potential of each relationship.

We've been very flexible with the delays and would like to confirm - personally with you - as to when we can expect payments of the (three) 60, 50, and 30 day late invoices.

Once they are fulfilled, we can happily continue rendering our services and finish up this incredible app.

—his reply —

    I got your phone call; it’s my understanding you are in frequent conversation with Pam, and she has been trying to keep you as updated as possible.  We have been in a bit of a financial squeeze ourselves, in part because funds we thought were coming in didn’t, and that has affected our ability to pay what we owe to you and some others.  I do expect that we will have clarity next week with regard to when we can make the payments due.  As a small business ourselves, and someone with many years experience in that position, I know how difficult this can be and we really do appreciate your understanding.

—my reply —

    Thanks for your timely response.

If you've been in my position you then you fully understand the entire situation.

I absolutely need $5000 by next week to fulfill both my employee and family commitments on my end.

The last thing I want to do is purse alternatives. What is the likeliness of this payment?

—to which his COO decided to call me and commiserate with no clear deferred payment plan and just a sob story.

[arthurcolle]

Close to zero chance you will receive the money by next week.

[throwaway477]

If you have the IP as of now, you may be able to use that as a pressure point. IANAL, but I used this successfully with a deadbeat client. The client had run low on money after I finished an iPhone app for them. They had been distributing the app on the app store, but hadn't made the final payment, which was five figures. They were still paying the Android contractors, who hasn't finished yet. After they stopped returning my calls for several weeks, I called up their main investor, who they needed a follow-on round from, and told him that they didn't own copyright to their app. I got a call back a couple of hours later, they claimed poverty, but that they were getting money real soon. I offered them a one week license for $2000 paid that day. I had to do this a few more times before they eventually paid the balance. They wanted a final copyright assignment letter from me at the end, presumably to show the due diligence people from their investors.