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by bigtoga
6582 days ago
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Wow - talk about an optimistic approach to business. I have to say that IMO this is horrible advice. You need a lawyer for equity deals - you'll never convince me otherwise. Your "simple agreement" is fine - as long as it was written/reviewed by an atty w/ experience in this particular subject. Having a partner, dissolving a partnership, firing a partner - those are rarely simple "plug and play from a handbook" type of situations. You need a document that handles everything known to man. The more you spend up front on this one not-simple matter means you spend less down the road. "If you can't afford to do it right, don't do it at all." You'll potentially save yourself a ton of money and stress if you follow that sentence. Don't start your business if you can't do the legal/tax stuff correctly. Don't go into a partnership if you can't do the legal/tax stuff correctly. Any other advice IMO is just overly optimistic. "But it'll never happen to me and my best mate, Jimmy - we'll be buddies for life!" Of course you will... |
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to clarify, by "pre external funding" I essentially meant "pre money" - so situations where you're not bootstrapping yourself to the tune of several tens of thousands - e.g. pre-YC, idea-stage companies - when you're just getting started.
example: say if you have between zero - 10k to spend, don't spend it on legal - there's bigger risks/more important things!
i agree you need a lawyer for a proper equity deal - share classes, tax, voter rights.. yuk! but you don't need all that on day one - just an agreement that "if we get to the next stage, we'll be equal partners assuming you do X and I do Y".. ok, and a bit more than that, as i said previously.
i've been through all this, and regret worrying too much about legal/shareholder details in the beginning. sure, we had team issues, guys coming and going, and guess what - they $2k and countless hours we spent on legal did't help at all - and in the end our first shareholder agreement was ripped up the moment we raised angel.
finally, i think anyone starting a start-up has to be optimistic! but optimistic doesn't mean not believing the worst will ever happen to you - i specifically said there's a high chance your team won't survive in it's original form.
[edit: screwed up double-negative in final para..]