Many people often dream about starting their own business, whether it’s a new product they came up with, a new website idea, a clothing line, something that would help the environment, or countless other ideas people dream of. The thing is, people are afraid to pursue their dreams because it’s a big risk to spend the time and money it takes to start a new business. Working at your day job, spending time with your family, and learning the guitar is one thing. Trying to start a company, such as a tech startup, is a whole different animal.
One of the things I learned early on working with cofounders in tech startups, is that they want to protect every piece of their idea as well as their role in the company by hiring attorneys to draft expensive documentation. This includes but is not limited to a nondisclosure agreement, cofounders agreement, operational agreement, certificate of incorporation, independent consultant and confidentiality agreement, stock option agreement, exercise agreement, and the list goes on and on.
The challenge is to protect the interest of the founders, while not spending the bulk of the money on it. My first tech startup, which was a group based social discount platform lasted about a year. My cofounder was adamant about hiring an attorney before starting any real work. When I told him that I would rather work on the website first before hiring attorneys so that we would have an idea to protect he countered with, “I watched the Social Network movie, and I’m not interested in getting screwed the way the Winklevoss twins did.” Unfortunately, he didn’t realize that not only was I not going to screw him, but after $10,000 worth of legal fees, and no programmers to help us build our website, we were left with nothing but a pile of expensive documents. Needless to say, that idea/company fizzled shortly after. I learned a very valuable lesson: Never prepare business, marketing, or legal documentation before you have a product.
After a second attempt at tech startups, I found myself in a similar situation with two cofounders who really wanted legal documentation again. This time I agreed to do so, as long as we were building a platform at the same time, which we did. We finished our social commerce platform and also had all of the relevant documentation to back it up. We spent about a year on this company/idea. We ended up pivoting, and one of my cofounders bought out the other cofounder so there was just two of us. We didn’t get very far because investors wanted to see more traction, and as the Catch-22 goes, we were looking for an investment in order to gain traction.
Then came my third attempt at building a tech startup, my current company. I decided to go it alone this time, no cofounders, no legal documents, no paperwork, just a product. I designed a unique mobile app, and found Alec Kriebel – a genius high school student to help me build a prototype. From there I was able to gain team members who shared my passion for the idea. Since I knew so much about legal documentation this time, I was able to draft some basic documentation to get things rolling legally. Fortunately, through my connections and networking, I was able to find out about a really helpful program at the Drexel Entrepreneurial Law Clinic. Led by Steve Rosard, this program did for my company what law firms did for my past companies. The only difference is that I wasn’t charged $10,000. Not only that, I was able to get one on one time with my student attorneys to ask as many questions as I wanted. This helped me understand the documents much more so than with my past attorneys. Since my past attorneys would charge me $500 an hour, it wasn’t really worth it for me to ask them questions, but my student attorneys were glad to answer all of my questions and help me really understand everything in detail.
My student attorneys were very responsive and regularly wanted me to come into Drexel for face-to-face meetings to discuss documents, ask me questions, and really get to the root of everything needed for my company to succeed. “We are more than happy to help the Philadelphia tech community with their legal needs, because we understand how difficult it is for a bootstrapped company to pay a law firm large amounts of money to protect their ideas.” Said Rosard, director of the law clinic. “Not only do we get to help local companies, but our students get to help a real company draft all of their necessary documentation, instead of using dummy data. This prepares them for the real world when they graduate.”
I can safely say that the Drexel Entrepreneurial Law Clinic is one of the best programs I’ve ever been a part of in recent years. If you are a tech startup in need of legal help, feel free to reach out to them here. Lastly, if you were a part of the program I would love to hear your thoughts or comments on it.