Our Taking the Scary Out of Startup series is now in full swing and half over. Last week, we talked about some of our wonderful advisory board mentors; this week's series will discuss why contracts matter.
If someone tells you that contracts are a waste of time and that only lawyers insist on contracts, walk away or run. Picture yourself sitting across from a potential investor or a large company who is interested in a strategic partnership – very exciting. Yet you feel very uncomfortable as they mention words like due diligence or concepts like assembling all your contracts in data room because you did not get paperwork done during the exciting startup phase.
One of the most frequent mistakes entrepreneurs make is thinking that their idea and developing the prototype or product is the most important first step. Other than forming an entity for your business, taking control of your idea development has to come first. That means identifying who is going to do what for you and finding the appropriate contract for the situation.
Getting a contract is just the first step. Make sure you will own what you are paying for and have a professional assist you with your contract. Are you going to bring this person in as a co-founder? Co-inventor? Contractor? If you did not have the product rights transferred properly in the first place, it is often too late to get them.
Location, Location, Location. Not just for real estate but for your contracts. Do not go out on the internet and grab a contract. Many startup lawyers will give you a break on contract pricing, and sometimes large firms offer free documents. Check out this cool resource from Orrick's Startup Forms Library – also on our Resources page.
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