Venture Deals, 3rd Edition

CHAPTER 16 Legal Things Every Entrepreneur Should Know

There are a few legal issues that we’ve seen consistently become hurdles for entrepreneurs and their lawyers. While in some cases they will simply be a hassle to clean up in a financing or an exit, they often have meaningful financial implications for the company and, in the worst case, can seriously damage the value of your business. We aren’t your lawyers or giving you legal advice here (our lawyers made us write that), but we encourage you to understand these issues rather than just assume that your lawyer got them right.

If you want to read the best book ever written on legal issues that face entrepreneurs, get the book The Entrepreneur’s Guide to Business Law, Fourth Edition, by Constance Bagley and Craig Dauchy (South- Western, 2012). It is written for entrepreneurs, not lawyers, so it’s easily digestible and is the best legal resource we know for entrepreneurs.

Intellectual Property

Intellectual property (IP) issues can kill a startup before you even really begin. Following is an example.

You and a friend go out and get some beers. You start telling him about your new company that will revolutionize X and make you a lot of money. You spend several hours talking about the business model, what you need to build, and the product requirements. After one beer too many, you both stumble home happy.

Your friend goes back to work at his job at Company X-like. You picked this particular friend to vet your idea because you ...