Starting a Company? Don’t Hire a Cheap Lawyer
"Entrepreneurs have been starting companies without reading instruction books since the first Phoenician trader bought his first ship over 5,000 years ago," admits David Rose in his new book, The Startup Checklist: 25 Steps to a Scalable, High-Growth Business, adding that "Amazon would be pleased to sell you any of the 93,210 books listed in its 'start a business' category." So why do you need this one?
The short answer is that Rose wrote it. A legendary Silicon Alley angel investor, he founded or funded more than 100 companies before launching Gust, an online platform that has so far connected more than 350,000 startups in 190 countries with over $1 billion in VC money. "Along the way, I have learned firsthand the problems that can quickly arise from starting off on the wrong foot," he writes. "They range from the fundamental (charging off to start a business that just doesn't make sense)...all the way to the really, really expensive (making simple mistakes at the incorporation level that result in five- and-six-figure cleanup costs the first time a serious investor is thinking of supporting you)."
By his lights, more than two-thirds of startups are built on creaky foundations, and fledgling enterprises waste way too much money and angst trying to spend their way out of dilemmas they could have avoided.
Rose doesn't want that to happen to you. Think of him as an extremely knowledgeable friend who's on your side but -- for your own good -- isn't going to let you cut corners or take the lazy way out.
Consider, for example, lawyers. Noting that many company founders think they don't need a lawyer at all, Rose writes, "More often than not, I've seen startups skimp on legal expenses in the early days only to learn a hard lesson.... The peace of mind that comes from knowing that a good lawyer has your back is extraordinarily liberating. Believe me."
He then describes 33 specific things you need an attorney for, along with an alphabetical list of 39 firms -- from Bryan Cave to Wilson Sonsini Goodrich & Rosati -- with proven startup expertise. Rose even includes a section on the fine points of how to change law firms if you decide you don't like the one you've got. "Remember, your files and any work product are yours," he writes. "A law firm can charge you for copying, but cannot refuse to give them back even if you are behind on the bill."
Rose's approach to the book's other 24 steps, from initial business idea to eventual exit, is just as thorough and no-nonsense. In a chapter about crowdfunding and online equity funding platforms, for instance, he writes, "I am constantly flummoxed by the number of startups that create a profile or send in an application with a few lines of text, incomplete data, a host of misspellings, and other errors." They usually don't raise a dime.
What online backers do respond to: A "killer video.This does not mean sitting in front of your webcam while you read a prepared speech." He recommends checking out a concise American Express Open Forum guide to videography for startups. The computer and smartphone sitting on your desk are all the tools you need to produce a professional-quality video for practically nothing, Rose notes. "All you have to do is be willing to put in the hard work to use them."
The pages about patents alone could save newbie entrepreneurs untold hassle and expense. Rose explains the "real-world reasons" why "merely filing a patent ... will not significantly affect anyone's decision to compete with you…. Do not assume that owning a patent gives you an automatic, unassailable claim on the economic value that your idea generates."
Early in The Startup Checklist, the author quotes "my hero, Benjamin Franklin," himself an astute businessman (whose will established the first U.S. seed fund for startups): "Experience keeps an expensive school, but fools will learn in no other." Drawn from what Rose calls "a lifetime spent painfully learning from experience" -- his own and other people’s -- this book could go a long way toward keeping entrepreneurs' tuition to a minimum.
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