Antone JohnsonGeneral Counsel to Startups; ex-eHarmony & MySpace
Bio

Seasoned tech business lawyer, "on-demand GC" advising startups, entrepreneurs & investors. Pragmatic perspective honed by a decade as VP & corporate counsel at marquee consumer Internet & digital media companies, preceded by large Valley & NYC law firm training. Delivered papers on Steve Jobs' block in Palo Alto as a kid.



Recent Answers


Sometimes the best way to break a stalemate over equity is to agree on equal shares but give someone a faster schedule or some portion vested up front — or, conversely, agree to allocate a larger percentage but tie it to a longer vesting schedule and/or milestones. Shares aren't really "owned" until they're vested.

There's no hard and fast rule about vesting any more than there is about exact equity percentages, yet entrepreneurs often assume everyone's shares must vest according to the same schedule. Instead, I recommend taking a hard look at past, present, and anticipated future investment of "sweat equity" in the venture by each co-founder. More often than not, in my experience, someone started working first/harder/longer, quit their day job, made a critical breakthrough early on, etc. — or is expected to pull the most weight in the coming months, solve thorny technical problems, recruit vital team members, and so forth. (Yes, it's a guesstimate, but the same is true of valuation and almost every other metric at an early stage startup.)


California licensed attorney here, former VP/head of legal at eHarmony and original MySpace legal team. This question falls right in my sweet spot.

At the risk of sounding preachy, TOS *and* Privacy Policy are best developed with the help of an experienced Internet lawyer. These form a contract between your startup and every person who uses the service — which, if you're successful, will number in the hundreds of thousands or millions. There are endless variations, including many items that are product-specific or unique to the location of the company. As you grow, these terms will lay the foundation for everything from banning abusive users to complying with DMCA takedown notices to handling refunds and credits if payment is involved.

There are no easy/cheap shortcuts, but I wrote a Quora post on this subject; the title says it all:

"How To Do What You Really Shouldn't Be Doing: 'Rolling Your Own' Website Terms of Use and Privacy Policy" - http://qr.ae/TvgyH

Happy to connect by Clarity to answer any questions or offer specific advice as appropriate. (This answer is general legal information, not advice.)


There are no easy/cheap shortcuts, but there are lawyers and firms that are more efficient than others. As a startup lawyer focused on social media, I wrote a post on this subject; the title says it all:

"How To Do What You Really Shouldn't Be Doing: "Rolling Your Own" Website Terms of Use and Privacy Policy" - http://qr.ae/TvgyH

Happy to connect by Clarity to answer any questions or offer specific advice as appropriate. I'm a California licensed attorney, former head of legal at eHarmony.


I would use a simple, straightforward beta license agreement. In practice I've never seen one of these litigated, but it can't hurt to disclaim all warranties, put the user on notice that things may be buggy or crash (coffee is hot too), and make it clear that you have the right to incorporate any user feedback into future versions of the software.


I'm reluctant to say "it depends," but legal expense for a true seed round varies dramatically based on:
1. Whether the investment is structured as a priced equity round vs. convertible debt (or variations on that theme such as "SAFE")
2. Number and location of investors, timing of closing(s), and prior angel investing experience
3. Company counsel's efficiency and fluency in industry norms
4. "Deferred maintenance" necessary in areas like corporate formation, founders' equity issuance and IP assignments.

#4 is the item that takes many entrepreneurs by surprise. On the investor side, it leads otherwise very savvy observers to give unrealistically low estimates of legal expense because they assume starting from a clean slate. This item is also most resistant to automation or standardization because startups come into being many different ways; each story is unique.

I would put the lowest estimate at around $3K, assuming the company is already formed as a Delaware corporation with clean, basic documents, has issued founders' stock and handled related IP and other matters, and simply needs to issue a convertible note to one or two accredited investors with minimal negotiation of documents.

The highest I would expect for a true "seed round" is about $15K, where some corporate cleanup is needed, the deal is structured as a streamlined kind of preferred equity (e.g., Series Seed), there are multiple closings with investors on different dates and terms, etc. Beyond that point we're really in "Series A" territory, doing things like creating a full set of VC preferred stock investment documents (about 100 pages), negotiating with investors' counsel (at the company's expense), and so forth. The expense and complexity of a traditional Series A deal have been the main impetus behind using convertible debt or Series Seed-type documents for seed-stage investments of less than $1 million or so in recent years.

I hope this proves helpful. Always happy to chat and answer further questions.


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