Structure Your Startup for Stability Innovation Insurance
Whether it’s romantic or professional, no one enters into a new relationship anticipating its end. However, these early stages are precisely when you should plan for the worst. Take, for example, two or more life sciences innovators who join forces to pursue an entrepreneurial dream. Establishing a startup should always be a time of great promise and mutual enthusiasm. Still, the excitement driving this all-for-one, one-for-all mindset can cloud the partners’ judgment and prevent them from taking appropriate steps to protect themselves legally as their new endeavor expands and achieves greater success. If you’re considering partnering with other budding entrepreneurs to launch a startup, please read on for critical tips that could save your aspirations from sinking into legal turmoil. FORMAL WRITING TRUMPS FRIENDLY WORDS. If launching a startup were easy, everyone would do it. The early stages of the process are often characterized by multitasking, paperwork and (in many cases) a fair amount of stress. Although you and your partners are likely already spinning plenty of plates, you must devote adequate attention to your startup’s formalized internal agreements and governance structure and put safeguards in place in the event of changes to the partnership. Mutual trust and respect may have brought you and the other co-founder(s) together, but legal documentation is necessary if and when disagreements arise. In business, words and promises alone are never enough. What happens if a co-founder decides to leave? Do you have appropriate stockholders’ agreements, intellectual property (“IP”) assignment records and agreements that specify your organization’s board structure, voting rights, decision-making protocols and control of equity interests? These are just a few of the questions you must consider as early as possible.
Additionally, investors will look for documentation outlining these areas when considering their support of your innovation, and they may use any missing documentation as leverage during negotiations. Aside from potentially alienating key investors, overlooking these critical factors can cause considerable strain on your future success, including the possibility of a departing co-founder still retaining an equity stake, voting rights and even the ability to participate in key decision-making. EXPERIENCE EXCEEDS FALSE EXPECTATIONS. As the adage suggests, “You don’t know what you don’t know.” Unfortunately, many startups only discover their structural shortcomings when their vision becomes profitable, friction builds between co-founders and their initial strategic gaps become virtually impossible to fill without extensive legal and logistical headaches. The team at Crowley Law LLC leverages its decades of combined experience to help clients establish a functional and legally sound foundation on which to bring their innovations to market. Although the nuances of creating a suitable legal framework for your startup are too extensive to cover in full in this article, here are the critical documents you must have in place: • Stockholders’ Agreements and Operating Agreements • IP Assignment Agreements • Confidentiality and Invention Agreements Please contact Crowley Law LLC for a thorough review of your existing documents or to begin the process. The more robust your formal structure, the better your innovation(s) will be protected from the negative impact of an overlooked or poorly devised agreement. We are also happy to discuss any of the specific issues outlined in this article.
Collaborative Counsel for Competitive Clarity: Quesited LLC
“Quesited (derived from the Latin word quaesitus , which means to seek, inquire or question) is a market research firm headquartered in Trenton. True to our name, we conduct extensive research for companies, ranging from startups to global organizations, that are interested in gaining a deeper understanding of their clients, customers and competitors. Our process involves examining the economic, political, technological and legal components that impact an organization’s opportunities in a specific marketplace. “Through my industry networking, I was fortunate enough to meet Philip Crowley. In addition to being a wonderful and generous person, he’s a man of great intellectual curiosity. The complexities of succeeding in the life science and technology space require a strong
legal mind to review a company’s structure, the legitimacy of its patents and other critical facts to ensure market-readiness. Phil has the expertise to help our clients address these areas, enabling these companies to accomplish their goals more effectively. “Quesited LLC and Crowley Law LLC enjoy a symbiotic and synergistic relationship. Phil refers clients to us when they have market research needs, and we refer our clients to him when they require expert legal advice. Our unique partnership helps ensure our mutual clients’ lasting success, and I’m grateful to Phil for his ongoing support.”
–Patricia W. Peiffer
2 — CROWLEYLAWLLC.COM
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