Here’s a short guide I wished I would have had when starting out as an entrepreneur. All these could be my #1 item, I’ve made all of them at one point or another or else been a principal in a company where the situation arose to my detriment. If I had to pick a top mistake, it would be:
7. Not having your own attorney.
Don’t expect venture capitalists (VCs) to look after your interests. When your company is ready to raise funds, the fund provider, usually a VC or two, will be represented by legal counsel. The VC will usually insist that the company hire a fancy law firm that has experience with corporate finance and securities. But who is representing the entrepreneur? Often, no one. You need your own independent legal counsel. You may be hesitant to hire an attorney because you do not want to kill the deal or seem like you are getting in the way. But a good attorney will look out for your interests in a way that does not hurt the company. The same is true if the company is going to be bought by another company.
One thing that that Gary doesn’t say about this is that when you are starting a company, and you have a personal attorney, use them. Run every legal agreement by them, even if you don’t think you need to or especially when other people are telling you not to. This practice may save you a lot of time, money, and trouble. See it as a cost of doing business – a personal attorney is your advocate and is there to help you understand the risks of legal situations.
The reason I put this as my #1 is that a good personal attorney can then teach you about the other 9 problems and help you avoid them.