Legal Resources/Costs

• Here is a great thread on the process, legal issues,  and how to keep the costs down.http://www.linkedin.com/answers/technology/web-development/TCH_WDD/221736-53813?browseIdx=0&sik=1214403991706&goback=%2Eahp%2Eama
• Legal costs are always subjective and, in my experience, should be given a margin of up to +/-40%  what you expect. Your legal firm and relationship will make the biggest difference.  Keep my honest here, PSL, but going by that calculation you should expect to pay$2-$6k for the note. (roughly$3800)
• Before you sit down to document the terms, make sure you know what a convertible note is, what %s you’re comfortable with, what terms you’re comfortable with, etc.  That could easily cut down a 2 hour meeting to 30 min.  The rest will be drafting.

Keep track of accounting

• I am big fan of outright.com. Its very simple and free.
• Quickbooks Online looks nice on the surface. It looks like we could stick to the free version for now.
• http://www.freshbooks.com
• http://www.Xpenser.com is a simple tool worth exploring. Has sms integration
• which is nice on the go.
• I’ve used: http://pulseapp.com/ Pretty inexpensive and there is a trial period to test it.

Make an Agreement with a Developer

Gabe Weinberg sent an attachment to PSL-Talk on Oct 6

Stock Option Agreements

• Haven’t used or reviewed them, but have noticed these get pointed to a lot in answer to these types of questions: http://www.orrick.com/practices/corporate/emergingCompanies/startup/forms_equity_compensation.asp
• This is something that you should have a law firm do.  Option plans are complex.  Since options rarely get exercised before your exit you should consider giving your employees a signed letter.  They will work just as hard knowing that you care about them and want them to feel like an owner.

• If you are raising professional $$$ you need to spend 10k + to set up and manage an options plan  / pool.

• You need to remember that this will be part of your exit strategy and you need to think it through. I would suggest spending a little money with a good attorney that will explain to you your options and approaches that you can use that will benefit you as well as the employee’s, if you don’t do it right it may come back to really haunt you down the road. If you don’t do it right and you move toward an M&A, most likely the purchasing company will come back to you and want some of your equity out of your pocket to hold the employee’s and you don’t really wan’t to screw the people that helped you to be successful. At least I didn’t.

• These guys might have something: http://www.docstoc.com/
• I’m signed up with a site called thefunded.com which is supports startups by rating VCs and providing general support for funding activities.  They just produced the following documents (links below) which are oriented in favor of the start ups and might give you some point of reference versus other documents you may get elsewhere.  Hope they help.
  • – http://www.docstoc.com/docs/12233422 – Bylaws
  • – http://www.docstoc.com/docs/12233427 – Certificate of Incorporation
  • – http://www.docstoc.com/docs/12233434 – Initial Stockholder Consent
  • – http://www.docstoc.com/docs/12233436 – Invention Assignment Agreement
  • – http://www.docstoc.com/docs/12233437 – Restricted Stock Purchase Agreement
  • – http://www.docstoc.com/docs/12233430 – Indemnification Agreement
  • – http://www.docstoc.com/docs/12233432 – Initial Board Consent
  • – http://www.docstoc.com/docs/12233420 – Action by Incorporator
  • – http://www.docstoc.com/docs/10303638 – Plain Preferred Term Sheet
• When considering a stock option plan, don’t overlook the compliance cost of having to get the options valued for tax purposes (called 409A valuations, named for the IRS code section) and financial statement purposes – if/when your company issues financial statements (called 123R valuations, named for the accounting standard).  At the very minimum, the options must be valued once a year … more often if there are events that materially increase/decrease the value of the common stock (which would affect the value of the options).