Legal Debt is an Analogue of Technical Debt Shortcuts in coding – not using DRY, not refactoring, not testing – are common sources of technical debt, which require additional effort, in the form of attention, thus time and money, to address. Shortcuts in the formation and operation of your startup create legal debt, which is…

I recently came across a situation where we used “net revenue” in a bonus plan as part of the calculation to determine what the bonus pool would be. In other contracts, we’ve used “net revenue” to distinguish from “revenue” (aka gross revenue) to deduct things like discounts, credits, returns, and so on. In many of…

I recently came across this language (unaltered) in a contract: The Parties understand and agree that all Confidential Information (i) is to be preserved and protected; (ii) is not to be disclosed or made available, directly or indirectly, to anyone other than Authorized Employees, including, without limitation, third parties or unauthorized employees for purposes unrelated…

Over the years I’ve had many occasions to figure out the price of an offering of preferred stock for a typical venture funded startup. This is different from, and definitely not to be confused with, the valuation of the company on a pre-money basis. That’s a topic for a later post. In its most simple…

Here’s a common set of angel-investor questions regarding a standard seed round term sheet for a tech company: Why are the shares divided into preferred and common? Why does the preferred stock have a limited “1x” return? What will happen with liquidation preferences in future rounds? What will happen with dividends? Does the preferred stock…

Fred Wilson of Union Square Ventures wrote about his board meeting and ugly travel schedule some time ago. It’s refreshing to hear him talk about being excited to go to board meetings. I’ve sat in too many where a VC (even a monster big-name guy) ended up talking about the format of financials being presented…

This post on the use of the term immediately, one of many similar explorations by Ken Adams, is the sort of thing that attracts me to contract drafting. There is a lot to be said for using the right language to convey an idea: language that is clear, concise, hard to misconstrue, and simple without…

Due diligence is the catchall phrase used to describe both the amorphous investigative process that prospective investors and acquirors go through before, during, and after their initial decision to proceed with a transaction with your company as well as the materials (paper, electronic, and Q&A) that they and their advisors receive in response to their…

NB: Google Reader is long gone, so these links to the Observations page have been removed. I’m sorry too. Following in the footsteps of giants, I’ve decided to create a separate page to track my notes on shared items from Google Reader. One reason for this is to encourage me to comment on GReader items…

Kat Shoa asked about licensing audits on LinkedIn: How do you know if your IP licensees are paying you properly? I sat on a presentation about royalty audits today and think it’s a fantastic to collect due royalties – wrote about it here[.] But I’d be interested to know what other methods are used to…

Writing about Ted Wang’s “simple series A” reminded me of this idea I came up with years ago. One alternative to drafting that I’ve always liked: “check the box” forms.” During any moderately stable period in Silicon Valley, certain terms become “market,” meaning that there’s little real dispute about them in substance and only some…

Gina Trapani, formerly of Lifehacker, recently posted this picture and the accompanying text. It’s a short set of rules that are, in effect, a simple team SOP (standard operating procedure). With even a small set of agreements about how they will operate, expectations and execution will more closely match up. When these rules are known…

In a recent conversation at a business breakfast roundtable at the Cornell Club in NYC, a question was asked about blogging, and I volunteered a brief description of my blogging activities. If you are blogging about multiple issues, you should consider separating your blog writing into categories to improve or reinforce your personal branding. Leading…

Eliminate words no one uses from your writing to make it flow more smoothly.