Hi Kareem,
A few of these fall outside our wheelhouse and an AMA may not be the best venue for a list of questions like this, but I've tried to respond as best as I can below!
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Are there any resources available from Venturous Counsel for legal help & IP protection for bootstrapped startups?
"IP protection" is a pretty broad umbrella, but certainly one essential element will be making sure that everyone who performs any kind of work for the company enters into an agreement assigning IP they develop to the company. A common form of such an agreement is the "CIIA" or "Confidential Information and Inventions Assignment Agreement." Most consulting agreements have language assigning IP to the company as well--however it's documented, this is critical and investors will expect that anyone and everyone who has every performed any kind of work for the company will have such an agreement in place. To the extent you are developing IP that needs to be registered (patents, generally), there's no substitute for retaining competent patent counsel--in the medical device field, this is likely to be even more important.
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Do you have advice on legal pitfalls to consider when fundraising from VC, angels, & institutional funds?
Yes, but a lot of it is context-specific. In general:
- know your audience (do your homework)
- ask for references (other founders they've worked with)
- ensure you share a vision for how you'll be working together (how 'hands on' will the investor be)
- don't negotiate against yourself; let the investor make the initial offer terms
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What is the best way for us to properly distribute equity for contractors as a pre-revenue startup?
Depends on the nature of the services being provided, but we'd generally expect consultant/contractor grants to be in the range of 0.1%-0.25% depending on the cash value/importance of the services being provided. If contractors are retained to provide specific deliverables, sometimes equity vesting is tied to 'milestones' instead of automatically vesting over time (the default for employees). If the company is in a position to pay contractors in cash, this can be preferable as it avoids diluting the founding team.
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Aside from Gusto, what are some affordable resources we can use for maintaining legal & tax compliance?
Gusto seems to be popular in the space; we have clients using Deel and Rippling as well.
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How can we leverage R&D tax credits as we develop our medical device?
Good question for a tax advisor :)
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What are some legal mistakes to avoid as first-time founders?
We have an entire presentation on this! High-level:
- form the right type of entity (DE c-corp)
- work with attorneys or a trusted platform (i.e. Clerky) to manage equity issuances
- don't forget to make your 83(b) election!
- develop open dialog with your co-founder(s) re: expectations
- loop in attorneys EARLY in the fundraising process
- hire attorneys who actually do a high volume of venture financing transactions (all-purpose 'corporate' attorneys = no)
- understand the difference between various fundraising instruments (notes, SAFEs, preferred stock)
- practice delivering constructive feedback and having difficult conversations
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Will VCs invest if the company does not yet have a patent?
Many startups don't require patents or have patentable inventions, so yes. For a medical device maker, my instinct is that an investor would want some assurance that the company wouldn't be precluded from bringing its product to market, so it's likely you'll need to consult with an IP specialist before fundraising.
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What are best practices for drafting patent claims that are novel and non-obvious? How do we avoid having a "useless" patent?
Great question for a patent attorney :) We work with clients who have patented inventions every day, but the actual work of preparing and prosecuting claims is highly specialized and outside our particular wheelhouse.
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As a medical device company, we are preparing for our first clinical trials. If we partner with a university to run the trial, how do we ensure that we retain our IP?
Would strongly recommend to have experienced attorneys review the agreement with the university to ensure the IP terms are clear and will not imperil your future fundraising efforts.
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Michael Young
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Original Message:
Sent: 11-12-2024 12:00
From: Kareem Elfoulie
Subject: Startup Legal AMA w/ Venturous Counsel
We are a pre-seed, medical device startup incorporated as a Delaware C corp and operating in Georgia at the moment. We participated in Startup Launch at Georgia Tech, which led us to using Carta for equity management.
Are there any resources available from Venturous Counsel for legal help & IP protection for bootstrapped startups?
Do you have advice on legal pitfalls to consider when fundraising from VC, angels, & institutional funds?
What is the best way for us to properly distribute equity for contractors as a pre-revenue startup?
Aside from Gusto, what are some affordable resources we can use for maintaining legal & tax compliance?
How can we leverage R&D tax credits as we develop our medical device?
What are some legal mistakes to avoid as first-time founders?
Will VCs invest if the company does not yet have a patent?
What are best practices for drafting patent claims that are novel and non-obvious? How do we avoid having a "useless" patent?
As a medical device company, we are preparing for our first clinical trials. If we partner with a university to run the trial, how do we ensure that we retain our IP?
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Kareem Elfoulie
Original Message:
Sent: 11-07-2024 12:31
From: Michael Young
Subject: Startup Legal AMA w/ Venturous Counsel
Hello Carta Community!
We are the partners of Venturous Counsel, a uniquely mission-driven law firm operating as on-demand general counsel for diverse startups, emerging investors and mission-driven, values-aligned companies. We provide them with seasoned, practical, actionable, bottom-line-oriented and mindful advice, all in a more efficient and responsive manner (and at lower billing rates) than BigLaw.
We'll be here to answer your questions next Tuesday, November 12 at 11:30am! From formation to financing strategy, equity compensation, commercial agreements, employee/service provider matters, IP strategy, all the way to exit--ask us anything!*
More about us below--hope to "see" you there!
*****
Aravinda Seshadri is the Founding Partner of Venturous Counsel, a uniquely mission-driven firm dedicated to representing underestimated startups, investors and values-aligned companies, with over 17 years of experience advising startups like Uber, Lyft, TaskRabbit and investors like Rakuten, Hustle Fund, Felicis and Floodgate. Aravinda has been named a Super Lawyers Rising Star for 7 years. She was previously a Partner at Silicon Legal Strategy in San Francisco. Before that, she was a corporate associate in the startup practice of Hogan Lovells in Palo Alto. She started her career in Orrick's Emerging Companies Group in Menlo Park. Aravinda received her law degree with distinction from Stanford Law School and her undergraduate degree with honors in Language and Mind from New York University.
Michael Young is the Managing Partner at Venturous Counsel. He specializes in advising emerging companies and their investors at all stages in a company's life cycle-from formation to exit. Prior to joining Venturous Counsel, Michael represented startups and investors at Silicon Legal Strategy and at Perkins Coie LLP (where he also did a stint as a commercial litigation attorney). Michael is passionate about empowering clients to realize their vision and navigate the complex startup ecosystem with confidence by offering actionable, bottom-line-oriented advice.
*please note that answers given are not legal advice, but our opinions based on general knowledge of certain substantive areas of law; if you require legal advice tailored to your particular circumstances, please discuss with legal counsel retained to represent you.
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Michael Young
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