To read the Green Pants Chronicles from the beginning, click here.
Act 2: Launch
From the very beginning, we wanted our professional services partners to be more than just knowledgeable experts who would transact with us. We wanted team members.
The Road Trip Test
I’ve long believed that you should follow your gut… it’s usually right. When it comes to people, an easy way to get your gut thinking about a long term relationship with a person is to ask “would I enjoy doing a road trip with this person?” If your immediate reaction is “yeah, that’d be fun. I’d enjoy finding some mischief to get into with this person,” then you’ve probably passed the first test. On the other hand, if the prospect of grinding through long hours of eating up highway with this person makes you shudder, you should stop right now. Your gut is right.
Picking the Right Lawyer for Windsor Circle
I started with the obvious and started asking people in my entrepreneurial circles about the lawyers they knew. It became clear that the attorneys who were really focused on Entrepreneurship had launch kits that got the basics nailed down, and deferred payment until later (typically after the first fundraising event).
We met several attorneys that would have done well for us, but Neil Bagchi of Bagchi Law had a unique and scrappy determination that attracted us to him. A road trip with Neil would be fun (something that I should actually test now that I’m on the other side of the entire experience… Neil, you in?!).
Launch Package. One Price. Deferred Payment.
If I remember correctly, the startup package had a small fixed amount associated with it, and that the rest could be deferred to later.
- Incorporation and Charter
- Employment Agreements (including Invention Agreements, Non-Competes, etc)
- Basic Cap Chart and docs
It’s not that one couldn’t find form letters for all of this stuff online (you can, and the reason the startup laywers can do this on the cheap is because they are using all templated stuff and just modifying it for you).
That said, I found it immensely helpful to have Neil available for questions and coaching about why certain things were the way they were. It also ensured that all of the docs tied together as they are interrelated and connected…. Changing something in one doc can ripple into others, and those connections aren’t always apparent to first timers.
Incorporation: Delaware C-Corp
One of the biggest decisions we made early was to go ahead and incorporate as a Delaware C Corp. Let’s break it down quickly.
You want to incorporate because it provides you personal protection from legal and financial issues arising from the business. If the company goes bankrupt, the buck stops with the company. If the company is sued, the organization is the target, not you personally (unless you’ve done something untoward personally). On a cheerier note, if a company wants to buy the value you’ve created, they can’t very well buy YOU, but they can certainly buy all of the shares of a corporation.
The next consideration is what kind of corporation you want to be. There are a ton of resources out there that have already documented the kinds of corporations that exist (LLC, S-Corp, and C-Corp are the most common), so I’m going to let you Google it instead of rehashing it here.
I will state that we chose to become a Delaware C-Corp for one main reason. We wanted to swing for the fences and try to build a really big company, quickly. We knew we would be fundraising, so we wanted to be ready for that.
Neil guided us to consider that future state of fundraising, and that when that happened, it was most likely that we’d need to be a C-Corp (as it is best suited to taking on investment, managing shareholders, etc). Delaware is known for having a well-defined and straightforward corporation statutes and low corporate tax rates. Over half of Fortune 500 companies are incorporated there for this reason.
So, while it was slightly more expensive and time consuming, we decided to incorporate as a Delaware C-Corp right out of the gates as a matter of signalling. When the time came for fundraising, we assumed that this would show that we came ready to play and knew the ropes… that a fundraising event wouldn’t be impeded by a switch in corporation type.