Do you have, or will you have, co-founders or investors?
As a startup the answer is probably yes to at least one of these questions; and if this is the case it’s of paramount importance to have an operating agreement. This agreement marks the legal foundation for which your entire company rests on. Essentially it acts as the playbook for your company’s decision making. It will help you dictate what to do when things are hard; stuff like:
What happens when a founder quits or is fired?
How often do we need to show our finances to investors?
What type of equity do my co-founders get?
What happens to our equity if we raise a round of financing?
Do my investors or co-founders and I have a non-compete with each other?
Who owns what?
Although it feels like you instinctually know the answer to these questions, I promise that when things get hairy no one on your team will be on the same page. Think about how expensive it would be to get a lawyer at $400 an hour to get rid of a co-founder that is adding absolutely no value. Think about how expensive it would be if you’re acquired and you haven’t pre-negotiated how much your investors or co-founders get? The list goes on…and the answer is always WAY MORE EXPENSIVE than if you had just put together an operating agreement from the start.
It will save you money, and in some cases friends – something that is more important than money. It’s hard for friends to get mad at each other long-term when the stipulations of the deal were put in legal terms before you start. On the other end, no one’s recollection of the agreement is ever perfectly on the same page.
Not only does an operating agreement save you a lot of time, turmoil, and money in the future – it also looks incredibly professional to potential partners, such as investors. Founders that skip this step look like amateurs, and amateurs get amateur partners or no partners at all.
Our team has invested in over 100 startups, and with each one of them comes an operating that we’ve written. Thus we’ve developed these documents to be like Legos, meaning as things change it will be very easy to change the document with it. For example: you have zero investors now, but might be adding one in a year-or-two. No problem. Now we’re talking about an hour worth of editing VS the creation of the agreement from scratch.
It’s a pretty simple process, and will add a lot of value.
1. You chat with someone on our team for a half hour so we get a general idea of what you’re trying to accomplish.
2. You answer a series of questions that will allow our legal team to write the rough draft. These questions will be written in very human and understandable terms.
3. We write the rough draft according to the answers from the previous step.
4. You review the rough draft, ask questions, provide feedback, and ask for edits.
5. We send you the final copy in Word, and you’re off to the races.
To order an operating agreement, the first step is to start a casual email conversation with someone from our team. So fill out the contact form below and we’ll get back to you ASAP.