Law advice for entrepreneurs

It is inevitable that you have to use lawyers at some stage if you run a company.

At Oslo Innovation Week, Martin B. Rove and Remi Christoffer Dramstad, two lawyers with experience in corporate law and finance, imparted some lessons learned from law for entrepreneurs

Avoid the mess

Don’t let a giant backlog of paperwork build up – you’ll live to regret it.  It is challenging to run a startup, and when you have 1000 things you need to take care of to develop the core of your services, it is easy to let other things – intellectual property rights, tax issues, investor issues – fall by the wayside.

“At the same time, you need to take care of the other parts- if you don’t do that, you may not be able to focus on your core business at all, because it will be gone,” says Martin.

The relationship between cofounders is like a marriage

How do founders stick together as the company grows and challenges rise?  Many founders think they will be able to overcome the ups and downs of starting a business.  But the process of thinking out a shareholders agreement should never be underestimated.

As Remi says, “Do not miss out because you were naive! People think that they will think about things ‘when they come’, but by the times things come, it will be too late.”

Be professional – investors will show up with a term sheet

Investors pose a great opportunity, but also a challenge.  Make sure that you completely understand everything you sign. Don’t make the same mistake as Edward Savarin!

“That is how Savarin got kicked out of Facebook,” says Martin.  “His job was to find the money, but it was Zuckerberg who found the money instead. Savarin also signed a paper disclaiming his right to Facebook, and he had to sue to get the claim back.”

They both reiterate, that it is better to have 20% of something big than 100% of nothing! Which leads to their next piece of advice:

Do not sign stuff you don’t understand

This tip is a cliche for a reason.

Create and preserve your value

Both Remi and Martin remind entrepreneurs to strongly consider who you invite in. Why are they joining the company?

“Everyone you invite in needs to give your startup something – money, working capital, etc. don’t invite people who happen to just be friends. Do you due diligence on people, so you know what you’re getting into,” says Martin.

They also advise getting documentation – early.  Even when it’s just a nondisclosure agreement for when you talk to people about your idea.

Your business plan is like your CV

Your business plan is a crucial document – anyone who will be investing or joining your company will need to  understand it and agree with it.

“Keep a business plan available, this is like keeping your CV ready if you are not an entrepreneur – it can be short – 3 pages, what you sell, what’s the market, and how you will conquer that market,” says Remi.

Their advice really boils down to one piece of advice: Establish, maintain, and update crucial documentation.

It may not be very glamorous, but the consequences of not doing so can be dire.