D.C. Entrepreneurial Week isn't all about pitching your business and listening in to forums on how to get capital investments for your startup. Those in charge of the weeklong event realize there's more to entrepreneurship than that, like navigating the legal world – something that almost no one wants to deal with or is prepared for on their own. Therefore, in its fourth year, DCEW hosted an event Wednesday to educate entrepreneurs on how deal with legal issues in their businesses' infancies.
David Muchow, a 23-year-veteran of law in Arlington, led a panel with Matt VanderGoot of DLA Piper and Interfolio Founder and CEO Steven Goldenberg addressing the legal traps that startups most often fall into. The three took an experiential approach in advising the entrepreneurs in attendance on how best to "plan ahead to prevent a launch disaster."
Muchow began the event by listing the seven most common pitfalls he as a lawyer sees founders get tripped up on:
- Partners who vanish after launch, and dealing with their runaway equity
- The opposite: "I wish my partner would leave," and dealing with a no-good co-founder
- Protecting you intellectual property. "You need to treat that idea like money in a vault, and lock that vault up tight," Muchow said.
- No one buying your product – solve it by adding connections and experience through equity
- Not enough time? You're probably failing to prioritize, focus and execute. "If you do that, you stand a good chance of being successful," Muchow said.
- Underestimating legal expenses, or paying for a $2,000 oil change, metaphorically speaking.
- Have a lawyer review everything and get it in writing
If entrepreneurs can enlist the services of a lawyer for those needs, they should have their bases covered, Muchow said. The difficulty, often though, is finding the right lawyer.
The best way to start this process is to figure out what you can do for yourself, and then go from there in determining what assistance you need. For example, Muchow believes any founder can file a copyright, but properly filing a patent is like "brain surgery." He also added that when choosing the size of a firm, larger ones often offer pro bono work because they have money and need experience in segments like patent law. "Just watch out for back-end surprises," Muchow said.
VanderGoot, though, warned that big firms aren't always the best choice, depending on a startup's vision. "A big law firm is going to expect a big company five years down the road. So think about your vision and if it matches."
As the sole entrepreneur on the panel, Goldberg gave some of the most digestible and empathetic advice. He explained that in the past, he has found his lawyers by asking around the startup community – the best way to find ones with experience in your field. Additionally, he said, "Spend time with them so they know your product and tell them exactly what you want." He elaborated on an experience where he had to actively manage his legal counsel and explain to them exactly what he wanted from them. Lastly, though not completely related in a legal sense, Goldberg pressed that the best people entrepreneurs can get capital from are customers.
The panelists gave those in attendance a great foundation in what legal issues they can expect with newly-launched or soon-to-launch startups. And at the end, everyone at least left entertained by Goldberg's very contrarian opinions on much of what the lawyers had to say as he advised the audience to take the more-rewarding and riskier approach.
