- Issuing founder shares without vesting. Vesting protects the members of the founding team who take the venture forward against the claims of those who leave early.
- Failing to make a timely Section 83 (b) election. An 83 (b) election allows the tax computation on issued shares to be made based on the value at the time the shares are issued, which is often pennies per share.
- Promising more in the business plan than can be delivered and failing to comply with state and federal securities laws. Trying to squeeze out a little extra valuation by fudging the numbers erodes credibility, makes investors less trusting, and ultimately impairs the ability to get subsequent rounds of financing.
- Thinking any legal problems can be put off until later. Many of the points made here are problems that can’t just be fixed at a later date, so hire a competent lawyer. Excellent legal talent can be retained for relatively little money up front at the early stages.
There are three kinds of consumers
Those that know