Ask HN: Should a Startup in the messy middle change TOS on every turn?
We seem to closing in on market-fit. Should we book a lawyer every time we change routes to update our TOS and contracts? If not, what is best practice to go about this?
But I think you already know that.
The reality is, as a programmer, you’re never going to convince your non-programmer cofounder to stop wasting time and money on dumb shit.
At least it’s just $10k on a lawyer. Some people blow $100k on branding. Other $60k on executive recruiting. Wait until you get bigger and these people are booking $240k a year in expenses, putting their wives and girlfriends on payroll, renting offices and apartments downtown...
I've been in a situation where a couple of early clients were able to dictate quite a bit of the business due to early contracts. We do not want to end up in that spot.
So I'm looking for best practices to find a balance between "just trust me" and your scenario.
You've coined a term. I love it.
Your contracts and insurance coverage exists to protect yourself from risk. Identify your risk (severity and probability of adverse events) and act appropriately.
Coming from the latter. We build custom turn-key ML products for enterprise. Usually, meetings are with legal, security, strategy, and CEO/COO/CIO/CFO. We constantly push to get end users and subject matter experts to the table, for they are who we are building for. Lawyers to fine tune the contracts, clauses for support, exclusivity periods, geographic locations, and defining competitors. Non disclosure agreements, etc.
Repeat clients are frequent, which simplifies things as we already had gone through the process, had clearances, and built trust, relations, and a reputation.
Deal size in the ball park on average, but we're building tooling that considerably reduces the time a project takes us.
Resiliency + risk profiling for these changes are the name of the game. There are no hard rules, just overlapping bands of probabilities. ;)
It's the "overlapping bands of probabilities" (sounds like a Boards of Canada album) that seems very hard to put in black and white...
We've decided on the following stack:
- General Terms of Service. This will describe what benefits customers can expect from us and by which general means we deliver this e.g. our core service but also support, the amount of effort, etc; what requirements customers need to fulfill before we can deliver our service (like a working internet connection), that customers may only use our service for what it is meant for and shouldn't try to hack our shit; that customers will have an obligation to pay for these deliverables and how long we are willing to wait for payment, what we do when they don't pay and other nasty stuff; How we communicate, where you can find pricing information and what happens in case of disruptions and calamities, what liabilities we accept and how we promise to handle complaints and disputes; other stuff that needs to be said like how we handle privacy sensitive data and which legal jurisdiction applies.
- Terms of service concerning generics for a certain type of business model. This can be quite short and wil lay on top of the general TOS. E.g. in case of a subscription model, how subscriptions can generally be started, how we prolong them and how customers can cancel. Which requirements a customer should fulfill before a subscription can be delivered. (like a working internet-connection) Where to find the equipment that can be used to receive our service.
- Customizable customer contracts for different target markets and business models. Again these lay on top of the business model TOS which lays on top of the general TOS so this can be really short for a simple contract and expanded at will.
I'm convinced this is a very workable method for us and will give us the flexibility that we need in this phase while still adhering to our lawyers advise.
In what way specifically?
Also, assuming they are “getting their butt handed to them” it’s only because they are huge and successful. If they were a failure nobody would care. And if they had kept up with TOS updates and still ended up a failure would they be saying, “boy glad we dropped that $5k on a lawyer.”
If you get big enough you can overcome any legal misstep you made in the early days whether it was accidental or malicious.
Patreon said disputes had to go through arbitration, and couldn't go through class action law suit.
Patreon removed a creator. That person's patreons all went to arbitration. Patreon declined the arbitration, and went to court to convert all those individual arbitration cases into one big class action.
The court said they couldn't do that, and the reason the court said that was because of the ToS drawn up by Patreon.
So now Patreon has to go to arbitration on thousands of cases, and has to pay the fees. The fees bill is a couple of million dollars.
Get big enough and then use somebody else's money to pay off your multimillion dollar mistakes. Or go out of business and it won't matter anyway.
A risk that has a 1% chance of wiping out 100% of your company, vs a risk that a 10% of chance of costing you 10% of your company, are not the same even though the net "expected value" is nominally 1% for both.
If if's and but's were candy and nuts then we'd all have a merry christmas.
If $50 million could bankrupt FB then the Winklevoss twins would have never got that much.
Do the means of not doing it justify the ends of moving super quickly and likely never encountering problems and getting liquidity and cashing out all the liquidity leaving only an empty shell for customers to sue and never be able to collect from? Yes.
Spoiler: We're naive and want to make the world better! (yes, I've seen all Black Mirror episodes AND we have weekly drinks where we think up scenario's where our company is the villain) But we need to protect our business not swindle our early customers.