Orrick's Legal docs for startups | Hacker News Reader

Orrick's Legal docs for startups

docracy.com

171 pointstomazstolfa31 comments

One thing to note here is that there are fairly significant differences in law between states. Especially employment and corporations laws (e.g. why lots of companies are Delaware corps)

While these might provide a good basis to start conversations I would still have a lawyer that is licensed to practice in the state in question and also specializes in the area of expertise in question review them before anyone executes them. I have spent a lot of money on lawyers in my life but I can tell you I actually have realized more gain back when things went wrong and my contracts were there to protect me.

Nobody reads the contracts until something goes wrong! Do you really want to fight about millions of dollars with someone on your team when you get bought because you didn't spend $2,500 getting a contract reviewed?

Why would you down vote this it is a real and valid observation. I'm not selling legal services or anything I'm just suggesting people use a lawyer when it makes sense.

Nobody on hacker news would expect a lawyer to build a NoSQL solution. Why do we think lawyers have no right to be acknowledged for their expertise!?

Anyone downvoting you isnt worth engaging in a dialogue with. Law is a complex discrete dynamical system with ambiguous transition rules that are nondeterministic functions of relevant case law and applicable local state and federal regulations.

That sounds like it requires an expert to me. :-)

Sounds like you're describing a byzantine system that, among other things, (i) obligates citizens of a democracy to obey its rules without providing free access to the rules themselves and (ii) allows special interests to capture disproportionately large benefits under the veil of complexity.

Surely this isn't the best we can do.

To me this is an example of great marketing by Orrick. Making these basic resources available to startups raises awareness of their firm among new companies, some of which will grow and inevitably develop more complicated legal needs that require a firm of Orrick's size.

Yep, great marketing by Orrick, but also great free ressource for entrepreneurs. The latter is probably why it's been upvoted here. ;)

Agreed! Almost like a freemium model for legal services.

The documents have actually been up on Orrick's site for awhile: http://www.orrick.com/practices/corporate/emergingCompanies/...

I used these docs in 2010 to form my company.

What's new here is Docracy, a "Github for Law", where you can version and branch legal docs. It's a cool concept, and I hope they succeed.

Some thoughts: - A huge value-added would be turning the document variables into a questionnaire. Just answer the questions (CEO name, address, etc.) and it will populate the doc. That'd be awesome.

- Even though I used Orrick to create these docs, I did not hire them when it was time for a lawyer. Can open sourced legal docs really be used for law firm lead generation, and if so, how? I suspect "brand awareness" is not sufficient. For instance, if I branch an Orrick doc, I'd say that they should have the right to add me to their mailing lists. What I'm getting at is that I think it'll be important to take the idea of making-law-firm-lead-generation-happen-through-open-sourced-docs really seriously and build in real hooks to make it happen. Otherwise, quality content will be hard to come by.

- I wonder if e-sign is out of scope for where they are now. I suspect that they're doing it because it will help get distribution for the docs, but it's the most sloppy part of their site right now. They know better than I do, but if I were them, I would focus 100% on getting the content and making the content shine.

>Even though I used Orrick to create these docs, I did not hire them when it was time for a lawyer.

I don't think this was their intent. What kind of crazy law firm would want a client that used free legal documents off the web? They want the super rich people who would say "Oh, that's really nice what they are doing" and will file the Orrick name in the back of their head. People like you and me are the targets of the low-end of the legal field. $100/hr guys that work without a retainer.

The only case where they'd want a free customer to convert to a paid customer is if the free customer became really, really wealthy.

I don't know about this. I'm sure there's a kernel of truth to it, but I think the most lucrative source of billings for corp law have more to do with circumstances than with client selection. Being a deal lawyer for an M&A event just generates more hours than a boring company formation.

And the people involved in those M&A events are very often the same people that would have had trouble paying a $550/hr-billed project just a few years ago.

There's another advantage for Orrick: Suppose a growing company were to come to Orrick for help with an M&A event, a VC financing, etc. Now suppose the company's initial corporate paperwork were a stew prepared by non-lawyers (or non-expert lawyers). That would make Orrick's job more difficult. So it's to Orrick's advantage to have the initial corporate paperwork be competent: even though Orrick doesn't necessarily get to bill for doing that initial paperwork, its later work is made easier.

It can also be advantageous in negotiations for Orrick's documents to have become de facto standards.

Best practices in many cases are to incorporate with as little expenditure as possible, then clean up the mess ASAP when you get on stable financial footing (e.g. funded). Most top firms will strike a deal with promising companies: all payments are waived until <milestone> in exchange for <percent> of equity. A typical milestone is a financing of $1mm or more, and the percent is usually <1%, varying by the firm and the optimisim about the startup.

Another reasonable approach would be to start with documents like this. However, if you do this, you would be much better off to use Orrick. That's because each firm's standard documents are significantly different. If you use someone else's, they will have to come up to speed - on your dime. They will also likely want you to make amendments and changes to bring the documents in to line with what they consider best practices.

Then, years down the line, when it comes time to litigate something (hopefully not), you'll have lawyers who know your company's paperwork intimately, vs. dealing with unexpected details (e.g. your company is a WA corp instead of a DE corp so you have to send papers by courier instead of faxes, delaying your closing by 3 days, costing the company a few thousand dollars lost interest payments on a $10mm round).

Take it from someone who's spent many tens of thousands of dollars cleaning up after extremely smart lawyers who did things that were just a little bit wrong. The sooner you get represented by top-tier legal counsel, the better.

For many who may not know orrick has been hosting some great events for entrepreneurs in the valley. These are all free. some of the more useful ones, help you walk through and understand the key components of a terms sheet, etc.

Are you referring to Orrick's Total Access event series?

http://reaction.orrick.com/reaction/sites/totalaccess/defaul...

I have been to a few. All of which offered free access to top-tier attorneys. I highly recommend attending an event if you are located in SV.

Legal template sites tend to assume that the only value that lawyers add is to provide the documents. Whilst making the docs available is great, lawyers can still add value in terms of negotiation.

For me, lawyers extract the salient points avoiding the need to get bogged down in the text itself. I think anyone could if they had the time read through lengthy docs and make a decision as to whether to sign. However the reality is that using a professional who has experience will allow you to focus on the stuff you're good at.

Also my problem with these sites is that no liability is accepted for the use of the documents. I realise this isn't viable on a free docs site, however people may use the documents without actually realising this.

One of the main benefits of retaining a lawyer is that there is a route to redress if they make a mistake.

>For me, lawyers extract the salient points avoiding the need to get bogged down in the text itself.

For me, the primary value of lawyers is that they eliminate or constrain the downside. It's too easy for someone untrained in law to introduce a mistake, technicality or otherwise, that could cause big problems down the road. Having a lawyer review everything you sign and agree to is a crucial part of downside risk management.

I am a very happy customer of Orrick. They helped me tremendously with my incorporation (c-corp Delaware) and I attend their seminars frequently. These documents are great, but I recommend you go directly to Orrick: http://www.orrick.com/practices/corporate/emergingCompanies/.... They also have some wizards that help you prefill documents, like the term sheet generator (https://tsc.orrick.com/)

Also, the Founder Institute advisory template (http://fi.co/contents/fast) was created with the help of my lawyer at Orrick.

BTW no I do not get paid to post this!

Great move by orrick.

Value ressource for entrepreneurs. They level themselves above the cliché of a lawyer that gets his money just for documents (not saying this cliché really exists). Could turn out to become a brilliant marketing stunt - apart of just the pure PR they should receive now.

But the big thing could maybe come based on this move a bit later… If this becomes successful and they are wise enough to iterate on it they could establish their documents as defacto (outline) standards for legal documents for (tech, delaware) startups.

We have seen similar starting steps with Seedsummit[1] and Seriesseed[2] would be great if someone steps up to move this forward.

[1]: http://seedsummit.org/legal-docs/ [2]: http://www.seriesseed.com/

Lawyers do not charge for the documents. They charge for customizing documents to a client's individual set of facts. All lawyers create their own set of tested templates that they reuse and customize for later clients. Orrick is simply offering their templates for free.

The components of what should go in business incorporation documents are already effectively standardized by legal education, legal treatises, or case law. Furthermore, Orrick is merely but one of many "BigLaw" firms that cater to startups and those other firms are not likely to adopt Orrick's language as their standard. Consequently, it is unlikely that Orrick will establish any sort of de facto standards for tech startups.

Ad 1) Yes agree. That's why i meant that it is a public cliché Ad 2) You are correct. I was not thinking that this standards could push sideways or upwards but might downwards to smaller local lawyers. But you are most probably right. Thanks for the feedback.

I feel like I made a mistake incorporating in CA instead of Delaware. Should I consider setting up a "parent" company or something in Delaware?

The way it was explained to me was that the corporate governance rules are different in Delaware, but the operational rules about how you actually do business and pay taxes and hire people and stuff would be the same. If you operate in CA but are incorporated in delaware, you have some added complexity, too, as you need to file both places.

The way it was explained to me was that I would only gain benefit from incorporating in Delaware if there were other owners; because I was the only owner and I have no plans to get investors, there's no advantage to having legal bullshit in two places.

Thanks for the helpful info. I did do a lot of research about it but still wasn't 100% sure. I am a solo "owner" so I think I'm good.

That depends on why you would want to switch to Delaware. Don't do it just because the "common wisdom" in the Valley is that you're supposed to. The common wisdom is usually wrong or seriously overgeneralized to the point of meaninglessness.

What would you get out of switching to Delaware? Corporate management (i.e, the rules governing how a corporation is structured and run) would be governed by Delaware law. But most of the remainder of your business would continue to be governed by the laws of the state (CA) in which you actually conduct your business operations. There are some areas where you can contract jurisdiction to Delaware, but many of the most important areas (i.e,. employment laws) cannot be contracted to a different jurisdiction.

Basically, you need to talk to a lawyer.

I was planning on speaking with a lawyer but there really isn't much at this point except consulting so I was holding off. Thanks for the feedback & info.

Does anyone have a good privacy policy document style recommendation?

I'd like to give visitors and customers the best possible experience when viewing such boring but important documents. Saving their time and allowing easily to grasp the document. Particularly, also content wise, what should be really in there?

wow this is awesome, should hopefully reduce the rather steep initial legal costs for early stage startups

Awesome. Previously I'd been pointing people at Gunderson Dettmer's set of documents (http://www.docracy.com/userprofile/show?userId=80) but it looks like Orrick's is more comprehensive.

This is awesome, thanks Orrick team. Even if you don't use these verbatim, take a look at your current docs and then scan the Orrick version to see if any improvements occur to you. I'd like to see more law firms do this.

This is very useful. It is hard to the legal docs in the early stage. Thanks for providing the docs.

Legal mad libs.

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