Three made-up matters, shown the way a lawyer sees them in Tellbrief. The client answers plain questions; you get the issues in their own words, what to ask and what settles each one.
A retail deal · made-up example
Marlow Street Sauce Co
“What should be in place before we sign the retailer’s vendor agreement?”
A national retailer wants our sauces in 40 stores by spring, and they sent us their vendor agreement. Our recipes were developed with a contract manufacturer in Ohio, and I’m not sure who owns them. My co-founder and I never signed anything between us.
What to raise on the first call
They want to move in two to six weeks.
1The recipe may not be fully theirs
Our recipes were developed with a contract manufacturer in Ohio, and I’m not sure who owns them.The sauce recipes
An outside manufacturer helps make the product, and the recipe is what the business is worth. If it was developed with the manufacturer and nothing assigns it, the manufacturer may have a claim to it or be free to make it for others. A retailer’s vendor agreement will usually ask them to promise they own or have the rights to the product.
Ask on the call
Who developed the recipe, and when: before the manufacturer, or with them?
What did they sign with the manufacturer: a supply agreement, an NDA, a quote, or nothing?
Can the manufacturer make the same product for anyone else, and what happens if the relationship ends?
What settles it
The manufacturing, co-packing or supply agreement, and any NDA with the manufacturer
Anything showing who developed it and when: notes, emails, test batches
2The retailer’s paper will ask for promises about the product
A national retailer wants our sauces in 40 stores by spring, and they sent us their vendor agreement.What should be in place before we sign the retailer’s vendor agreement?
Retail vendor agreements usually shift product risk to the supplier: ownership and compliance warranties, indemnity, insurance requirements and recall duties. Those promises are hard to make before the product side is in order.
Ask on the call
Has the retailer sent its vendor agreement or standard terms yet, and is any of it negotiable?
Do they carry product liability insurance, and does it name the retailer?
What do the label, packaging and ads say about results, health or safety?
What settles it
The retailer’s vendor agreement or standard terms
Their insurance certificate, if they have one
Current label, packaging and ad copy
3Who owns the company isn’t written down
My co-founder and I never signed anything between us.
Every raise, hire, sale or falling-out starts from who owns what. Fixing it with all founders still aligned is quick; after outside money or a disagreement it is slow and expensive.
Ask on the call
How was ownership split, and has anyone else been promised a share?
Has founder stock or membership been issued, and does any of it vest?
Has any founder stepped back, or might one soon?
What settles it
Formation documents and any stock issuance or membership records
Anything showing the agreed split: an agreement, a term sheet, even an email
A retailer’s vendor agreement: what usually decides it
Product liability insurance Retailers commonly require a minimum policy and to be named as an additional insured. Here: Ask whether they have a policy yet.
Indemnity for product claims The supplier usually covers the retailer for claims about the product. Here: They make claims about results, health or safety.
Promises about ownership and compliance Warranties that the supplier owns or has rights to the product, formula and brand, and that it meets labeling rules. Here: An outside manufacturer helps make it, and ownership may be unclear.
Recalls and withdrawals Who decides, who pays and how fast the supplier must act. Here: Food products.
Ways to take it on: focused
Confirm who owns the product and paper it with the manufacturer: ownership or license terms and confidentiality
Review and negotiate the retailer’s vendor agreement
Put ownership in writing: founder stock or membership records and a founder agreement
A first raise · made-up example
Northline Labs
“What should we check before we sign the SAFE?”
An angel investor sent us a draft SAFE and wants to close this month. My cofounder and I split the company 50/50 on a handshake. A freelancer built our app.
What to raise on the first call
They want to move within two weeks.
1Who owns the company isn’t written down
My cofounder and I split the company 50/50 on a handshake.
Every raise, hire, sale or falling-out starts from who owns what. Fixing it with all founders still aligned is quick; after outside money or a disagreement it is slow and expensive.
Ask on the call
How was ownership split, and has anyone else been promised a share?
Has founder stock or membership been issued, and does any of it vest?
Has any founder stepped back, or might one soon?
What settles it
Formation documents and any stock issuance or membership records
Anything showing the agreed split: an agreement, a term sheet, even an email
2The ownership record needs reconciling before the money comes in
An angel investor sent us a draft SAFE and wants to close this month.What should we check before we sign the SAFE?
Investors price and paper the round off the cap table. Earlier SAFEs, notes, promised equity or assets outside the company change the numbers and show up in diligence.
Ask on the call
What has already been promised: SAFEs, notes, options, advisor equity, anything said in a pitch?
Does the company hold its key assets, or does a founder?
Is the company the right type of entity for the investors they want?
What settles it
Cap table, with every SAFE, note and option grant
The investor’s term sheet or draft SAFE
Formation documents and board or member consents
3Work the business relies on may belong to the people who made it
A freelancer built our app.
Under U.S. copyright law, a contractor generally owns what they create unless it is assigned to the company in writing (17 U.S.C. § 204(a)). The gap shows up when a buyer, investor or large customer asks.
Ask on the call
Who made the key work: the product, code, designs, logo, content?
Did any of them sign a contract, and does it say who owns the work?
Are they still reachable and on good terms?
What settles it
Contractor and agency agreements
Any written assignment of rights
Invoices or statements of work for that work
An investor’s SAFE or term sheet: what usually decides it
Earlier SAFEs and notes Each one converts too, so stacked instruments dilute the founders more than any one suggests. Here: Equity, SAFEs or notes may already be promised.
Who signs, and the company type The documents assume a properly formed company with authority to issue. Here: Ownership isn’t written down.
Valuation cap and discount Together these set how much of the company the investment converts into.
Most-favored-nation and side letters Rights to match better terms given to later investors, and extra rights outside the main document.
Ways to take it on: focused
Put ownership in writing: founder stock or membership records and a founder agreement
Clean up the cap table and earlier instruments, and review the investment documents
Get written assignments from the people who built the key work
A first hire · made-up example
Field & Fold
“What do we need in place before our first employee starts?”
We are hiring our first employee next month and offered some equity. Freelancers built our online store and designed our brand. We have been selling under our name for a year.
What to raise on the first call
They want to move in two to six weeks.
1Work the business relies on may belong to the people who made it
Freelancers built our online store and designed our brand.
Under U.S. copyright law, a contractor generally owns what they create unless it is assigned to the company in writing (17 U.S.C. § 204(a)). The gap shows up when a buyer, investor or large customer asks.
Ask on the call
Who made the key work: the product, code, designs, logo, content?
Did any of them sign a contract, and does it say who owns the work?
Are they still reachable and on good terms?
What settles it
Contractor and agency agreements
Any written assignment of rights
Invoices or statements of work for that work
2Equity has been promised before there’s a way to grant it
We are hiring our first employee next month and offered some equity.
A promise of equity binds the company only to what it can actually grant. Options and stock usually need board approval, a plan and a price set with tax rules in mind, and promises that don’t match a real grant turn into disputes when someone leaves or the company raises.
Ask on the call
What exactly was promised, to whom, and was it in writing?
Is there an equity plan, and has the board approved any grants?
Does the promise vest, and from when?
What settles it
Offer letters, emails or messages that mention equity
The cap table and any equity plan or board consents
3The name hasn’t been cleared
Freelancers built our online store and designed our brand.We have been selling under our name for a year.
A wider launch, a retailer or a raise puts more money behind the name. A conflict found later means rebranding or a dispute.
Ask on the call
Where is the name used today, and where next?
Has anyone searched it or objected to it?
Is anything filed?
What settles it
Any trademark search or filing
Where and when the name was first used
An offer letter or contractor agreement: what usually decides it
Employee or contractor Classification decides tax, benefits and who owns the work, and the rules vary by state. Here: Contractors already do much of the work.
Ownership of work and confidentiality An assignment of inventions and work product, and confidentiality terms. Here: Earlier contributors didn’t all sign over their work.
Equity promises Any equity mentioned in an offer should match a grant the company can actually make. Here: Equity may already be promised.
Restrictive covenants Non-competes and non-solicits, which are limited or unenforceable in some states.
Ways to take it on: focused
Get written assignments from the people who built the key work
Set up the equity plan and paper the grants already promised
Clear the name and decide on a trademark filing
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