Checklist for a startup at the pre-seed stage
By pre-seed stage startup we herein mean a startup:
- has an idea,
- has the beginning of the development process,
- has no certainty of the project's success,
- team does not exceed 5 people,
- as a rule, is not legally formalised, there is no company.
What we recommend that such a startup do at the beginning to protect its product and not scare away investors in the future:
Analyse the stages of product development
What questions to ask yourself here:
- Is there already an MVP of some sort in place or are you at the very beginning of your journey?
- What elements are included in the product?
- Who is involved in the product creation process?
- Are there any contracts with the authors?
Define the IP accumulation scheme
It will be helpful to decide on the following:
- Who is currently the copyright holder of the product/separate elements of the product?
- Who will be the rights holder?
- Is it possible to sign contracts with all authors involved in the creation of the product?
Prepare yourself mentally for the fact that you will have to pay the author for the correct transfer of rights under the contract, the option with a gratuitous contract is too risky.
Draft documents for IP accumulation / building contractual bundling
At this stage it is better to turn to lawyers for high-quality preparation of documents, taking into account all the nuances of the development process, the peculiarities of the product.
Earlier we have already written about how to accumulate the rights to the product and what to provide for in a contract with team members, also in our article our colleagues shared their experience regarding the contract of assignment of rights to the game.
Develop agreements of intent between founders (Term Sheet)
We would like to point out at the outset that this is an M&A deal tool, but in this case its usefulness is to take the focus away from the product and discuss the business. The document itself is not binding (usually with the exception of confidentiality clauses), but it will help founders at the start to decide on the key points of the future business.
What's there to fix:
- Who from the team will be among the founders of the future company.
- How many shares/stakes each of the founders will have.
- At what point the decision is made to incorporate a company, what indicators must be achieved.
- How decisions will be made, whose voice will prevail, whether someone will have a veto.
- Additionally, some sort of vision for the development of the product as a whole can be captured (if only so that all founders have the same understanding).
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