Insight
Levy: Tacking on unfamiliar co-founders is more damaging than going solo
“It's such a better idea for founders to just try and if they don't have a co-founder to just do it themselves. It will be very hard, but it is the damage that can be done by tacking on a co-founder that you haven't worked with, that you don't know very well, t…”
Insight
Levy: Founders should split equity equally rather than reward the original idea
“Do not place too much importance on the founder that had the idea for the business, because all of the hard work is in front of the team, and all of the value is going to be created in the future. If you are all going to be working hard going forward, which yo…”
Insight
Levy: Startups should avoid formal employment agreements
“Employment agreements are actually are not actually appropriate for startups because employment is at will by default, and the basics of hiring and firing are governed by law anyway. In fact, employment agreements can sometimes complicate things because courts…”
Insight
Levy: Trademark registration is a nice-to-have early on, not essential
“Generally we consider trademark registration to be something that can wait. It's a nice to have, not a need to have in the early days of your startup.”
Insight
Levy: Co-founder equity should default to equal rather than reward past work
“I think a mistake that founders make is that they come to the equity discussion, and they're only looking backwards. They're thinking about who had the idea, and who worked the longest on it at the beginning, and who has the MBA, and who's going to be CEO, and…”
Insight
Levy: Founder equity disputes often signal underlying trust or commitment issues
“If you and your co-founders are having a really hard time coming to a consensus about stock allocation, there may be underlying trust or commitment issues with the team, so you want to pay close attention to that.”
Assertion Supported
Levy: Founders not paying themselves violates labor law but goes unenforced
“Strictly speaking, it's against the law not to pay yourselves although obviously this isn't a thing that That gets enforced.”
Insight
Levy: Having non-founders work for free creates major legal risks
“It's one thing for founders to work for free, but it's significantly riskier for non-founders creating work product and other intellectual property to work for no compensation.”
Insight
Levy: Investors avoid funding founders who lack stock vesting
“No investor wants to put money into a company with founders who may decide the next day that they're burned out, so they take their shares and they leave.”
Insight
Levy: Founders must read every line of their stock purchase agreement
“You can get away with not reading every word of your bylaws, for example, but you need to understand every provision in your founder stock purchase agreement.”
Insight
Levy: Startups should never fight trademark lawsuits or overpay for domain names
“It is a bad decision to waste time getting into a lawsuit with a company that claims you stole its trademark, and it is usually also a bad decision to spend a ton of money on a domain.”
Insight
Levy: Use convertible notes over SAFEs if prior investors used notes
“A time when you may not want to use the safe is if you are looking at a company that has already issued convertible promissory notes to earlier investors, and if that's the case, you're going to want to go ahead and just use that same note, not use the safe, a…”
Insight
Levy: Investors should not use SAFEs for lifestyle businesses
“If you want to fund lifestyle companies, You definitely do not want to use the safe, because then you're going to have this problem all the time.”
Insight
Levy: Angel Investors Waste Time Negotiating Downside Protection
“If you believe in the power law and you invest that way, excuse me, then what you're not going to do is waste time negotiating downside protection, because what you've realized is that eking out a one and a half X return
On all these little investments is not …”
Insight
Levy: Startup Founders Usually Do Not Want Angels on Their Board
“Sometimes angels think that they need to ask to be on the board of directors in order to be officially helpful, and you don't, and please don't, because it's actually not something the founders probably want. Sometimes, I mean, there's exceptions, but usually …”
Assertion Not checkable as stated
Levy: Founders breach contracts if they ignore SAFE pro rata rights
“This is a contractual right. You're breaching the contract if you do not give the safe holders their pro rata right.”
Assertion Supported
Levy: Most public companies and investor requirements make Delaware standard
“Most public companies are Delaware companies, so that saves you a little time if you're gonna go public. And some investors actually will require that you're in Delaware before they, before they'll fund you.”
Insight
Levy: Basic incorporation platforms cause founders to forget to buy their stock
“One of the reasons why we think, ah, Clerky and Stripe Atlas are so great is because they don't stop after formation. They also have post incorporation documents, and some of the not so good platforms stop after formation, and they don't do post incorporation,…”
Assertion Supported
Levy: Delaware franchise tax is minor for startups when calculated correctly
“If your startup is a Delaware corporation, there is an annual tax you have to pay to that state, but if you calculate it correctly, the tax owed is really minor for startups.”
Assertion Supported
Levy: The vast majority of angels and VCs will not fund LLCs
“The vast majority of angels and VC firms will not invest in an LLC.”
Assertion Supported
Levy: SAFEs are not debt, accrue no interest, and lack maturity dates
“One of the most important things, I say this a lot, the safe is not a loan. It is not debt. It does not accrue interest. There is no right to be repaid at some point in the future at some maturity date. So please don't call it a safe note.”
Insight
Levy: Startup dissolutions rarely leave enough money to repay investors
“In a dissolution situation, not only is there never any money for stockholders, but there's rarely enough to pay back investors either.”
Assertion Not checkable as stated
Levy: Startups no longer need PPMs for SAFEs or priced rounds
“You don't even need a PPM these days to do a priced round. Nobody, nobody really does those anymore. SAFE is just one document. That's all you need. For a priced round, it's usually just a term sheet.”
Assertion Supported
Levy: Startup corporate boards do not require an odd number of directors
“There's a misconception that board of directors have to have an odd number of directors, but that is not necessary.”
