It’s Never Too Early to Have a Lawyer on Your Side
Written By: Perry Fried
What do Veoh Networks, Carrier IQ, Homejoy, and Auctionata have in common? They are all failed startups that you have probably never heard of. And if you have heard of them, it is probably for an infamous reason. All four of these companies were failed startups due to lawsuits or illegal actions, and their downfalls could have easily been prevented.
“Sign clients now and sort out the details later.” This is the mindset of some CEO’s and their teams in the startup ecosystem according to lawyer Karelle Dagon. Dagon is very familiar with the startup environment; she works alongside startup teams on a day-to-day basis, assisting them on legal issues. She currently works in both the M&A and high-tech department at Glusman & Co., a private law firm based out of Tel Aviv, Israel.
According to Dagon, one of the reasons that startups may fail is because their leaders fail to look at the big picture. Founders and CEO’s often believe that having great ideas and creating viable products are the most important things to focus on; and while these activities are important, keeping legal actions in mind are just as quintessential for success. CEO’s will make spurt of the moment decisions that help their companies in the short run without considering the legal consequences down the road. Therefore, Dagon emphasizes the importance of having a lawyer on your side from the beginning.
“Whether you’re part of a group of entrepreneurs with nothing more than an idea or part of an established startup, don’t be afraid of the cost of legal assistance. Anticipating problems before they happen is much cheaper than resolving them after they occur… Not being proactive can be detrimental to companies and is often the reason that startups fail.”
Dagon went on to share that many of her clients try to achieve multiple goals simultaneously, leaving them unable to pay attention to legal details. They often don’t read contracts themselves.
“They are counting on you to read contracts carefully and inform them of any potential problems. Lawyers have to always be thinking two steps ahead to see how signing something in the present will look in the eyes of potential purchasers in the future and how it affects existing contracts. This, for example, is something that startup CEO’s often overlook.”
A key characteristic of great entrepreneurs is willingness to make mistakes and learn from them. However, this being said, some mistakes can be so injurious that they can lead to the demise of an innovative company before it even begins. This is why it is so important to have legal assistance while building and growing a startup. No matter what stage of development the company is in, “it can never hurt to have a lawyer on your side.”
I would like to give a huge thank you to Karelle Dagon and the Glusman & Co. team for their willingness to interview and share their advice. Keep up the great work!
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