Startup accelerator acceptance season is upon us and those lucky startups are now going through the vetting process that follows acceptance into an accelerator. In order to simplify the lives of founders and lawyers everywhere, I’ve put together a list of key items that often need to be addressed as part of the accelerator vetting process:
1. IP Ownership. Make sure all intellectual property developed relating to your startup has been assigned to the company through separate assignment agreements or as part of employment/independent contractor agreements. Remember, this is where the value in your startup lies.
2. Clean up the CAP Table. This is the time to clean up your CAP table and make sure that everyone you’ve “promised” equity is issued their shares and represented on the CAP table. There’s nothing worse than calculating the number of shares of the company to issue to the accelerator only to realize that you forgot an intended shareholder – your uncle granted 0.5% (undocumented) for doing company taxes a year ago. Go in with a clear picture, and proper documentation, of company capitalization.
3. Lock Down Founders. The accelerator will want to see that the founders and key persons are tied to the company, whether by an employment or contractor agreement. If your resources are limited, a reverse vesting agreement for founders should suffice. In addition to IP, founders are a key startup asset.
4. Canadian Company? Determine Cross-Border Structure. If the accelerator is in the U.S., Canadian startups have the extra steps of determining what Visa will allow them to work in the U.S. while at the accelerator and what cross-border company structure will meet company and accelerator needs. A discussion of company structure can be found HERE.
If you’re not in an accelerator yet, the above are important considerations to keep in mind for running any company and will make future accelerator vetting a seamless process.