> The more sophisticated hires will realize this and you may then have to increase their compensation (in equity, cash or both) to make up the difference to avoid a morale issue.<p>What about the less sophisticated hires? Employees are trusting founders not to screw them over. I'd expect this piece to advise either: a) educating less-sophisticated employees, or b) increasing compensation for all employees that didn't get their equity grants before the term sheet.
* <i>Any agreements, understanding, instruments, contracts or proposed transactions to which the Company is a party or by which it is bound which involve obligations of, or payments to, the Company in excess of $25,000.</i><p>* <i>Any licenses or agreements of any kind with respect to the Company’s or others’ patent, copyright, trade secret or other proprietary rights, proprietary information or technology, including employee confidentiality and proprietary information agreements.</i><p>* <i>Any standard forms of agreements used by the Company.</i><p>* <i>Any confidentiality and nondisclosure agreements.</i><p>* <i>Any consulting contracts.</i><p>Consultants: this is one reason why it's often easier to get in the habit of working off your client's paper than trying to get them to accept your own. A lot of startups might not care, and will accept your MSA. But for some of them, accepting a new MSA creates a huge amount of hassle down the road.
> If the Company has any foreign employees, separately list (by country) all benefits provided to foreign employees.<p>How does this work for startups employing their foreign employers as independent contractors? Also, it might be helpful to mandate startups provide documentation how they're adhering to local labor regulations in countries outside of US jurisdiction (especially if you're a US company hiring in Europe; their local labor regulations differ substantially from US labor law).<p>Also, under Material Agreements, I don't see anything called out for compliance with GDPR for startups expecting to or currently serving users in the EU. Does YC perform diligence in this regard considering the 4% of annual revenue penalty for those in violation of the GDPR?<p>Very helpful resource, really appreciate YC sharing it.
I try to tell companies this all of the time - keep your books/contracts in order and diligence is a breeze. If you're expecting a Series A, and you aren't a household name, the diligence process will slow your business down, so plan ahead at a pace that doesn't disrupt your business.
Great move to make this transparent to founders, even at an early stage. I'd argue it even makes sense for founders to file their entire paperwork in a folder structure that reflects this set up <i>from the get go</i>.<p>What looks like an unnecessary distraction in the early days will save you time and headache later down the line.<p>You have to file your documents either way, so why not make sure they are already in a format that's ready for due diligence - once an investor or acquirer comes knocking, you basically have most of your data room ready.
Is there any kind of diligence for seed investments? I know there is the obvious YC application process, with an interview or two. After that, are there background checks? References? Anything like that? I know there isn't much to do diligence on with companies that are often just an idea.
Great list!<p>I'm missing a chattel (I hope that's the right term in English) or asset list and in the IP section a list of licenses obtained as well as statements of non-retention by former employees and executives.<p>Furthermore a statement of compliance with the various applicable laws (retention, privacy and so on) would be very useful, as well as the disclosure of the results of any audits the company has undergone.
This list may seem daunting to a lot of people, but as a "noob" startup founder, most of these become self-explanatory as you go along.<p>Just make sure you keep a record of everything you do officially and get help in legal/accounting in any questionable aspects of your work.<p>Don't wing anything. Don't be lazy, be super detail-oriented in everything and you'll be okay.
This is a really long list. How much of this is needed due to US securities law and how much to say "hey, you are really doing this on your own volition, all of our cards are on the desk?"<p>So much for a private sale of shares. In Pakistan, a proper listing agent can put your company on the stock exchange in under 2 month with most of this time just waiting for permits to arrive through snail mail.