Startup Legal Foundation: Building a Technology Business That Can Survive Success

Speaker A: Hey, it's Ryan Reynolds here for Mint Mobile. Now I was looking for fun ways to tell you that Mint's offer of unlimited Premium Wireless for $15 a month is back. So I thought it would be fun if we made $15 bills, but it turns out that's very illegal. Uh, so there goes my big idea for the commercial. Give it a try@mintmobile.com Switch upfront payment

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Speaker C: Welcome to Building Better Developers, the developer

Speaker D: podcast where we work on getting better step by step, professionally and personally. Let's get started. Well, hello and welcome back. We are continuing season 28. We're showing where AI exposes the cracks. But today we're gonna do things a little bit differently. Um, we're not gonna get quite into as technical a discussion initially, but we' we're actually going to talk about uh, some other things and I bet you we're going to find some cracks along the way. More importantly, let's get those introductions out of the way first. I am Rob Brodhead, one of the founders of Developnor, also the founder of RB Consulting where we help your business find clarity so that you can avoid spending a lot of money that you didn't want to spend. Save you a lot of money that you didn't want to throw out the door whenever you do your next project. Good thing and bad thing. Uh, good thing is it's summer. It is great. It's time to like I'm finally after what felt like 16 years of rain and cold and things like that out in the sun, able to uh, get out there and enjoy some fresh air and things like that. Uh, the downside is I feel like Michael a little bit because one stuff's blooming, there's stuff blowing in the air, uh, so much so I had a stain on a shirt the other day that we jello that was just from some bush that I had brushed up against. So uh, sometimes that does impact the allergies just a tad. Uh, the aforementioned Michael gets to dive right in with his introduction.

Speaker E: Hey everyone, my name is Michael Malach. I'm one of the co founders of Developer Building Better Developers. I'm also the founder of Envision qa where we fix broken systems and replace the guesswork with tested dependable solutions built around your business. Good, uh, thing and bad thing here. Uh, good thing. Um, I'm a gamer. The new season of path of exile 2 came out, so I finally freed up some time to get back into gaming, uh, having some fun with that. Also tested out Arc Raiders, which is an interesting game, but not quite my gaming style. So that's kind of the bad thing. I'm trying out some different games, and, uh, you find some good ones you love and some bad ones. But on the weather side of things. Yes. I don't know what it is. In Tennessee, we thought we were past the pollen and allergy season, but the last week has just been miserable here.

Speaker D: And that allows us to shift it to our guest today. Phil, would you go ahead and introduce yourself?

Speaker F: Sure, Rob. Hi, I'm Phil Crowley. I'm the founder and managing partner of Crowley Law. It's a boutique law firm that is passionate about helping technology entrepreneurs avoid getting taken advantage of as you pursue your dreams. Uh, I'm a former research physicist who decided that, uh, I didn't really enjoy spending 15 hours a day in the lab, wanted to have a more immediate impact, and so turned to law. And, uh, have had a really wonderful career in helping technology entrepreneurs take great ideas from the lab or the dining room table out to the marketplace. Uh, a good thing is, uh, I'm getting into video, getting more comfortable in doing short videos, videos, which has turned out to be a lot of fun. The bad thing is here in New Jersey, uh, we also have the pollen problem, but it's going to be incredibly hot today, so we're getting some heat warnings, and so we're getting into those dog days of summer. So that's it. Back to you, Rob.

Speaker D: Oh, thank you so much. Yeah, I guess that's all for all of us. At least we're somewhere hopefully cool enough that we can get through this podcast without melting along the way like a couple of snowmen. There's. Your background is incredible. Um, and so I guess the first thing is we'll talk about the legal side of it. And so I think everybody that's in technology, or at least a large number of us, feel like when we start getting into the legal side, there's a two way, there's a wall that goes both ways that we don't really understand legal, and very often whoever's on the legal side, to spend too much time understanding law, to understand, really our technology. And now, while you could be a unicorn because you have such an incredible background that you obviously speak all these languages, I'd like to start with more like a general, um, what should someone expect if they're a startup, especially a technology startup, what should they expect from legal counsel? And particularly, um, let's get into the, the specific side of it, of the technical things, of things like patents and copyrights and things like that that they may want to pursue to protect their business.

Speaker F: Great question, Rob. Rob. What I found is that um, technology entrepreneurs tend to be wonderfully deep in their technology but they don't understand how they can protect themselves from ah, personal liability. Uh, they understand, oh, I need a limited liability company or I need a corporation and so form them with a bargain basement, uh, formation company. But that company doesn't tell them how to run the business in a way that maximizes, excuse me, the protection, Maximizes the protection of those particular forms. And then there are some basics in terms of running the company that are very important. What I found is that what, um, new entrepreneurs tend not to do is to talk to their colleagues, mentors, friends who are more advanced and who have had uh, lawyers they've worked with and try to find a lawyer that you can talk to. We don't all talk in Latin phrases in a very stern voice. There are many lawyers out there, particularly in boutique firms, who really take an interest in learning about the business and helping entrepreneurs think through questions. Uh, I'll give you an example. I spent 30 years as an assistant general counsel at Johnson and Johnson. I found that when I was dealing with managing directors of the Johnson and Johnson companies, um, they really appreciated having the lawyer help them think through what their options are and what the consequences, consequences of that are. And if you can develop a relationship with a lawyer or law firm, but presumably a lawyer who will take the time to sit down with you and explain what you need to do in order to protect yourself, uh, that can be a very, uh, long term and productive relationship for you because you get to teach the lawyer about your business and, and the particular uh, issues and challenges that you're experiencing and they can help you identify uh, potential landmines, uh, case in point. Many people don't appreciate the importance of having written agreements in place among the founders of a company with your workers, with your vendors to protect the intellectual property that you are paying for so that it belongs to the company and not to some individual vendor. So having someone available to teach uh, about that. Well, it's in fact one of the reasons why I, uh, wrote my book, which you can get on Amazon. It's called Avoid Startup Failure. Learn the top 10 causes of failure for technology startups and how to turn them to your advantage. And what it does. Instead of some books that I've read out there that are kind of lawyers tomes and give you a whole list of things to do. And if you miss any of these things, you're doomed. But I tell the story of a likable young man who comes from a humble background, works really hard, gets a scholarship to technical, uh, university, and then goes out and starts to commercialize technology and makes just about every one of the top 10 causes of failure and somehow survives in the end. But people get to see what happens when risks turn out to eventuate. And having a lawyer who's been around the track, uh, with technology companies and appreciates technology companies can be very important. But that's why I say communicate. Talk to your friends, talk to your colleagues. Find other technology entrepreneurs who have set up good relationships with their outside counsel. It doesn't have to be tremendously successful. Uh, excuse me, um, expensive. If you can find the right person and you'll be able to tell whether or not you can connect with the person, whether or not he or she is the right person.

Speaker D: Well, that's interesting because we, we talk very often, uh, on the development side, on the, even on the business side of being able to understand, um, your customer. And when you're, when you're in the consult side of it, much like lawyers do, that one of the biggest things is being able to understand the business. Not just the technology, but in this case the business of the person you're working for. It sounds like, uh, that's the best thing for us to look for as well from a lawyer is someone that wants to understand and learn our business.

Speaker F: Yes. In fact, I've found that people who have been in house counsel have a, um, somewhat greater, ah, focus on learning about the business. Uh, I'll tell you a quick, quick story. Uh, one of the general counsels that I worked for at Johnson and Johnson was very fond of taking, uh, candidates for the Johnson and Johnson law department, which, as you can imagine, is a pretty prestigious spot. So after they had gone through the gauntlet of talking to just about every lawyer in the department, they get to the general counsel and general counsel set him down. And after some chit chat he'd say, well, you know, we don't hire lawyers in the Johnson and Johnson law department to practice law. And you can see the person rear back in their chair and say, oh my God, what sort of trick question am I going to get now? No, he said, just like we don't hire engineers to practice engineering at ah, Johnson and Johnson, we hire engineers to use their engineering skills to drive the business same way we hire lawyers to use their legal skills to help our businessmen drive the business in a way that is 1 legal, 2 ethical and 3 consistent with Johnson and Johnson credo. And so that kind of focus that uh, caused me to stay there for 30 years. And the idea is that we're on the same side of the table. We're working with people, we're trying to help them make the business succeed and giving them legal options that they can consider legal, ethical and consistent with the credo. And so I think that if you can find a lawyer who has been an in house counsel, you may find that that person is much more attuned to learning about your business than someone who could be a really brilliant lawyer. And uh, the big law firms out there, you know, can recruit the best and the brightest. But uh, the reality is if you're not billing $100,000 a month in legal fees, your work gets delegated down to the lawyer who has the skills to do the work, which may be a fourth year associate, so he's four years out of law school, presumably with no experience in business. A brilliant lawyer. But what I found is sometimes um, their view of negotiating uh, contracts is that every potential issue is a major issue rather than kind of focusing on the 20% of things that create 80% of the value. I think if you can find somebody who's been an in house counsel, they can take a much more practical view and are willing to take a much more practical view of the issues and learn a little bit more about how you conceive your business and what you see as the risks of the business and then to work from there, uh, it's kind of a communication thing. But you'll be able to discern that by having a conversation with the lawyer. If the lawyer says, well I don't want to talk to you unless you pay uh, a non, uh, refundable retainer fee before they even know what your business is, that that may be a lawyer that you don't want to talk to. But uh, there are plenty of lawyers out there. And now with the advent of artificial uh, intelligence, chatgpt Claude helping you find those lawyers a little bit more easily.

Speaker E: So I wasn't quite going to rip the band aid off on AI yet. Ah, but you just kind of touched on it, so I'm going to go ahead and rip that band aid off. Um, I love what it is that you do and you talk about because as an Entrepreneur. As a business owner, it is hard. We barely have enough time to work on our business, let alone, you know, figure out the legal things, make sure we're paying our taxes on time.

Speaker F: Right.

Speaker E: Contracts are huge. Um, most of the time you can go out to like legal, zoom and that and download what you think is a good contract and you find out that it's not binding enough to protect you or your assets with your business. As AI continues to bleed into our everyday lives, our businesses, what you're seeing, what you're doing right now to help entrepreneurs, to help businesses, how do you see AI, uh, disrupting that? Because I can see people using AI like Google to go find a layer. But better, uh, yet, hey, solve this problem for me. And because AI is still not quite where it needs to be and we're talking about technical people, we're good at figuring out that, oh, AI is telling us the wrong thing technically. How do we know that we're getting the right legal advice? So how do you see this evolving? You know, how, how do you caution or advise our listeners on the use of AI with legal?

Speaker F: Well, uh, AI can get you started on understanding what some of the legal issues are. But in terms of taking that AI product and applying it to your, there are risks. I had a client who went out to the Internet to get what he thought was an operating agreement for his limited liability company. Well, it turns out it was not an operating agreement. And when one of, when one of his partner stopped working in the business, he found he had no way to uh, disenfranchise the partner, to fire the partner basically. And it resulted in litigation and he almost lost his $50,000 investment. Investment in the business. So, uh, AI can help you understand some of the basic issues, but in terms of doing the detailed work, you don't know what AI misses. And the problem with large language models is that they go out and look at the entirety of the Internet and those are not curated resources. We use artificial intelligence in our practice, but we have a set of curated resources that are, uh, not, uh, hallucinations and uh, are uh, vetted and maintained, uh, templates and forms that we can then customize for uh, our uh, clients. So I would caution people against going out to the Internet because you may find that you're using a, uh, form that was the subject of a great deal of litigation and it just happens to pop up on the Internet. No quality control. And um, you can negotiate with a lawyer to get a fixed price for something. I think that the main fear that I have seen in clients is that, well there's this unending um, uncontrollable bill that comes in based on what's called the hourly uh, rate. Whereas uh, you can find law firms that can provide a fixed price or a not to exceed price for certain well defined things like um, coming up with uh, an initial draft, uh, that can be used in your business as a reliable template. And, and those are the sorts of things that lawyers can use to uh, create a, a uh, product, basically an sku, if you will, of a particular product that they can then customize for your unique business. But AI has a place in every business. I think successful businesses will learn how to employ them to drive down their costs and increase their speed. But uh, in terms uh, right now of the quality control for uh, documents and agreements that come in from the Internet, uh, I think they're a good starting place to help entrepreneurs understand what are the issues, to go through those and understand what the form is trying to cover and then go talk to a supportive uh, uh, startup or technology council and uh, explain what you want to achieve from a business standpoint. And if you get the right person, they can then help you achieve those business aims and focus on the business aims, understanding what the legal risks are.

Speaker E: So going down that path, um, I love that suggestion. In fact that's kind of how I found my financial guy. In fact I was doing my own finances and then just sat down one day and just started up a conversation with someone at a restaurant and found out he was as much a financial nerd as I was a computer nerd. And we just hit it off and you know, you hit the ground and you got a great relationship. But uh, I find, I see, I find that difficult though when I do talk to lawyers because a lot of the lawyers I talk to kind of have their sales pitch right. They kind of like here, here's how I can help you. Or if you have legal problems, come talk to me. From a technical perspective, a lot of these lawyers I talk to don't have a clue about our industry. They don't know really about out, uh, some of them understand intellectual property in that, but a lot of them are like real estate or commercial. How do you, or how would I, or how would you advise our listeners to kind of weed out the lawyers how to talk Lawyers speaking to understand what we need to hear, to understand that we're talking to the right person, we found the right fit to help us with our business.

Speaker F: That's a great question, Michael. The thing to do is to uh, ask a lawyer and uh, find out whether or not you can interview the lawyer. If the lawyer won't give you the time so that you can learn about his or her experience, then I think they're a little bit, uh, too much, uh, having too high a regard for themselves without being focused on the client. And ask them, how many other clients have you worked with? With, uh, in, in my particular industry, what sort of transactions have you dealt with? What sort of risks have you dealt with, uh, for a company like mine? And then explain your particular business and find out whether or not the lawyer has experience in that. You know, when you're admitted to the bar, you're admitted to practice in any area. But just like in a technology area, you wouldn't use uh, a person who's a software expert to design a, uh, an integrated circuit and vice, uh, versa because, you know, there are different verticals. And uh, the important thing is to find a lawyer who has experience even if it's not exactly consistent, at least parallel to what your business needs. So if you're in a software business, you'd want to have someone who can tell you that, yes, we've dealt with software businesses and give a couple of examples and uh, some examples of the sorts of risks that they see come up in those sorts of business. If you have a hardware business to be cognizant of the issues that come up in that particular area, and if the lawyer, uh, is a little bit too stuck up to take, uh, some time to explain that to you, it's the wrong lawyer, it tells you it's the wrong lawyer for you. And you won't have somebody who has the experience, uh, dealing in a practical way with the kind of risks that your business is involved in. Which is why I say, you know, go talk to your friends, go talk to your mentors about the lawyers that they have used in their particular areas and see if you can get a personal recommendation and then do your own due diligence. You know, find somebody who has experience in your particular area. And so the lawyer who did the will for your mom and dad is probably not the right lawyer to do your software license agreement. And uh, the lawyer who did the closing on your house, uh, is not the best person to do your employee proprietary rights and confidentiality agreement, even though under the rules of the bar they're thoroughly capable of doing that. But there are nuances in each of those practices, just like there are in your technology practices that uh, you should ask about and uh, do your due diligence. On the extent to which, number one, the lawyer has experience in the kind of issues that you're experiencing and number two, whether they are willing to communicate about that. Because communication between lawyer and client I find is the major measure of success.

Speaker D: And that is. We're about to pause and actually not about to. We are actually pausing right now. Don't, um, worry, there is more coming. Uh, this is one of those things that sometimes we have guests. I mean we've got great guests across the board, but sometimes we have guests that have very deep experience. Deep and I would even say broad. And that's the kind of stuff when you've got decades in huge organizations. Regardless of where you're at, there's just, there's so much experience that you can get out of that. Uh, and I think Phil's one of those that he was in a position that he's able to see a lot, learn a lot, uh, and he is sharing a lot. So don't, uh, don't get yourself some rest. Don't put your notebook too far away because you're going to need it for episode two when we come back. But until then, go and have yourself a great day, great week, and we will talk to you next time.

Speaker C: This was sponsored by RB Consulting, your partner in building smarter scalable tech. From startups to established teams, RB Consulting helps you turn tech chaos into clarity with proven roadmaps and hands on expertise. Visit rb-sns.com to start your next step forward. Also sponsored by Envision qa, they help businesses take control of their software by focusing on what matters most, quality, reliability and support you can count on. Find out more@, uh, envisionqa.com thanks for tuning in to the Developinor podcast where we're all about building better developers and better careers. I'd love to hear your thoughts or feedback, so drop A note to infodevelop.com be sure to subscribe on Apple Podcasts, YouTube or wherever you listen. And remember, a little bit of effort every day adds up to a great success. Keep learning, keep growing. It's and we'll see you in the next episode.

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