For new entrepreneurs, the first pot of gold often may come in the mouths of a mimic – scheming small investors or even venture capitalists which may get an additional bite of the pie because of small little terms which may be missed out when you sign on that agreement to get the seed fund.
So here comes 500 Startup, a tech start up which provides legal documentations, free of charge – Who doesn’t like free things?
Similar to the Simple Agreement for Future Equity (SAFE) from Y Combinator released in 2008, Keep It Simple Security (KISS) covers not just agreement for equity, but for loans as well. What they actually do is to release a format of legal documents for the incubators and investors to use so as the relieve them the troubles of seeking a legal documentation which is most of the time an additional cost.
So what makes KISS different from SAFE, which set the bar for legal documentations? KISS actually fine tunes the documentations in such a way that the intentions of both the entrepreneur and the investors are protected – The entrepreneur will neither get in hot water for financing issues, nor the investor will get into trouble for the non-repayment. In simpler terms, it takes consideration of both parties needs and wants instead of just the entrepreneur.
A key thing to take note is that usage of the documentations from both Y Combinator and 500 Startup will not entail the legal responsibilities on their end should there be any occurrence of disputes – they are merely providers of legal documentations based on the experience they have from all the paperwork that they’ve done. They’ve really done the job of Mr Nice Guy to provide the community a template for everyone to follow on.
However, this also means that the entrepreneurs will have to be on their own once the ink is on the paper – after all that is one of the risks they have to be aware of when they start up on their own.