June 19, 2019

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June 17, 2019

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The Form is Always Wrong

We are often asked as to why we don’t simply provide “forms” on our website that can be downloaded and used.  After all, a number of law firms let you download term sheets and other forms such as SAFEs. Our simple answer is: THE FORM IS ALWAYS WRONG! Legal forms are merely starting points and most forms are typically only half an inch deep. A successful enterprise truly needs so much more depth than what is provided in a basic form.

While many of the issues involved in various transactions are similar, every single transaction that we get involved in is nuanced and different in some way from other similar transactions. Pattern matching is important, but each successful enterprise is successful in a unique way. Building an enterprise requires a balancing of the economic interests of the various parties. The Founders may want to control their destiny or be captains of industry, in addition to making outsized returns. Investors will be laser focused on those returns but may also be interested in promoting activities that involve sustainability or technical breakthroughs. Employees will be hoping for financial rewards but may also want to be involved in cutting-edge technologies and a flexible workplace. Finally, the Board of Directors needs to monitor the enterprise and provide relevant advisory insights. Getting this right is so much more than processing a form; it requires deep domain knowledge of the industry sector and a good sense of the people involved. It is similar to why the best doctors examine a patient before prescribing medication. Knowing the context of the situation truly matters and one size never fits all.

One other aspect that we all need to remember is that different sectors have different customs as to what is “market.”  While much of the popular press is focused on information technology companies, such as social media and e-commerce businesses, a significant portion of venture capital activity involves other sectors such as life sciences, biotech, and energytech.  Each industry sector has its own patterns and customs. To try to simplify it so that one size fits all would be a disservice to each and every entrepreneur who is trying to build a large and meaningful enterprise.

Finally, as a number of pundits have pointed out, we are in an era in which experts and expertise are often ignored. Why do you need an expert when you can find it on the Internet?  But as we have all witnessed, information on the Internet is often misinformation, out of date, or simply not relevant or applicable.  Using a legal form without legal advice reminds us of the commercial where people are deemed knowledgeable about many esoteric topics simply because they stayed at a Holiday Inn Express. In reality, that is really not the case. We have on too many occasions had to correct mistakes that were made in forms used before we represented a particular client, often at greater expense than if the client had sought legal advice initially instead of using a form.

©1994-2019 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

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About this Author

Daniel I. DeWolf, Mintz Levin, Emerging Companies Lawyer, Venture Capitalism
Member

Daniel is Co-chair of the firm’s Venture Capital & Emerging Companies Practice. In addition to his active legal practice, he is an adjunct professor of law at the NYU Law School and he has a wealth of experience in private equity and venture capital, having co-founded Dawntreader Ventures, an early stage venture capital firm based in New York.

Daniel's practice focuses on representing emerging technology companies, venture capital, private equity, sports and entertainment, corporate governance, and general corporate law.

Before joining Mintz Levin, Daniel was head of...

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Samuel Effron, Securities Law Attorney, Mintz Levin, Capital Financing Lawyer
Associate

Sam’s practice focuses on general corporate representation, securities law matters, and transactional work, including public and private offerings, mergers and acquisitions, venture capital financings, debt and venture capital fund formation, federal securities law compliance and reporting, and corporate governance matters.

He has provided counsel to a diverse range of public and private companies, both domestic and foreign, in a variety of industries, including video gaming, consumer electronics, media, e-commerce, software and high technology, education, marketing, financial services, and shipping/maritime logistics. He has represented both issuers and underwriters in connection with initial public offerings by a number of special purpose acquisition companies (SPACs) and has provided counsel with regard to their respective ongoing regulatory compliance and reverse merger transactions.

Sam’s pro bono experience includes assisting not-for-profit clients to obtain federal tax-exempt status and providing legal services to victims of domestic abuse.

Prior to joining Mintz Levin, Sam worked in the film and television industry on productions shot in and around New York City. He later served as a project manager at an online marketing and strategy agency, where he led a team of designers, writers, and programmers to create websites for clients including musician Sting. Subsequent to his agency work, Sam helped manage a company specializing in liquidation of technology assets for downsizing dot-com companies.

During law school, Sam was a staff member of the Cardozo Law Review and worked as an intern at the legal departments of This Is That Films and DC Comics.

212-692-6810