#NDA Compilation series

[multistanisms]

Save a Horse || Ateez

FANDOM: Ateez

PAIRING: Hongjoong x fem!Reader

WORD COUNT: 5407

RATING: M

POTENTIAL TRIGGERS: Biting, degradation [honestly, I'm not sure, so if anyone finds one, please let me know?]

SUMMARY: The staff of KQ know full well about the nonhumans who have taken the world by storm with their music. The last to reveal their nature is Hongjoong, a demon-siren hybrid. Despite staff worrying for his girlfriend, what only the members know is that the little witch is a delight that's not afraid of Hongjoong's darkness.

TAGLIST: @daceydeath, @justaaveragereader, @no1likemybbgcharlie, @spookidema

AUTHOR NOTES: Y'all please be nice, I haven't written smut in literal years. I saw the outfit Joong wears in this fic when I got to see Ateez back in July, and it has just sat and rotted my brain to mush, so here we are. Not beta'd this time around, but I did reread three times to try and catch everything. Much thanks to Dacey and Syd especially, because sometimes my depresso bean self needs some encouragement to share my weird joys. Enjoy, my dearies. <3

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One of the perks of your audio production degree was a free seat at the mixing booth during shows when you don't want to stay at the hotel waiting on Hongjoong to get back. Tonight was one such night, but the staff kept looking at you in a way that confused you. While the other members had been open with the company about their races from debut - from Seonghwa’s selkie blood to San’s Cheshire form, Hongjoong had only recently revealed to staff that despite masquerading as a regular human, his heritage ran closer to the other members of Ateez - as he was a demon/siren hybrid. Perhaps they were concerned for you, though they were unaware you yourself were a witch. Sitting at the booth as you watched the crowd pour in from the rain outside, you pulled your phone out to text your boyfriend. 

⇐: Hey gorgeous. How's it going?

My Captain: There's my beautiful girl. We were just talking about you.

⇐: Who's we, Joong?

My Captain: Hwa, Mingi and I. I was asking for opinions on what I should wear during the last set.

⇐: And you didn't ask me? 

My Captain: I want it to be a surprise, precious. It is our anniversary, after all.

The text stops you and you have to swipe down to check the date. Sure enough, it's the one year date since Hongjoong asked you to officially be his mate. Neither of you counted the two years of fuck buddy/situationship before that.

⇐: It really doesn't feel like it's already been a year already, holy shit. I didn't get you anything, baby. 😭

My Captain: Don't worry, after the flight to the next city, we have two days before we even have to do anything big. I'm sure we'll think of something.

⇐: How about we start with me making dinner?

My Captain: The show lets out late, beautiful. We have to do the send off tonight, which takes longer. But don't worry, I've got it handled.

⇐: Should I be concerned?

My Captain: Hardly. Just have fun. I'll listen for your screams in the crowd. 😉

⇐: Like you'll hear me with the sold out stadium of Atiny, baby. The seats are already almost full.

My Captain: Come now, you think I can't find your voice even with a full house? I know it so well, after all.

The blush that heated from your neck up into your face made you lower your head. You waved a hand dismissively when one of the nearby staff asked if you were okay, diverting by asking for some water. Once the member had wandered off, you took a breath to settle yourself before responding.

⇐: You have a show, Hongjoong. Focus on that instead of my screaming, yeah?

My Captain: Oh, I know there’s a show. Don’t worry, I’ll get the screams later. 😚

Your eyes roll at his antics, slipping your phone back into your jacket pocket and settling into the rolling chair as you move to watch the stage and willing the blush on her face to fade. The show is always a work of art, the energy Hongjoong and his team gave never failing to amaze you; though with none of them being human, it makes sense their energy is slow to fade. You loved watching the group perform, but sometimes it was hard not to focus on just Hongjoong. You enjoyed the concert in its entirety, but as the boys came back for the final encore set, you couldn't help the sharp intake of breath as you saw the outfit your boyfriend was wearing. Dark blue jeans clad his legs, covering the black boots he wore. His shirt was a black button up that hugged against his body, perfectly showing off his torso while simultaneously still leaving room for the imagination - though you didn't need to use it. The bolo tie was a good accent of silver against the shirt, but the obvious piece de resistance was the dark colored leather cowboy hat he wore atop his head. The sight alone stole your breath, unable to even glance at any of the other members for the duration of the encore. “You fucking menace.” Your tone is a quiet, breathy growl as the boys all line up on the lift to be dropped down and you move to stand, bidding the staff goodnight and making your way to the dressing rooms. 

Hongjoong is still wearing the hat as he laughs with Wooyoung and Mingi, but the moment he lays his eyes on you and all out smirks, you know he chose the outfit on purpose. He steps to one side so he can pull you to him, dipping his head to kiss you while his hands slid to rest at the small of your back. He's extra warm from performing, but you settle into him with ease. “There's my girl.” he teased when he pulled away, smiling down at you.

“What are you trying to do in this, huh? Drive me absolutely insane?”

“Partly. I do have a few better ideas, though.” He grinned, one hand moving to tuck his fingers under your chin and bring your lips back to his. “But those have to wait until we're back at the hotel.” He laughs quietly when your response is a quiet whine as you pout. “Don't worry, baby. All that's left is send off, you don't have to wait much longer.”

“But you look so good.” you counter, arms moving from his waist to snake at his neck and let your fingers play with the hair at the back of his head. 

“I know, Y/N. Tell you what. You take my card, get us something for dinner and I'll meet you at the hotel, okay? I'll come straight to you as soon as we're done.”

“Promise?”

“Swear it.” Hongjoong replies, stealing another kiss. 

“Fine.” You reluctantly pull away, immediately missing his warmth as he enters the dressing room. As the door closes, you catch the familiar sound of San’s naturally pouty voice as he teased his leader. You laugh a little, aware of the muffled noises inside as you lean against the wall by the door to wait. The chatter inside bursts louder as Hongjoong reappears, hat no longer resting atop his head. “Awh, where'd my cowboy go?” You tease as your lips pout playfully, which grants you another kiss. 

“Don't worry, baby girl, I'm still your cowboy,” he assures, hand slipping his card into the back pocket of your jeans. “And only your cowboy.” He laughs as you hide your face in your hands at the growl in his voice, his own coming to wrap at your wrists and gently urge them away from their position as he changes to a softer, playful tone. “Come now, don't hide from me, Y/N. You know I love it when you blush for me.” 

“Oh hush, you. You shouldn’t be fucking growling at me in public when you look like this.” You huff playfully, but you're powerless to the soft tone he uses, looking up at him just so you can see him smile at you as if you'd hung the moon itself. “Just come home quick, yeah?”

“As soon as I can slip away, I will be there.” 

You go to step back so you can leave, but as he opens the door to leave you, you reach for his wrist, tugging him back to you to steal one last kiss, smirking as you nip your teeth over his lower lip and he groans loudly. His eyes flash crimson, and you know you’ve tempted him in return. Satisfied you've returned the favor when he's already tempted you, you ruffle your fingers through his hair and quickly step out of reach. “I love you.” You laugh as you slip out of view. You can just barely catch the familiar ring of his darker laughter, knowing that you were in for at least a little bit of trouble when he got back to the hotel. It was worth it, though, seeing as he'd sauntered around on stage in the outfit just to rile you up. 

All’s fair in love and war, right? 

You pass through familiar faces of staff, congratulating them as you find your way out to the underground garage where your rental is parked near the bus. Traffic is still going to be a mess, but not as insane with the show having a send off, so you have time to think of what to get for dinner. You settle on fried chicken, looking up the nearest place that serves it because you don't think you have time to finish cooking before your boyfriend joins you. Once you find a place, you order food for the two of you and head towards the restaurant. As you pull into the shopping center and get out, you spot another shop nearby that catches your eye, and you go there first before grabbing dinner and stopping to get some ice cream for dessert. The drive from the shopping center to the hotel isn't long, thankfully, and you find yourself sliding the key card through the door in no time at all compared to leaving the arena. The company always makes sure there's decent accommodations for everyone, and you set the bag of food in the kitchenette counter so you can put the ice cream away. You then go to change into more comfortable clothes - a pair of pajama pants and a tank top you'd stolen from Hongjoong (who had purposely gotten it too big so you would steal it). You turned your little speaker on to play music, going about moving the desk chairs closer together and setting out the boxes of food. You're singing as you go about the process, lost in the sheer domestication, and don't register the sound of the door unlocking. Hongjoong’s voice harmonizing with your own as his arms wrap around you from behind startles you from your mind and you laugh a little. “Hey there, gorgeous.” You greet, adjusting so you can tilt your head back and let him kiss you. “How was send off?”

“It was fun, but honestly, I was also a little out of it.” Hongjoong admitted. “I’m pretty sure I missed interacting with a few fans.”

“I'm sure they'll forgive you.” You playfully banter back. “You deserved to be distracted after what you did to me.”

“Oh, I plan on doing a lot more than distracting you, princess.” Hongjoong's voice pitches into a growl, head dipping to bite at where your pulse beats just under your jaw. He holds you securely even as your legs threaten to give out. 

“Fuck, Joong.” You breathe, one hand moving to slide into his hair. You can feel the laugh even as he continues to bite and suck at your skin, intent on making sure a possessive mark is left behind when he's done. 

“I know all your sweet spots after three years, baby. You should have known I'd use them after that tease.” The smirk in his voice is evident as one hand snakes lower so he can slip it beneath the fabric of your pajama pants, but stops just beneath the hem to simply brush his fingers over your hip gently.

“Kim Hongjoong, we've been over this. It isn't a tease if you have every intention of following through.” Your words are breathless even as you correct him, barely keeping yourself up because true to his word, Hongjoong knows every spot that drives you wild. “And if you thought for a moment I wouldn't follow through when you look this delicious, well, that's just sad.” You're very aware of the heat pooling in your body, turning into putty with every touch and kiss Hongjoong places on your body. 

“Did you think I wouldn't follow through?” He smirks, stepping away to pull you towards the bed. “Did it not occur to you that I picked this exact outfit specifically for you?”

“Oh yeah, just for me? Why, so I could jump your bones, handsome?” You tease back, your voice shaky from desire as he brings you to the bed. 

“Maybe. Would that make it better, princess?” Hongjoong cooed, moving to make you sit on the foot of the bed so he can settle on his knees between your legs. Dark eyes looked up at you, the sheer lustful adoration in them making you bite your lip and moan. 

“How are you so fucking gorgeous on your knees? It's not fair.” You pout, moving to tilt the hat back so you can see his face better. He smirks up at you, reaching up to remove the hat and set it aside, hands moving to the waistband of your pants to tug them down, his eyes watching you as you adjust to help him remove the fabric easier. When his eyes lower, he groans, eyes closing briefly. 

“What are these?” He coos breathily, fingers trailing up your thighs to tease over the navy colored lace of the underwear you have on. 

“I figured since I didn't have a gift, I could find something else to give you.” Your voice is smug even as he brushes his thumb over the fabric covering your core, biting your lip. “Happened to find a shop that was still open and I know how much you like me in lace.”

“I do love you in lace, baby, but you've never made a special trip like this just for me.”

You pout at his response despite the desire burning through your veins. “Do you not-”

“I love it, princess, please don't doubt that. You're fucking spoiling me with this. I couldn't ask for a more perfect anniversary gift. I simply can't decide if I want to ruin these panties while you're wearing them or take them off and just devour you.” One hand is pressed at the crotch of his jeans where his length is already visible through the denim, and you almost feel sorry for his indecision. Almost. 

He started it by wearing the damn cowboy outfit he's in, after all.

“Would seeing the set help you decide?” you ask, and the feral heat in his eyes as they swirl crimson in desire when he looks up at you makes you giggle, crossing your arms over your body to grab the hem of the shirt and pull it off, revealing the matching lace bra underneath the tank top. There's a pride that swells when he moans loudly at the sight of you in nothing but the lingerie set. 

“Fuck, Y/N,” he lurches up at you, sealing his lips over yours as his hands move to cup at your chest, massaging your breasts as he moans into your mouth. You can't help but laugh out a soft moan as he trails his lips further down your neck, leaving open mouth kisses and a faint touch of saliva on your skin. “So beautiful, so soft…can't believe you're really mine.”

One hand moves to play in his hair, gripping at the brown tresses gently. “I'm only yours, Joong, my delicious cowboy. You claimed me a long time ago.” You shiver as his laugh vibrates through you, his hands moving to unclasp the bra before nudging at you to lay down so he can hover over you, your arms above your head as you look at each other longingly. “Our food will get cold, baby.”

“There's only one thing I'm hungry for right now.” Hongjoong breathes, holding himself up with one hand as he dips his head, taking one nipple in his mouth while his fingers scratch gently and pinch at the other. The ministration makes your back arch, one hand returning to his hair to tug at the strands. It earns you a pretty little moan, Hongjoong switching his mouth to the opposite nipple. Teeth graze over the sensitive bud and you gasp, hips bucking up suddenly and letting you feel just how hard your boyfriend already is for you. Hongjoong laughs, pulling away to kiss you. “I love how responsive you are to my mouth, princess.”

“I'm responsive to you, Hongjoong, not just your mouth.” You manage to breathe back, tongue wetting your lips when he pulls away. 

“Well, I plan on using my mouth thoroughly first.” Hongjoong grins down at you, starting to trail bites and kisses down your body. When he gets low enough, his teeth clasp onto the fabric of the panties and tug. Unable to help yourself you prop up on your elbows to watch him, hips lifting just enough to aid his task. His eyes stay locked on you as he works the fabric down. Once it's low enough, he uses his hands to finish removing it, kissing up the inside of your thigh. “Mhmm, how many times should I drive you over that edge, hmm? My precious girl.”

You can't help but reach out to card your hand through his hair again, licking your lips. “As long as I get a chance to reciprocate in between. It's not just about me, baby.” 

“I could get off just listening to your noises, Y/N. You know that.”

“Mm, but I like getting you off in other ways.” You fire back. “My cowboy needs some physical touch, too.” You're more than aware of the shiver than runs through his body, picking up the hat to put it back on his head. “Let me ride you like a good girl, yeah? What is it they say? Save a horse, ride a cowboy?” The words seem to break his will to debate, arms wrapping around your thighs and tugging you towards his face.

“Let me taste you first. I want you to fall apart on my tongue before you go on your ride. Be a good girl and speak up for me.” He doesn't give you a chance to respond, mouth enveloping your folds and swirling his tongue around your clit. Having him between your legs like this is nothing new, he loves getting to please you in this way, but the hat sits just so that he can look up at you and yet you couldn't see him, which somehow added to your arousal. One hand moves up to lace his fingers through yours, squeezing your hand as he moans. The sound vibrates into your body, making you wetter as your eyes close and you moan in return.

“Fuck, Joong, baby,” you know you can't last long after the build up, and it doesn't bother Hongjoong at all, he sucks harder at your clit, sliding two fingers between your folds as he continues. The sensations are too much and not enough, your body unable to decide if it wants to pull away or press closer. Hongjoong obviously senses it, adjusting so he's hovering better over your core, slowly adding a third finger before scissoring them. Your back comes off the bed as you cry out, eyes closing as you grip at the sheets and your head slams back onto the bed. You're right on the edge, feeling your body quake from how tight the coil of your pleasure is. “Joong, mm, Hongjoong, fuck, don't stop, please baby, don't stop.” It’s obvious he has every intention of having you hit that first orgasm quickly, his mouth sucking harder as his hand speeds up at your pleas. It doesn't take much longer before your legs fight against his hold, your release spilling on his fingers and tongue while you half scream his name. He doesn't stop though, making sure you ride out the high as he takes every bit you give him, moaning like he's just had his favorite meal. When you whine, he pulls away, knowing it means you've become too sensitive.

“Did your cowboy do good?”

“So good.” You pant, watching him with half-lidded eyes. “But it's my turn now, Joong.” He smirks up at you, moving onto the bed so he can kiss you deeply, swiping his tongue over your lower lip to ask for entrance. You open your mouth eagerly, letting him make you taste yourself as you moan into the kiss, pulling at his shirt to hold him close. His hands lift to start unbuttoning his shirt but you smack at his hand. “No.” you whine. “Let me taste you while you're still like this, please? You can take it off when you fuck me, I just want to see you fall apart like this.” You beg, fingers already working open his jeans as you start to slide off the bed and try to tug him over. His hands catch your wrists, however, a stern command escaping his lips as your knees touch the floor. 

“No, baby girl, get up from there.”

“But-”

“Y/N, I didn’t say no. I just don’t want you on the hotel floor like a common whore.”

“But I’m your whore, Captain.” you counter, grinning when the name makes his gaze darken. “I don’t mind being on my knees for you like a good girl.”

“Princess, we’ve already been over this.” His grip at your wrists tightens and he tugs you up to standing, getting off the bed himself to look down at you from your height difference. He leans in, swiping his tongue up your neck and grazing his teeth over your pulse before growling quietly in your ear, the sound alone making you shiver. “You may be my whore, but you will not sully yourself on the floor of hotel rooms. So if you’re so intent on sliding my cock down that pretty little throat of yours,” he pauses to dip his head to the other side, biting hard at where your neck and shoulder meet, smirking at the moan you make and the way your body quivers before he lifts his lips to your ear again. “Get your ass back on the bed like a good girl.” 

The obedience is immediate, you crawling onto the bed the moment he releases the hold on your wrists, tongue wetting your lips as you wait patiently for him to join you. You sit back with your legs tucked underneath, hands clenching as you lower your gaze for a moment. When he moves to join you on the bed, he slides his jeans down just enough to reveal the boxers underneath, leaving the clothing on per your request as he settles on the bed and leans back against the headboard. You can feel his gaze on you, a shiver of pleasure down your spine as he hums appreciatively at your nude form before opening his arms. 

“Come here, darling girl. Let me kiss you.”

You move closer to him, scooting up the bed and letting him guide you between his legs so he can lean into him, sealing your lips together. You moan as his fingers wind their way into your hair, his nails becoming claws to faintly scratch over your scalp. This kiss is heated, Hongjoong dominating the contact with ease as he holds you to him. Your hands move lower, fingers brushing over the outline of his cock through the boxers he wears. “Please, Joong,” you beg between kisses, voice little more than a whine. “My Captain, my soulmate, please.”

Hongjoong hums, the sound vibrating in his chest as he swipes his tongue over your lips again. “What is it, my precious? What do you want from Captain, hmm?” He’s mocking you, and you know it, but it’s so undeniably sexy because he saves the sexual torment specifically for you. “Use your words, be a good girl for me, yeah?”

One hand moves shamelessly over his erection, whining helplessly as you press just faintly against the bulge. “Let me taste you, please. I need it.”

“Mm, look at you, begging so pretty for me.” he smirks as he drags your bottom lip between his teeth, and you’re very aware of the way he’s completely dropped his human facade, fangs catching your skin as he tugs your lip teasingly. “So good and obedient. I haven’t even given you my cock but you’re already drunk on it.”

“Drunk on you, Hongjoong.” you weakly correct, whimpering as one hand reaches up to wrap around your throat for a moment. 

“Yeah, it’s just my presence making you so wet and needy?” he tilts his head, crimson eyes glowing and he smirks at you, and you’re very aware of the way you can feel the emotions between each other.

“Fuck,” you gasp, one hand covering the one he has at your throat. “Please, Joong. Please let me have you in my mouth. I can be such a good girl, please.”

“Oh, I know you can be. You’re always so good, even when you’re getting punished.” Hongjoong growls, leaning to kiss you roughly. “Have your fill, my princess. I’ll let you enjoy my cock.”

You almost collapse into his lap, thanking him wildly as your hands move to slide the boxers down and let his shaft free. There’s already precum glistening on the tip and you lean to swipe your tongue over it, proud when you hear Hongjoong moan and his length twitches under your touch. You start slowly, lowering your mouth over him through a few breaths through your nose, waiting until his shaft grazes the back of your throat before moaning. Hongjoong has one hand gripping the sheets, claws tugging at the fabric as the other moves to pull your hair from your face. 

“Look at you, knowing how to use your mouth like a good little slut.” Hongjoong both praises and degrades, fully aware of the way you squirm at the words. “You like making me writhe for you, don’t you? Like watching me while you fuck me with your mouth?” The hand in the sheets moves as the other tugs at your hair, pulling you from his length enough to brush his fingers over your lips while one of your hands wraps around him to stroke him while he holds you away from the length. “I showed you how good it feels, and now you love to do it, huh?” He watches as you nod. 

“I like seeing how good it makes you feel,” your voice is rough, but you hold his eyes, smirking at him. “I love the way you moan and hiss, the way you praise me for pleasing you right.”

“You do love to be praised, huh?” Hongjoong mocks, hips rocking up into your hand as he speaks. “You get so wet and needy when I tell you you’re doing a good job. My perfect mate, my good girl, always being so attentive to my reactions. I taught you so well, didn’t I?”

“Yes, Captain.” you reply.

“I should reward you, princess.”

You shake your head a little. “Not yet, please. Let me be a good girl and please you first.”

“You’re already being such a good girl, though, Y/N.” He teases, but when you once more shake your head, he smirks at you. “Ahhh, I know what it is you want. You want us even before I fill you with my cock, don’t you? You want me to cum all over your tits so I can clean up my mess, yeah?” When you moan with a near-frantic nod, legs squeezing together as you lick your lips, he hums thoughtfully.

“Yes,” you beg, eyes closing. “Yes, please, Hongjoong. My soul, my captain, my love.” Your hand still works over him, and you know he’s aware of the way he’s leaking precum, his eyes never leaving yours. He then nods, relaxing the hold on your hair so you can once more dive onto him, hollowing your cheeks every few bobs of your head to further spur him to his first end. You recognize the way his head tilts back, the way his legs fall open even more, how his hips roll erratically up into your mouth. Suddenly, his hand tightens and pulls you up, a string of saliva connecting your now swollen lips to his throbbing member. Your hand returns to stroking him, adjust so your chest hovers near his shaft. His free hand moves to join your own at his length, applying just a little more pressure as he watches you.

“Can’t wait to see you painted in my cum, to clean up your tits while you ride my cock.” he pants, body quaking as he gets closer. A few more pumps from your hands and his release hits him, coating your breasts in his seed as his head falls back and whacks the headboard, his eyes closed as he breathes. “Fuck, princess,” he huffs, opening his eyes to smirk down at you. “Such a good job. Couldn’t have asked for a better mate than my magic girl.”

You giggle breathlessly, moving to close his legs so you can tug at his pants, smirking up at him as he comes down from his high, watching you as he catches his breath. “I love when I get to see you like this.”

“Drained of every fluid and aching for more of you?” Hongjoong jokes, his eyes still glowing even in the light of the hotel room. 

You shake your head, letting the denim and the boxers fall to the side of the bed, scooting up to straddle him while your fingers begin unbuttoning the shirt. “Your true form, Hongjoong. The demon I fell in love with.”

“I fell in love with you first, you know.” Hongjoong sits up to help you slide the shirt off, hands then roaming over your body. “The first time you asked to see this form, I knew I was lost on you. You stole my heart when I didn’t even think I had one to steal.” he tilted his head to kiss at your shoulder and up to your neck, his claws teasing over your skin. “That’s why I can never get enough of you, my princess.”

“Is that why I have a mating scar and a ring?” you teased, sliding up to drag the pads of your fingers over his shaft, the contact easily stirring it back to life, hardening under your knowledgeable touch.

“You have both because you said yes,” Hongjoong countered with a moan as his arousal spiked again, biting at your pulse as your fingers caressed over his length. “You have them because I love you and my soul is yours. The sex is just a bonus.” You can’t help but laugh, adjusting so you can ease his semi-hard (and getting harder) length into your folds, both of you moaning as you became one. The moment he bottomed out, Hongjoong was pulling you into a deep kiss, hands on your hips as he devoured your mouth before dipping his head to swipe his tongue through the sticky mess still coating your breasts. “I could go so many rounds and not need a break. You feel and sound so good.”

“We still need sleep, my beloved demon.” you breathed, tilting your head to kiss at his neck. “We have a flight in the morning.”

“Then let’s make sure your ride lasts.” Hongjoong smirks as he looks at you, leaning to to swipe another bit of his own release from your chest. “Because I am so far from done with you.”

“All this from some lace lingerie? Maybe I should buy more.”

“You started this, my precious girl.”

You make a point to lift your hips and drop without warning, smirking as Hongjoong almost screams out a moan. “Don’t get it twisted, Hongjoong. You started this when you decided to flaunt around in a full cowboy outfit like I wasn’t going to devoid you over it.” 

He responds by picking his hat up from the bed where it had fallen, placing it on your head with a smirk. “I’ll wear it anytime you want me to, gorgeous.”

“What if I just want you in the hat, hmm?” you ask, laughing out a moan as he begins to guide you on him, the two of you falling into a rhythm as he watches you. 

“I’m your cowboy, remember?”

“Yeah? Let me save a few horses, huh?”

Hongjoong smirks, fangs showing as he tugs you against him into a kiss, which allows him to change the angle of his hips as he picks up the pace to hear you moan more. “You can ride me anytime, Y/N. Day or night.”

[chrismerle]

Elsa's Writing Commissions

Hey, hi, hello. I'm Elsa, if the title didn't give it away. If the title also didn't give it away, I'm doing writing commissions! Because I am broke. If it puts your fears at ease, I'm not a newbie to this; I've been a professional ghostwriter for years, to the tune of well over 800,000 words.

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FANDOM LIST (below the cut):

Kingdom Hearts (not Back Cover or Union)

Final Fantasy VII (original Compilation or Remake)

Final Fantasy XV

Persona 5, vanilla or Royal

Persona 4, vanilla only

Dragon Age (games only)

Mass Effect

Hazbin Hotel

Helluva Boss

Avatar: The Last Airbender (original series only)

Good Omens (book or show)

Five Nights at Freddy’s (games or movie, not the books)

Who Killed Markiplier? and related series

The Legend of Zelda (OoT, MM, TP, SS, or BotW only)

Star Wars (movies only)

Power Rangers, Ninja Storm and Dino Thunder

Yuri! On Ice

Fullmetal Alchemist, original anime or Brotherhood

Black Butler, anime or manga

Transformers, cartoons, anime, and live action movies

Critical Role campaign 2

Subnautica

The Sandman (Netflix series only)

Sonic the Hedgehog (recent movies only)

Howl’s Moving Castle (Ghibli movie only)

EPIC: The Musical

[chandelblogs]

Arihant's NDA Pathfinder and NDA Mock Tests: The Ultimate Resources for National Defence Academy Exam Preparation

Preparing for the National Defence Academy (NDA) entrance exam requires a robust study plan and access to comprehensive resources. Arihant Publications, a leader in educational materials, provides two outstanding resources for NDA aspirants: the NDA Pathfinder and NDA Mock Tests series. These books are meticulously designed to cover every aspect of the NDA exam, ensuring that candidates are well-prepared for success. Here’s how these resources can help you ace the NDA exam.

Comprehensive Guidance with NDA Pathfinder

The NDA Pathfinder by Arihant is an all-inclusive guide that covers the entire NDA exam syllabus. This pathfinder NDA book provides detailed sections on Mathematics, General Ability, and English, ensuring that students build a solid foundation in all the required subjects. Each chapter is followed by exercises and practice questions that test the student's understanding and application of concepts.

The NDA Pathfinder is highly regarded among NDA preparation books for its systematic approach and extensive coverage. It includes detailed explanations and solved examples that help students grasp complex topics. Additionally, the book offers tips and strategies for tackling different types of questions, making it an invaluable resource for comprehensive NDA exam preparation.

Realistic Practice with NDA Mock Test

Arihant’s NDA Mock Test series is designed to provide students with realistic practice opportunities. These mock tests simulate the actual NDA exam environment, helping candidates improve their time management skills and build confidence. Each NDA mock test in the series is crafted to reflect the latest exam pattern, providing a genuine preview of the test.

The NDA Mock Test series includes detailed solutions for each question, allowing students to analyze their performance and identify areas that need improvement. This thorough review process is crucial for refining exam strategies and enhancing overall preparedness.

Strategic Preparation with NDA Solved Paper

Arihant’s collection of NDA solved paper books is an essential resource for effective exam preparation. These books compile questions from previous NDA exams along with detailed solutions, making them an invaluable tool for understanding the exam pattern and question trends. Working through NDA solved paper sections helps students become familiar with the types of questions asked and the level of difficulty, which is crucial for building confidence and competence.

The detailed solutions provided for each question enable candidates to learn the correct approach and methodology, ensuring that they are well-prepared for any question that comes their way.

Holistic Preparation with NDA Preparation Books

The NDA preparation books series by Arihant combines the comprehensive content of the NDA Pathfinder with the practical experience offered by the NDA Mock Test series and the analytical insights from NDA solved paper sections. This combination ensures a well-rounded preparation strategy that enhances both knowledge and exam-taking skills.

The NDA preparation books series includes strategic tips and detailed explanations, helping students optimize their study plans and perform their best on the exam day. By integrating theoretical knowledge with practical application, these books ensure that candidates are thoroughly prepared for all aspects of the NDA exam.

Conclusion

Arihant’s NDA Pathfinder and NDA Mock Tests series are indispensable tools for anyone preparing for the National Defence Academy entrance exam. The pathfinder NDA book provides comprehensive subject coverage, while the NDA mock test series offers realistic practice. The inclusion of NDA solved paper sections further enhances readiness by offering insights into the exam format and question trends.

Together, these NDA preparation books from Arihant ensure a thorough and effective preparation strategy. As candidates gear up for this prestigious exam, they can rely on Arihant’s expertly crafted materials to guide them towards achieving their goal of joining the National Defence Academy and serving the nation with pride.

[manasastuff-blog]

Defence GK Questions for NDA 2024#gkquiz#gkquestions#trending#youtubevideo#trendingshorts

Watch full video: https://youtu.be/5kAayktjAG8

Are you preparing for the NDA 2024 exam and looking for some challenging Defence GK questions to test your knowledge? Look no further! Manasa Defence Academy is here to provide you with the best NDA Coaching, and in this video, we have compiled a series of Defence GK questions specifically tailored for NDA aspirants like you.

In this video, you will find a comprehensive set of Defence General Knowledge questions that will help you prepare for the NDA 2024 exam. Whether you are a beginner or an experienced candidate, these questions will challenge your understanding of various Defence-related topics and help you assess your preparation level.

Call: 77997 99221 Web: www.manasadefenceacademy.com #defencegk#defencelife#ndaquiz#preparation#tips

[secretswiftymarvelfan]

Memory Served Q&A

Little bit late, but better than never! I have compiled all the questions I’ve gotten following the final part of Memory Served, these are questions I’ve gotten from various different platforms, messages, comments and asks! 

obviously this will contain spoilers so go check out the series if you haven’t already done so!

Did Ransom know Y/N before the accident?

Yes, that flashback she had of him was true. They had met at a book event party (she works in book marketing for a different publisher based in Newton) and she turned him down. 

What was Ransom’s motive?

this answer is a little vague because I am planning a sequel so all i’ll say is that after Y/N turned him down he then overheard her saying less than complimentary things about him and decided to prove her wrong.

Did Walt know about Ransom’s plan?

No, he’s just a dick and said those things to make Y/N feel uncomfortable

What was his plan for when she remembered everything?

He hoped that he’d won her over enough that she would stay with him anyway but he also planned to just trap her in a marriage and make it impossible for her to divorce him or live without him

Why didn’t the people in the restaurant not recognise her?

They did, but Ransom had blackmailed and forced them to sign NDAs

Did his family not recognise her, or know there was a woman missing?

No, they’re too wrapped up in themselves to pay attention to anything else

Were the cops and the hospital involved?

Not all of them, but some yes

Did Ransom take inspriation from the book Walk mentioned?

Yep, because where else is better to take inspiration from!

How does the Y/N, Frank, and Andy all know each other?

Frank and Andy became friends while studying at Harvard, Andy went on to become a lawyer while Frank went to work at a different university as an assitant professor. Y/N was a mature student, a good few years younger than Frank and Andy, she was studying marketing when she met Frank and they started hooking up. They eventually called it off, and after graduating Y/N meets and falls in love with Andy and by this time Frank has moved to Florida. suffice to say when Andy introduced Y/N to Frank it was a little awkward but they all saw the humour in it! They all remained in contact, Andy and Y/N helping Frank out during the custody battle over Mary. 

Let me know if you have anymore questions and I’ll add them to this list!

Series Masterlist / Masterlist

[marwahstudios]

50 Most Influential Indians 2020 by Fame India Magazine and Asia Post

New Delhi: The list of ‘50 Most Influential Indians’ compiled by Fame India Magazine and Asia Post is based on a survey of 12,000 respondents across India. With 99.6 percent people voting/giving views in his favour, Prime Minister Narendra Modi is the most influential Indian and a mass leader.

If we ask you to find a platform that has Prime Minister Narendra Modi, Jharkhand CM Hemant Soren, Kerala CM P. Vijayan,  Mukesh Ambani ,  Ratan Tata & Ravish Kumar together in it, then you may certainly have a tough time in doing it. But we have one for you.  Fame India Magazine and Asia Post  have together compiled a list of ‘50 Most Influential Indians.’

“The list is based on a survey that saw 12,000 respondents take part. These respondents, chosen from across the social, intellectual and professional lines included writers, artists, bureaucrats, senior journalists, social activists and businessmen. The man who has topped the list should not come at all as a surprise because he is not just the most influential Indian in India at this time but probably most influential Indian in the world, Prime Minister Narendra Modi. With 99.6 percent people voting/giving views in his favour, he is the most influential Indian and a mass leader,” informed Dr. Sandeep Marwah Chancellor AAFT University of Media And Arts and part of Fame India Selection Board.

Hindi heartland Uttar Pradesh’s Chief Minister Yogi Adityanath has been liked by 97 percent of the respondents for his honest image and administrative qualities. Home Minister Amit Shah gets thumbs up from 96.5 percent for his determination, ability to take tough decisions and implement them. India’s well-known industrialist Ratan Tata has secured the fourth position with 95.2 percent votes. Mostly, people chose him on the basis of his social responsibility and astute entrepreneurial abilities. The fifth is Reliance Industries Chairman Mukesh Ambani, the richest man in India. He was chosen by respondents primarily for his contribution towards making the power of the Internet grow deeper in society.

For his efforts towards successfully containing COVID-19 spread in the state, Kerala Chief Minister gets the sixth position. Sri Sri Ravishankar, spiritual leader and messenger of world peace secured the seventh position. Defense Minister Rajnath Singh has successfully made to the top 10. Respondents voted him for his clean image and efforts towards self-reliant India in defense manufacturing. The man of all seasons, NSA Ajit Doval, has secured the ninth spot, while Odisha chief minister who enjoys a great connect with common people, Naveen Patnaik comes 10th on the list. PM Modi’s handpicked man PK Mishra, his Principal Secretary is on the 11th position for his managerial skills and effective execution. The young and effective Chief Minister of Jharkhand, Heman Soren, is the 12th, and Delhi CM Arvind  Kejriwal has found the 13th place on the list.

Editorial director of Fame India Magazine, US Sonthalia on the preparation of the list said “There were a total nine heads including personality, impact, vision, image, pro-development outlook and efforts towards upliftment of the society under which we have carried out the survey to select these 50 most influential Indians of 2020. The number of respondents was around 12000 which includes people from the varied field like social work, theatre, cinema, art, journalism, industry, commerce and cooperative. Fame India’s objective behind acknowledgement of such people is to set a high-performance standard for the rest in the society”.

Founder of AAFT Sandeep Marwah said “These 50 Indians are the torch-bearers of the New India that we think of creating. The price of success is hard work, dedication to the job at hand, and the determination that whether we win or lose, we have applied the best of ourselves to the task at hand. These people are the living example of it”.

Nitin Gadkari, the Union Minister who will always talk of growth, development and is known to be the man of his words, is 14th. For making positive reforms in Railways, Piyush Goel gets the 15th rank. ‘Sushasan Babu’ Bihar Chief Minister Nitish Kumar is the 16th for his pro-development governance in the state. Former health minister and BJP’s national president JP Nadda is the 17th, current Health Minister Dr Harshvardhan is the 18th, Lok Sabha speaker Om Birla is the 19th, while Baba Ramdev who has taken ‘swadeshi’ to new heights is the 20th influential man on this list.

NDA secured 37.36 percent votes in 2019 Lok Sabha polls and got 303 seats. While Rahul Gandhi-led UPA got 19.01 percent of the total turnout and managed to take the tally to 52. The brighter side UPA got eight more seats than 2014. Rahul Gandhi, being the face of the largest Opposition party, secured the 21st spot. Isha foundation’s head spiritual leader Sadguru Jaggi Vasudevan is 22nd. Bollywood star Akshay Kumar is 23rd. Union Minister for Parliamentary Affairs and Coal & Mines Pralhad Joshi has started a wave of reforms in the sector and thus gets 24th position, while Union Agriculture Minister Narendra Singh Tomar is 25th on the list.

Chief Minister of Goa and the suave politician Dr Pramod Sawant is 26th, Punjab Chief Minister and man of action Captain Amrinder Singh is 27th, Minister of State (IC) for Power and Renewables RK Singh is 28th and effective bureaucrat Ajay Bhalla (IAS) is the 29th on the list. The 30th on the list is Health Secretary Priti Sudan (IAS) who has been hitting headlines for all the good reasons of late. Dr Ajay Kumar (IAS), who has been immensely effective as Secretary Defence Manufacturing and Secretary Defence, has secured the 31st spot. India’s first Chief of Defence Staff General Bipin Rawat, the industrialist Gautam Adani, Pharma giant Cadila’s owner Pankaj Bhai Patel, Sajjan Jindal, Founder of Avenue SuperMarts Radha Krishna Damani, T-Series’ Bhushan Kumar, Industrialist much accessible to common people Anand Mahindra, Sulabh International’s founder Dr Bindeshwar Pathak and IFFCO’s MD & CEO Dr US Awasthi have been placed between 32nd to 40th in the list. Dr Awasthi is the only name from the cooperative sector to have made it to the list.

An IAS officer of 1987 batch (MP cadre) and Managing Director of Tribal Cooperative Marketing Development Federation of India Ltd (TRIFED) Pravir Krishna gets the 41st spot on the list. Krishna has the credit of steering the federation towards profitable avenues. Secretary Biotechnology department Renu Swarup (IAS), ISRO president K Sivan and Director of the National Institute of Virology Priya Abhraham have made it to the 42nd, 43rd and 44th spots in the list, respectively. On the 45th position in the list is PayTM Founder & CEO Vijay Shekhar Sharma. Apart from having been featured in the Time Magazine’s list of 100 Most Influential People, Sharma also has India’s digital payment revolution to his credit.

ICMR’s Dr Nivedita Gupta who has played a crucial role in strategic planning to augment the testing capacity for COVID-19 in India is the 46th on the list. AIIMS director Dr Randeep Guleria, Editor-in-Chief of Hindustan newspaper Shashi Shekhar, Magsaysay awardee journalist Ravish Kumar and Founder-Owner of Republic TV Arnab Goswami have secured the 47th, 48th, 49th and 50th spots on the list of most influential Indians 2020, brought to you exclusively by Fame India with Asia post as the research partner supported by AAFT University of Media And Arts.

[un-enfant-immature]

Startup Law A to Z: Corporate Matters

Founders are a special breed — independent, self-reliant, and resourceful. Yet these same attributes, critical in taking an idea from zero to one, can eventually cause first-time founders to misjudge situations and tackle problems without appropriate guidance. This is particularly true (sometimes tragically so) in the legal arena, where founders generally have little or no experience and the risks are difficult to quantify.

To solve this, Extra Crunch is offering up well-sourced lists of the best lawyers for startups, alongside articles and resources written by experts who navigate tricky legal issues for startups on a daily basis. This article is the first of a five-part series covering the legal terrain you should endeavor to navigate with the help of an experienced guide, including:

Corporate: Business Formation, Capitalization and Financing, Securities and Options, etc.

Intellectual Property: Patents, Trade Secrets, Trademarks, and Copyright, etc.

Business Transactions: Master Services / SaaS Agreements, Terms of Use, NDAs, etc.

Compliance and Regulatory: Business Qualification, Privacy, and FTC Regulation, etc.

Human Resources: Employee Compensation, Contractors, Discrimination, Immigration, etc.

While none of this will be legal advice per se, it is perhaps the next best thing: a simple checklist followed by in-depth summaries helpful to evaluate whether and when formal legal counsel is needed in key areas. With the information from this article and those to follow, alongside other Extra Crunch resources, you can analyze your business circumstances and evaluate your risk exposure. Should you identify legal risks in the above or related areas, simply reference the list of best startup lawyers compiled by Extra Crunch, then reach out to those lawyers focused on serving companies at your stage with experience in the matters at hand.

This article will examine “corporate law” as it relates to startups, which includes the body of laws, rules and practices that govern the formation and operation of corporations, including most importantly for founders, ownership and investment in securities (or stock) of a company. Yuval Harari, author of Sapiens, calls corporations (and limited liability companies more broadly) “among humanity’s most ingenious inventions” — so it is worth knowing a thing or two about them.

Two final caveats here: first, TechCrunch readers include everyone from first-time founders still bootstrapping a concept on nights and weekends to serial entrepreneurs with multiple large exits behind them. Overall this article will skew in the direction of the former, since those with more experience should have less need for guidance in these areas, but even experienced entrepreneurs should find this and subsequent articles helpful.

Second, for those unfamiliar with the legal profession, there is an important distinction between transactional and litigation practice. Most TechCrunch readers already understand this difference, but simply to address it here: transactional lawyers do deals and ensure compliance with laws and regulations, while litigators file lawsuits and go to court. That’s an over-simplification, but understand that great transactional lawyers are not likely to be especially great litigators in case you become involved in a lawsuit.

This and subsequent articles will focus on transactional issues, but litigation could arise within any of the five areas above and in that unfortunate event you should seek a lawyer (or team of lawyers) focused on litigating within the specific area(s) relevant to your lawsuit.

Read on for the official Extra Crunch corporate law checklist for startups.

Threshold matters: Pre-existing IP and trademarks

Although technically not matters of corporate law, two threshold items relating to intellectual property should be mentioned form the outset. First, make sure you understand whether the intellectual property you are creating is subject to any claims from the prior or existing employers of the founders. We’ll discuss this topic further in a later article, but it is worth mentioning now so it is on your radar.

Second, because your startup will need to brand itself to attract customers and/or users, put some effort in on the front end to make sure your business name is available and it will not result in trademark disputes down the road. This is easy enough to do using the USPTO’s trademark database, for example, but ultimately it could be a state-by-state question.

Entity selection and incorporation – C corp/S corp/LLC

While many types of legal business structures exist, assuming you are interested in starting a high-growth technology company, really only two matter: the corporation and the limited liability company, or “LLC.” Each allows for multiple individuals to share in the ownership of the company and most of the time will shield owners’ personal assets from the obligations of the business — that is, unless otherwise agreed by the owners themselves, or due to some malfeasance of the owners (such as mixing personal and business expenses, something which founders have been known to do unfortunately). In the latter case, where a business owner’s personal assets can be held to account for liabilities of the company, courts have creatively termed this “piercing the corporate veil.”

For startups ultimately looking to pursue a traditional VC route, incorporating in Delaware as a C corp is the obvious choice — there is no reason to overthink it. Under your certificate of incorporation (sometimes called a “charter”), you’ll typically want to authorize 10 million shares of stock at a “par value” price of $0.00001. (“Par value” is simply the lowest price at which a corporation may issue shares upon initial offering.) Of these 10 million “authorized” shares, only about 4-6 million shares of common stock are typically “issued” to founders from the outset (and don’t worry, percentage ownership is calculated based only on the issued shares).

This will leave available additional “authorized but unissued” shares which can later be issued to create a stock option pool for incentivizing employees, or issued as preferred stock to investors in exchange for cash. With respect to the latter use specifically, it is generally not necessary to specifically authorize a separate class of preferred stock upon initial formation — this can always be done by amending the charter in connection with the actual investment round later on, since the round is likely to require a charter amendment in any case.

One final note on initial formation: more recently, a new class of stock called “Series FF Stock” is sometimes included during initial formation for issuance to founders (essentially, a hybrid of common and preferred stock) in order to later facilitate stock sales by the founders themselves to investors in future equity financings, effectively allowing founders to personally realize some liquidity before an actual sale or IPO. If this sounds appealing to you as a founder, which it should, it is definitely worth asking your lawyer about.

If you are not looking at a traditional VC path, however, S corps and LLCs can provide better options in certain situations, particularly if your business will remain relatively small over the long term (tens of employees and not hundreds). In terms of tax treatment, these entities are typically advantageous, especially in the early years, since business income and losses are “passed through” to the owners and taxed on an individual basis using Schedule K-1, with no separate layer of tax liability for the company itself.

Also, in states like Delaware, California, and others that allow for “statutory conversion,” LLCs can relatively easily convert to a C corp later down the road, should the need arise, through a tax-free transaction under Internal Revenue Code Section 351; provided, however, that the operating agreement is initially well-drafted to anticipate this event (for example, using “membership units” rather than simple percentages to indicate the ownership interests of members).

Finally, if you incorporate outside the state where you will be primarily running the business, you will also need to “qualify as a foreign entity” in your home state (in this case, “foreign” means different state, not country). Put differently, you will need to register your “foreign” company with the state where you are primarily “transacting business” and perhaps your specific county too depending on the nature of your business and any required business licenses. In both cases, the process is very simple (see, for example, New York and California) and most of the time a lawyer is not truly required here, but many, many founders just skip this step entirely, creating problems later on.

Corporate governance

From a high level, a corporation is owned by the shareholders, who in turn have the power to elect individuals to the Board of Directors. The “Directors” govern the corporation on important matters outside the “ordinary course of business” and have the power to elect (and remove) the “Officers” of the corporation, who are responsible for day-to-day management of the business. The following offices must generally be filled right from the start: President (often the CEO), Treasurer (often the CFO or COO), and Secretary.

That said, all three offices can usually be filled by the same person; for example, in California and Delaware both, a corporation may have only a single shareholder and Director. In California, however, once a corporation has two shareholders, it must have at least two board members, and once it has three shareholders or more, it must have at least three board members. Corporations must also typically hold certain required meetings wherein formal minutes are recorded, including in most states at least one annual meeting of the Board of Directors and one annual meeting of the Stockholders (or written consents in lieu thereof).

Since the Board of Directors is the governing body of a corporation, a shareholder owning even a majority of the shares can be outvoted at the Board level with respect to important governing matters (e.g., sales of additional stock or election/removal of officers). Shareholders can remove Directors, of course, but this is a relatively drastic move, so selecting those who will occupy seats on the Board of Directors is extremely important for founders. In the beginning, the Board of Directors should only include founders and ideally an odd number of them to avoid voting deadlock on important company decisions. If you must have an even number of Directors on the Board, e.g., two 50/50 co-founders, then at least make sure you’ve included specific “tie-breaker” provisions in the governing documents of the company.Now, once the “certificate of incorporation” (or “charter”) is filed with the Secretary of State, the initial Directors of the company will be formally appointed by a written document called the “Initial Action by the Sole Incorporator” (often company counsel will perform this action). The initial Directors will then elect the Officers, authorize and issue stock to the founders, authorize the opening of a business bank account including establishing a federal Employment Identification Number (EIN), and paying expenses, etc. All of this is generally done through a “unanimous written consent” of the Board of Directors, which is a document signed by all Directors, rather than through votes taken in a formal in-person organizational meeting.

Other matters often addressed through this first “unanimous written consent” may include adoption of the following:

Bylaws, which set out board election and voting procedures;

Restricted Stock Purchase Agreement, which imposes “vesting” and rights of first refusal on founder/employee stock, as well as an assignment of pre-existing intellectual property to the company in certain cases;

Equity Incentive Plan (i.e., stock option plan), which sets forth the terms on which stock options can be granted and exercised;

Proprietary Information and Invention Assignment Agreement (PIIA), which will be signed by all founders, employees, and consultants, assigning to the company ownership of all intellectual property created in the business;

Selection of applicable fiscal year; and

Election of S Corp tax treatment (if desired).

Note finally, going forward, separate from any income taxes owed, corporations (as well as LLCs) must generally file certain information with the Secretary of State and pay franchise taxes each year as well (e.g., see Delaware’s Annual Report and California’s Statement of Information). For further discussion of corporate governance structure, see Holloway Guides.

For LLCs, rather than shareholders, each owner is called a “member” and instead of the “certificate of incorporation” and “bylaws,” the LLC is governed by the “articles of organization” and an “operating agreement” respectively. The operating agreement is often a lengthy, comprehensive contract detailing each member’s ownership interest (either percentage-based, or preferably, measured in ownership units), economic rights (distribution of profits and losses), governance and voting rights (addressing “tie-breaker” scenarios if necessary), and rights between members with respect to ownership interests (e.g., right of first refusal, buy-sell agreements, or other restrictions on transfers).

LLCs can either be “member managed” (all members approve major decisions and can act on behalf of the LLC) or “manager managed” (members may elect one or more managers with ultimate decision-making authority, but otherwise have no governance authority themselves). In the latter case, managers may also delegate responsibility for day-to-day business operations to officers, similar to the Board of Directors and Officers in a corporation. Since the operating agreement is essentially a contract between the members, which can be drafted with almost infinite variation, LLCs are known for being extremely flexible, but therefore less predictable for outside investors.

Since the operating agreement is less susceptible to standardization, it is wise to consult an experienced attorney to establish the desired governance and capitalization structure. Also, since equity issuance and compensation is less straightforward in the LLC context, most of the remaining sections below (except for the last) are specific to corporations, though many of the underlying principles may still apply.

All of that is to say, upon formation, you should have a clear understanding of what roles each founder will play, what time commitment is expected, what the ownership structure will look like, and who will serve on the Board of Directors (or serve as managers of the LLC) and therefore how decisions will ultimately be made. In the Delaware corporation context specifically, the Delaware Incorporation Package from Cooley Go, or services like Clerky, provide founders streamlined options and helpful resources to understand the steps involved; and again, if you’re thinking about going the LLC route, consult with a knowledgeable lawyer to ensure you don’t foreclose or complicate viable investment options later on.

Issuing “founder stock” at initial formation

“Founders Stock” is simply the common stock issued to founders when a corporation is initially formed; if done correctly, it is non-taxable because: (1) it is equal in value to the small amount of cash founders pay into the company in exchange for receiving the stock at par value (another good reason to set the par value very low, again say, $0.00001, allowing for  minimal cash outlay); or (2) “property” has been contributed to the company in exchange for the stock under Section 351 of the Internal Revenue Code, which provides that no gain or loss is recognized if property is transferred to a corporation by a person or persons who together own at least 80% of the corporation.

“Property” has been broadly defined to include legally protectable know-how and trade secrets, but this definition is not infinite in scope, so don’t get carried away trying to avoid paying the par value price for the stock in cash. Instead, one recommended hybrid approach involves each founder paying a portion of the par value purchase price of their stock to the company in cash, with the remainder covered by or attributable to an assignment by each founder to the company of their pre-existing intellectual property. This approach covers all the bases in terms of valid consideration (i.e., the cash payment) while ensuring that the pre-existing intellectual property of each founder is properly owned by the company.

Founder vesting and section 83(b) within 30 days

Where co-founders have contributed cash or other property to the company in exchange for their shares at par value, they own the stock outright. Thus, to achieve vesting and protect all founders from any particular co-founder leaving early with a large chunk of the company, each founder should enter a “Restricted Stock Purchase Agreement” (directly with the company), which gives the company the right to buy back that founder’s shares, often at par value. This right gradually lapses over time with respect to more and more of the founder’s shares, creating the effect of vesting for those shares no longer subject to the company’s repurchase right.

For co-founders involved immediately upon initial formation, you could reasonably argue that a “cliff” is not necessarily required, but the typical vesting schedule is 4 years, with 25% of the total shares vesting after the first year in a single chunk (this first year representing the “cliff” since nothing will vest if this one-year mark is not reached) then monthly vesting thereafter. Founders should also be aware of single and double-trigger acceleration provisions, which typically become more relevant once institutional investors are involved — more on that via Cooley Go.

Once the Restricted Stock Purchase Agreement is signed, however, certain tax implications are raised, because technically the founder’s stock is now at a “substantial risk of forfeiture” (since founders might forfeit stock if they leave the company). This means that by the time the stock actually “vests” it will almost certainly be worth more than the par value for which it was purchased. The IRS will want taxes paid on that delta, since technically that increase in value is taxable gain.

The solution? Internal Revenue Code Section 83(b), which allows founders and employees to elect treatment of non-vested shares as fully transferred at the very beginning of the vesting schedule, rather than over time as the shares vest. This allows for immediate taxation at the relatively lower current value, which in the case of a newly formed corporation is only some nominal amount based on the par value. This Section 83(b) election must be made in a written document actually signed and filed by the taxpayer within 30 days of the date the stock was made subject to restriction (or in the case of stock options, the date granted). While relatively simple to carry out, this process is important enough that getting oversight from experienced corporate counsel is prudent. See Holloway Guides for more discussion.

Raising capital

Capitalization, accredited vs. non-accredited investors. “Capitalization” in the startup context generally means the funding necessary for a startup to open for business, while “capital structure” refers to the types of capital (broadly, either equity or debt) available to fund business operations. Capital structure often consists of common stock and preferred stock (equity), as well as convertible notes (debt). A “capitalization table” (or “cap table”) will provide a summary of all securities (stock) issued by the company, along with the fully diluted percentage ownership of each shareholder based on all issued shares (not the total authorized shares).

Capitalization of your startup may include issuance of convertible notes or the sale of preferred stock and other securities, all of which are subject to the federal “Securities Act of 1933” as well as various “Blue Sky” state laws, essentially intended to prevent fraudsters from selling shares in worthless companies to unwitting investors. In determining compliance with these laws, the distinction between ‘Accredited’ and ‘Non-Accredited’ investors is important; in brief, raising money from accredited investors generally means there is less to worry about.

“Accredited Investors” by definition must have net worth of $1 million (excluding a principal residence) or annual income for the current and past two years of at least $200,000 (or $300,000 jointly with a spouse). If you are planning on raising money from Non-Accredited Investors, which founders should NOT do but often will do anyway, then in addition to familiarizing yourself with Rule 502(b)(1) and related Rules 504-506 of Regulation D (which provide relevant exemptions in this context), you should absolutely consult with an experienced securities attorney to make sure your reliance on these rules is not misplaced, as they are deceptively complex, though essentially can be summarized as follows:

Rule 504 provides an exemption for the sale of up to $1 million in securities within any 12 month period;

Rule 505 provides an exemption for the sale of up to $5 million in securities within any 12 month period to any number of accredited investors and up to 35 unaccredited investors; and

Rule 506 provides an exemption to an unlimited number of accredited investors and up to 35 other purchases, provided, however, that all non-accredited investors are “sophisticated” — having sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment.

Failure to comply with federal and state securities laws is a big deal: non-compliance gives rise to a rescission right for investors (legally they can demand their money back) and there are serious civil and criminal penalties for any materially false statements or omissions made during the offer or sale of any securities.

Selling preferred stock. Once you’ve found investors, outside of convertible notes and similar instruments discussed below, you should only be selling preferred stock to them, typically in the context of a “priced round.” If you sell common stock to investors, you will be setting the price of the common stock too high for purposes of granting attractive stock options to employees / advisers later on — that is, the “strike” or exercise price for the options will simply reflect the enterprise value of the company when sold, eliminating any real upside for employees (as well as the incentive to work extra hard) since there will be little or no spread between the strike price of the option and the ultimate price per share in an acquisition.

Selling preferred stock to investors in the context of a “priced round” requires that the company be assigned a specific valuation, however, which can be difficult and time consuming at the beginning of a company’s life. This is why convertible notes and SAFEs (discussed below) are so popular in the very early stages.

Preferred stock is so called because it carries certain “liquidation preferences” — meaning that if the company is sold or liquidated and there is not enough money to pay out all shareholders (e.g., the total investment was greater than the final acquisition price), then preferred shareholders get their money back before the common shareholders, i.e., the founders, will receive anything. The exact terms of the liquidation preference is negotiated (usually one to three times the amount of cash invested) and may be either “participating” or “nonparticipating” — though founders will want the “nonparticipating” variety.

A number of other special rights are also negotiated for preferred stock in a priced round, including those listed below; more info at Cooley Go, but for now, simply understand that these terms are complex enough that experienced corporate counsel is absolutely required when selling preferred stock in a priced round to investors:

Valuation/Dilution (pre/post-money)

Dividend preferences;

Redemption rights;

Conversion rights;

Anti-dilution protections (in order of most to least founder-friendly: “weighted average — broad based,” “weighted average – narrow based,” or “ratchet based”);

Voting rights (election of “x” number of members to the Board of Directors, approval of a sale or merger, issuing more shares, etc);

Registration rights;

Protective provisions, which can include certain affirmative covenants (e.g., investor access to financial information of the company) and certain negative covenants (e.g., agreement not to take certain actions without approval of the preferred shareholders)

Right of first refusal; and

Co-sale rights.

Convertible notes. For startups looking to raise less than ~$500K (sometimes more), rather than selling preferred stock and negotiating all the particulars above, alternatives exist which do not require setting a specific company valuation, namely:

Convertible Notes: As in “promissory note,” so technically a loan and therefore debt which carries interest, which in most circumstances converts to equity as preferred stock upon a later “qualified financing” when preferred stock is sold at a specific price. Usually the note converts at a 10%-30% “discount” to the preferred share price, or subject to a valuation “cap” that is effectively lower than the preferred share price, in order to reward the earlier investment for the additional risk. More info via 500 Startups.

KISS and SAFE Instruments: The relatively more recent “KISS” (from 500 Startups) and “SAFE” (from Y-Combinator) both remove the debt element of the convertible note, but otherwise operate in a similar fashion. Even more recently, Y-Combinator adjusted the terms of its SAFE from a “pre-money” to “post-money” valuation cap structure, which effectively means the new SAFE structure is now relatively more dilutive to current stockholders when issued (often the founders and early employees), but it is also now easier to calculate the amount of ownership sold to investors via the SAFE on a percentage basis (because the percentage no longer changes based on the potential addition or increases to the employee option pool in a later priced round).

“Finders” and brokers. The startup ecosystem is filled with certain people — known as “finders” or “connectors” — who promise to find investment for startups in exchange for a fee. These “finders” typically are not registered securities brokers, so technically they should not do any of the following: participate in negotiations with respect to investing in securities, provide counsel to investors or recommend securities as investments, and perhaps most of all, receive percentage-based compensation on amounts invested.

If presented with a written agreement from a “finder” who is offering to assist in fundraising, be sure that the agreement is non-exclusive and that there is no percentage-based compensation on the funds raised; instead, seek true “advisors” who can offer real business insights, have deep industry knowledge and connections, then pay them via an hourly rate, monthly retainer, and/or properly issued stock options, generally 0.10% to 1% vesting over 2-3 years.

Correctly issuing stock options to employees and advisers

Stock options are not stock, but merely the option to buy a certain amount of stock at a given price — the “exercise” or “strike” price. Employee stock options typically vest over four years, subject to a one-year “cliff” (i.e., the employee must work for at least one year to meet the “cliff” in order to vest any options at all; after that, vesting continues in monthly increments).

Startups generally get into trouble here for two reasons: (1) they fail to establish and formally adopt through appropriate corporation action (i.e., written board consent) a written “Equity Incentive Compensation Plan” (or “option plan”) pursuant to which the options are granted; and (2) they make a promise to grant stock options at a certain time (which implies a certain strike price at that time), but then do not take the necessary corporate action to actually make the stock option grant; namely, a written board consent approving the option grant with an exercise price equal to the fair market value of the stock, as determined by the board of directors, as of the date of grant (ideally with reference to a recent and valid 409A valuation).

It is critical that the board of directors accurately set the exercise price of the stock option to be equal to the fair market value of the optioned stock as of the date of grant. The 409A valuation, when done by a qualified third-party, is really the only way to completely safeguard the Board of Directors’ determination of fair market value of the stock in this regard should the IRS or some other financial auditor later take interest. Not getting this right could later blow up crucial deals — including investment rounds and potential acquisitions — due to the accounting and tax implications. Fortunately, there are now a number of companies which provide 409A valuation services at affordable rates, including Carta, Capshare, and more recently Meld Valuation.

Moreover, unless you want to commit securities fraud, you cannot “backdate” option grants (so that the option granted reflects a previous, lower price). That said, you can set the vesting commencement date to some point in the past in order to give credit for time served. Also, for those interested, there is an important distinction, with corresponding tax implications, between Statutory or Incentive Stock Options (“ISOs”), which can only be issued to employees, and Nonstatutory or Non-Qualified Stock Options (“NSOs”), sometimes issued to non-employee advisors — more on that via the Internal Revenue Service and Investopedia.

One last point worth mentioning in this section: very early on, when company valuation is still extremely low, it is possible and still practical (since tax liability will be minimal in light of the low valuation) to grant “restricted stock” even to non-founders – though you still need an Equity Incentive Plan in place first. In fact, restricted stock is the best option for non-founders involved in the very beginning of a startup’s life because aside from some immediate tax liability (which again, should be light given the relatively low valuation of a new company), ultimate tax treatment will likely be at capital gain rates and so much more favorable as compared to stock options, which usually end up being taxed as ordinary income.

Check out Holloway Guides for more discussion of equity compensation topics.

S Corp and LLC equity compensation

In the S corp and LLC contexts respectively, stock options or equivalent instruments are not as easily issued, and thus again, corporate counsel is appropriate. In the case of the S corp, if an option holder exercises an option who is not a qualified S corp shareholder (e.g., they are a nonresident alien), the S corp could lose its “S election” for pass-through taxation entirely. For LLCs, exercising an option on an interest in the LLC requires complex accounting entries, plus the person exercising the option will then become a member of the LLC, so they will receive “IRS Form 1065, Schedule K-1” and may be required to pay tax on the income of the LLC (in some cases whether or not they actually receive it).

While LLCs can create “profit interests” for its employees, which may entitle recipients to receive a percentage of the future appreciation in enterprise value, these plans are fairly complex to administer. A simpler alternative, used by many S corps and LLCs alike, is “phantom stock” which can be placed on a vesting schedule as well. Phantom stock is essentially a creature of contract, promising that a certain amount of the company’s ultimate acquisition price shall be reserved for distribution to holders of the “phantom stock units.” The amount so reserved is then divided by the number of phantom stock units established in the operating agreement and taken “off the top” from the final acquisition price, to be distributed to each phantom stock holder in accordance with the number of phantom stock units held.

Conclusion

Admittedly, the foregoing covered a bit of ground. As a founder, it is important that you have at least basic familiarity with an incredibly broad range of legal topics — corporate law being one of the most important. Such familiarity will allow you to identify and distinguish between situations that your team can readily handle internally, from those that require outside legal counsel. If you’ve made it this far, a congrats are in order — you are well on your way to startup success.

Daniel T. McKenzie, Esq., manages the Law Office of Daniel McKenzie, specializing in the representation of startups and startup founders. Prior to establishing his law office, Daniel McKenzie co-founded and served as lead in-house counsel for Reelio, Inc., backed by eVentures, and acquired in 2018 by Fullscreen (a subsidiary of Otter Media and AT&T).

Thank you to Stephane Levy, a partner at Cooley, for providing comments on this article.

DISCLAIMER: This post discusses general legal issues, but it does not constitute legal advice in any respect. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction. TechCrunch, the author and the author’s law firm, expressly disclaim all liability in respect of any actions taken or not taken based on any contents of this post.

[savetopnow]

2018-03-08 03 NEWS now

NEWS

Associated Press

Watchdog report: Failed VA leadership put patients at risk

Putin praises Trump, says US political system eating itself

Another snowstorm hits the Northeast, threatens more outages

Fears of 'brain drain' hit West Wing amid Trump staff exits

Cabinet members say Canada, Mexico could escape new tariffs

BBC News

Snowboarder's headcam captures avalanche escape

Tomb Raider star: 'It's all very positive' because of feminist movement

Diver swims through 'horrifying plastic cloud'

Michelle Obama dances with Parker the portrait girl

Homeless swept up in America's capital clean-up

Chicago Tribune

Pussy Riot gig makes for off-beat Biss campaign rally

Rockford-area professor — expert on presidential pardons — emailed life's work to others before apparent murder-suicide

Police: Man faces gun and drug charges after falsely telling cops he was shot in alley

Second teen arrested for making online threat against an Elgin high school

Proposed development along 606 trail highlights tension over rising rents and home prices

LA Times

Dodgers shortstop Corey Seager to play field on Monday

Sessions goes after Oakland mayor and Gavin Newsom in speech on suing California over 'sanctuary' law

Trump's immigration war with California has reached a fever pitch

How Trump's immigration war with California reached a fever pitch

Protest wanes but chants continue outside downtown Sacramento hotel where Sessions appeared

NPR News

Researcher Says 'Criticism Is Valid,' Will Revise Study Finding Low Uber And Lyft Pay

Top Stories: Missouri Officers Shot; Tech Companies Fight Wildlife Trafficking

A Push To Modernize Philippine Transport Threatens The Beloved Jeepney

Coca-Cola Will Launch Its First-Ever Alcoholic Drink To Compete In Japan

Stormy Daniels Files Suit, Claims NDA Invalid Because Trump Didn't Sign At The XXX

New York Times

New York Today: New York Today: A Winter Storm Hits the City

Northeast Storm Live Updates: A Warning That Conditions Will ‘Get a Lot Worse’

Top Architecture Prize Goes to Low-Cost Housing Pioneer From India

Review: ‘A Wrinkle in Time’ Gives a Child of the Universe Powerful Friends

ProPublica

Trump Town

What We Found in Trump’s Drained Swamp: Hundreds of Ex-Lobbyists and D.C. Insiders

How We Compiled Trump Town

‘Trump, Inc.’ Podcast: The Desperation, Secrecy and Conflicts of Jared Kushner’s Company

ProPublica, NPR ‘Lost Mothers’ Series Wins Goldsmith Prize for Investigative Reporting

Reddit News

Bill Gates: We will have another financial crisis like the one in 2008—it's a 'certainty'

U.S. trade deficit jumps to more than nine-year high

Rugby player who swallowed garden slug as dare gets rare brain infection.

Marine Veteran Gets No Jail Time After Attacking Iraqi Restaurant Because He Has PTSD

Teen drawn to ISIS brought homemade bomb to Utah school, police say

Reuters

Sessions blasts California after filing U.S. immigration suit

U.S. trade deficit races to more than nine-year high

U.S. Energy Secretary Perry unsure if Trump's views on tariffs are final

Cohn exit adds to Wall Street trade war fears

U.N. rights chief attacks EU and U.S. over migrants and Dreamers

Reveal News

Nation’s largest janitorial company faces new allegations of rape

A group of janitors started a movement to stop sexual abuse

The Hate Report: How white supremacists recruit online

New documents about Jehovah’s Witnesses’ sex abuse begin to leak out

California is preparing to defend its waters from Trump order

The Altantic

West Virginia's Teachers Are Not Satisfied

This Average Joe Is the Most Quoted Man in News

The Unsinkable Benjamin Netanyahu?

Eric Garcetti Isn't Expecting Much From Washington

The Particular Horror of Church Shootings

The Guardian

Trump officials deny Cohn's departure leaves economic team in disarray

Europe threatens tariffs on US peanut butter and orange juice as trade war looms - business live

Gorilla sanctuary workers in eastern DRC kidnapped by militia

Sergei Skripal believed to have been poisoned with nerve agent

A Wrinkle in Time review – Ava DuVernay's fantasy is a glittery disappointment

The Independent

New Look set to shut 60 stores putting close to 1,000 jobs at risk

Sergei Skripal poisoning: Nerve agent used on former Russian spy and daughter, police confirm

Brexit: European Parliament threatens to veto deal over Theresa May &apos;discrimination&apos; of EU citizens

Manchester City vs Basel, Champions League preview: What time is it and what channel can I watch it on?

&apos;Super seducer&apos; game that teaches men how to pick up women banned from PlayStation

The Intercept

As West Virginia Strike Winds Down, Angry Teachers Look to Bolster Progressives in Elections

Gary Cohn: Mission Accomplished

Illinois Democratic Party Chair Funds Mailers Attacking Progressive Candidates

As Democrats Shift Left on Palestine, 2020 Contender Kamala Harris Gives Off-the-Record Address to AIPAC

Labor Rallies Behind Laura Moser After She Overcomes Party Effort to Stomp Out Her Congressional Bid

The Quartz

I was tricked by a crypto scammer on Twitter

Fashion experts say tucking your hair behind your ear is a “look”

Samsung’s new TVs are almost invisible

In ‘The Assassination of Gianni Versace’, Ryan Murphy proves—again!—he can never get race right

US fears China winning on 5G if Broadcom gets to take over Qualcomm

Wall Street Journal

Trump Alienates Allies Needed for a Trade Fight With China

Saudi Crown Prince Woos British to Bring Business Back Home

Iran's Oil Boom Is a No-Show

Bank of Canada Holds Rates Steady as U.S. Tariff Plan Weighs on Outlook

South Korea Seeks to Blunt Skepticism of Pyongyang Outreach

[componentplanet]

Hands On With Nvidia’s New Jetson Xavier NX AI ‘Robot Brain’

Today Nvidia officially launched its most powerful card-sized IoT GPU ever, the Nvidia Jetson Xavier NX (dev kit $399). We covered the basics of the Xavier NX and its industry-leading MLPerf stats when it was announced in November, but since then we’ve had a chance to get our hands on an early version of the device and dev kit and do some real work on them. Along with the dev kit, Nvidia also introduced cloud-native deployment for Jetson using docker containers, which we also had a chance to try out.

Nvidia Jetson Xavier NX by the Numbers

Built on its Volta architecture, the Jetson Xavier NX is a massive performance upgrade compared with the TX2 and becomes a bigger-sibling to the Jetson Nano. It features 384 CUDA cores, 48 Tensor cores, and 2 Nvidia Deep Learning Accelerators (DLA) engines. Nvidia rates it for 21 Trillion Operations per Second (TOPS) for deep learning performance. Along with the GPU is a reasonably-capable 6-core Nvidia Carmel ARM 64-bit CPU with 6MB of L2 and 4MB of L3 cache. The processor also includes 8GB of 128-bit LPDDR4x RAM with 51.8GB/s bandwidth.

All that fits in a module the size of a credit card that consumes 15 watts — or 10 watts in a power-limited mode. As with earlier Jetson products, the Xavier NX runs Nvidia’s deep-learning software stack, including advanced analytic systems like DeepStream. For connectivity, the developer kit version includes a microSD slot for the OS and applications, as well as 2 MIPI camera connectors, Gigabit Ethernet, M.2 Key E with Wi-Fi/Bluetooth, and an open M.2 Key M for an optional NVMe SSD. Both an HDMI and DisplayPort connector are provided, along with 4 USB 3.1 and 1 USB 2 micro-USB port.

Cloud-Native Deployment Thanks to Docker Containers

It’s one thing to come up with a great industrial or service robot product, but another to keep it up to date and competitive over time. As new technologies emerge, or requirements evolve, update and software maintenance are a major issue. With Xavier NX, Nvidia is also launching its “cloud native” architecture as an option for deploying embedded systems. Now, I’m not personally a fan of slapping “cloud-native” onto technologies just because it is a buzzword. But in this case, at least the benefits of the underlying feature set are clear.

Basically, individual applications and services can be packaged as Docker containers and individually distributed and updated via the cloud. Nvidia sent us a pre-configured SSD loaded with demos, but I was also able to successfully re-format it and download all the relevant Docker containers with just a few commands, which was pretty slick.

Putting the Xavier NX Through Its Paces

Nvidia put together an impressive set of demos as part of the Xavier NX review units. The most sophisticated of them loads a set of docker containers that demonstrate the variety of applications that might be running on an advanced service robot. That includes recognizing people in four HD camera streams, doing full-body pose detection for nearby people in another stream, gaze detection for someone facing the robot, and natural language processing using one of the BERT family of models and a custom corpus of topics and answers.

Nvidia took pains to point out that the demo models have not been optimized for either performance or memory requirements, but aside from requiring some additional SSD space, they still all ran fairly seamlessly on a Xavier NX that I’d set to 15-watt / 6-core mode. To help mimic a real workday, I left the demo running for 8 hours and the system didn’t overheat or crash. Very impressive for a credit-card-sized GPU!

Running multiple Docker container-based demos on the Nvidia Jetson Xavier NX.

The demo uses canned videos, as otherwise, it’d be very hard to recreate in a review. But based on my experience with its smaller sibling, the Jetson Nano, it should be pretty easy to replicate with a combination of directly-attached camera modules, USB cameras, and cameras streaming over the internet. Third-party support during the review period is pretty tricky, as the product was still under NDA. I’m hoping that once it is out I’ll be able to attach a RealSense camera that reports depth along with video, and perhaps write a demo app that shows how far apart the people in a scene are from each other.

Developing for the Jetson Xavier NX

Being ExtremeTech, we had to push past the demos for some coding. Fortunately, I had just the project. I foolishly agreed to help my colleague Joel with his magnum opus project of creating better renderings of various Star Trek series. My task was to come up with an AI-based video upscaler that we could train on known good and poor versions of some episodes and then use it to re-render the others. So in parallel to getting on setup on my desktop using my Nvidia 1080, I decided to see what would happen if I worked on the Xavier NX.

Nvidia makes development — especially video and AI development — deceptively easy on its Jetson devices. Its JetPack toolset comes with a lot of AI frameworks pre-loaded, and Nvidia’s excellent developer support sites offer downloadable packages for many others. There is also plenty of tutorial content for local development, remote development, and cross-compiling. The deceptive bit is that you get so comfortable that you just about forget that you’re developing on an ARM CPU.

At least until you stumble across a library or module that only runs on x86. That happened to me with my first choice of super-resolution frameworks, an advanced GAN-based approach, mmsr. Mmsr itself is written in Python, which is always encouraging as far as being cross-platform, but it relies on a tricked-out deformation module that I couldn’t get to build on the Jetson. I backed off to an older, simpler, CNN-based scaler, SRCNN, which I was able to get running. Training speed was only a fraction of my 1080, but that’s to be expected. Once I get everything working, the Xavier NX should be a great solution for actually grinding away on the inference-based task of doing the scaling.

Is a Xavier NX Coming to a Robot Near You?

In short, probably. To put it in perspective, the highly-capable Skydio autonomous drone uses the older TX2 board to navigate obstacles and follow subjects in real time. The Xavier NX provides many times (around 10x in pure TOPS numbers) the performance in an even smaller form factor. It’s also a great option for DIY home video applications or hobby robot projects.

Now Read:

Nvidia’s new Jetson Xavier NX Adds Horsepower to AI at the Edge

Hands On With Nvidia’s New Jetson Nano

Hands On With Nvidia’s JetBot AI-Powered DIY Robot

from ExtremeTechExtremeTech https://www.extremetech.com/extreme/310159-hands-on-with-nvidias-new-jetson-xavier-nx-ai-robot-brain from Blogger http://componentplanet.blogspot.com/2020/05/hands-on-with-nvidias-new-jetson-xavier.html

[toomanysinks]

Startup Law A to Z: Corporate Matters

Founders are a special breed — independent, self-reliant, and resourceful. Yet these same attributes, critical in taking an idea from zero to one, can eventually cause first-time founders to misjudge situations and tackle problems without appropriate guidance. This is particularly true (sometimes tragically so) in the legal arena, where founders generally have little or no experience and the risks are difficult to quantify.

To solve this, Extra Crunch is offering up well-sourced lists of the best lawyers for startups, alongside articles and resources written by experts who navigate tricky legal issues for startups on a daily basis. This article is the first of a five-part series covering the legal terrain you should endeavor to navigate with the help of an experienced guide, including:

Corporate: Business Formation, Capitalization and Financing, Securities and Options, etc.

Intellectual Property: Patents, Trade Secrets, Trademarks, and Copyright, etc.

Business Transactions: Master Services / SaaS Agreements, Terms of Use, NDAs, etc.

Compliance and Regulatory: Business Qualification, Privacy, and FTC Regulation, etc.

Human Resources: Employee Compensation, Contractors, Discrimination, Immigration, etc.

While none of this will be legal advice per se, it is perhaps the next best thing: a simple checklist followed by in-depth summaries helpful to evaluate whether and when formal legal counsel is needed in key areas. With the information from this article and those to follow, alongside other Extra Crunch resources, you can analyze your business circumstances and evaluate your risk exposure. Should you identify legal risks in the above or related areas, simply reference the list of best startup lawyers compiled by Extra Crunch, then reach out to those lawyers focused on serving companies at your stage with experience in the matters at hand.

This article will examine “corporate law” as it relates to startups, which includes the body of laws, rules and practices that govern the formation and operation of corporations, including most importantly for founders, ownership and investment in securities (or stock) of a company. Yuval Harari, author of Sapiens, calls corporations (and limited liability companies more broadly) “among humanity’s most ingenious inventions” — so it is worth knowing a thing or two about them.

Two final caveats here: first, TechCrunch readers include everyone from first-time founders still bootstrapping a concept on nights and weekends to serial entrepreneurs with multiple large exits behind them. Overall this article will skew in the direction of the former, since those with more experience should have less need for guidance in these areas, but even experienced entrepreneurs should find this and subsequent articles helpful.

Second, for those unfamiliar with the legal profession, there is an important distinction between transactional and litigation practice. Most TechCrunch readers already understand this difference, but simply to address it here: transactional lawyers do deals and ensure compliance with laws and regulations, while litigators file lawsuits and go to court. That’s an over-simplification, but understand that great transactional lawyers are not likely to be especially great litigators in case you become involved in a lawsuit.

This and subsequent articles will focus on transactional issues, but litigation could arise within any of the five areas above and in that unfortunate event you should seek a lawyer (or team of lawyers) focused on litigating within the specific area(s) relevant to your lawsuit.

Read on for the official Extra Crunch corporate law checklist for startups.

Threshold matters: Pre-existing IP and trademarks

Although technically not matters of corporate law, two threshold items relating to intellectual property should be mentioned form the outset. First, make sure you understand whether the intellectual property you are creating is subject to any claims from the prior or existing employers of the founders. We’ll discuss this topic further in a later article, but it is worth mentioning now so it is on your radar.

Second, because your startup will need to brand itself to attract customers and/or users, put some effort in on the front end to make sure your business name is available and it will not result in trademark disputes down the road. This is easy enough to do using the USPTO’s trademark database, for example, but ultimately it could be a state-by-state question.

Entity selection and incorporation – C corp/S corp/LLC

While many types of legal business structures exist, assuming you are interested in starting a high-growth technology company, really only two matter: the corporation and the limited liability company, or “LLC.” Each allows for multiple individuals to share in the ownership of the company and most of the time will shield owners’ personal assets from the obligations of the business — that is, unless otherwise agreed by the owners themselves, or due to some malfeasance of the owners (such as mixing personal and business expenses, something which founders have been known to do unfortunately). In the latter case, where a business owner’s personal assets can be held to account for liabilities of the company, courts have creatively termed this “piercing the corporate veil.”

For startups ultimately looking to pursue a traditional VC route, incorporating in Delaware as a C corp is the obvious choice — there is no reason to overthink it. Under your certificate of incorporation (sometimes called a “charter”), you’ll typically want to authorize 10 million shares of stock at a “par value” price of $0.00001. (“Par value” is simply the lowest price at which a corporation may issue shares upon initial offering.) Of these 10 million “authorized” shares, only about 4-6 million shares of common stock are typically “issued” to founders from the outset (and don’t worry, percentage ownership is calculated based only on the issued shares).

This will leave available additional “authorized but unissued” shares which can later be issued to create a stock option pool for incentivizing employees, or issued as preferred stock to investors in exchange for cash. With respect to the latter use specifically, it is generally not necessary to specifically authorize a separate class of preferred stock upon initial formation — this can always be done by amending the charter in connection with the actual investment round later on, since the round is likely to require a charter amendment in any case.

One final note on initial formation: more recently, a new class of stock called “Series FF Stock” is sometimes included during initial formation for issuance to founders (essentially, a hybrid of common and preferred stock) in order to later facilitate stock sales by the founders themselves to investors in future equity financings, effectively allowing founders to personally realize some liquidity before an actual sale or IPO. If this sounds appealing to you as a founder, which it should, it is definitely worth asking your lawyer about.

If you are not looking at a traditional VC path, however, S corps and LLCs can provide better options in certain situations, particularly if your business will remain relatively small over the long term (tens of employees and not hundreds). In terms of tax treatment, these entities are typically advantageous, especially in the early years, since business income and losses are “passed through” to the owners and taxed on an individual basis using Schedule K-1, with no separate layer of tax liability for the company itself.

Also, in states like Delaware, California, and others that allow for “statutory conversion,” LLCs can relatively easily convert to a C corp later down the road, should the need arise, through a tax-free transaction under Internal Revenue Code Section 351; provided, however, that the operating agreement is initially well-drafted to anticipate this event (for example, using “membership units” rather than simple percentages to indicate the ownership interests of members).

Finally, if you incorporate outside the state where you will be primarily running the business, you will also need to “qualify as a foreign entity” in your home state (in this case, “foreign” means different state, not country). Put differently, you will need to register your “foreign” company with the state where you are primarily “transacting business” and perhaps your specific county too depending on the nature of your business and any required business licenses. In both cases, the process is very simple (see, for example, New York and California) and most of the time a lawyer is not truly required here, but many, many founders just skip this step entirely, creating problems later on.

Corporate governance

From a high level, a corporation is owned by the shareholders, who in turn have the power to elect individuals to the Board of Directors. The “Directors” govern the corporation on important matters outside the “ordinary course of business” and have the power to elect (and remove) the “Officers” of the corporation, who are responsible for day-to-day management of the business. The following offices must generally be filled right from the start: President (often the CEO), Treasurer (often the CFO or COO), and Secretary.

That said, all three offices can usually be filled by the same person; for example, in California and Delaware both, a corporation may have only a single shareholder and Director. In California, however, once a corporation has two shareholders, it must have at least two board members, and once it has three shareholders or more, it must have at least three board members. Corporations must also typically hold certain required meetings wherein formal minutes are recorded, including in most states at least one annual meeting of the Board of Directors and one annual meeting of the Stockholders (or written consents in lieu thereof).

Since the Board of Directors is the governing body of a corporation, a shareholder owning even a majority of the shares can be outvoted at the Board level with respect to important governing matters (e.g., sales of additional stock or election/removal of officers). Shareholders can remove Directors, of course, but this is a relatively drastic move, so selecting those who will occupy seats on the Board of Directors is extremely important for founders. In the beginning, the Board of Directors should only include founders and ideally an odd number of them to avoid voting deadlock on important company decisions. If you must have an even number of Directors on the Board, e.g., two 50/50 co-founders, then at least make sure you’ve included specific “tie-breaker” provisions in the governing documents of the company.Now, once the “certificate of incorporation” (or “charter”) is filed with the Secretary of State, the initial Directors of the company will be formally appointed by a written document called the “Initial Action by the Sole Incorporator” (often company counsel will perform this action). The initial Directors will then elect the Officers, authorize and issue stock to the founders, authorize the opening of a business bank account including establishing a federal Employment Identification Number (EIN), and paying expenses, etc. All of this is generally done through a “unanimous written consent” of the Board of Directors, which is a document signed by all Directors, rather than through votes taken in a formal in-person organizational meeting.

Other matters often addressed through this first “unanimous written consent” may include adoption of the following:

Bylaws, which set out board election and voting procedures;

Restricted Stock Purchase Agreement, which imposes “vesting” and rights of first refusal on founder/employee stock, as well as an assignment of pre-existing intellectual property to the company in certain cases;

Equity Incentive Plan (i.e., stock option plan), which sets forth the terms on which stock options can be granted and exercised;

Proprietary Information and Invention Assignment Agreement (PIIA), which will be signed by all founders, employees, and consultants, assigning to the company ownership of all intellectual property created in the business;

Selection of applicable fiscal year; and

Election of S Corp tax treatment (if desired).

Note finally, going forward, separate from any income taxes owed, corporations (as well as LLCs) must generally file certain information with the Secretary of State and pay franchise taxes each year as well (e.g., see Delaware’s Annual Report and California’s Statement of Information). For further discussion of corporate governance structure, see Holloway Guides.

For LLCs, rather than shareholders, each owner is called a “member” and instead of the “certificate of incorporation” and “bylaws,” the LLC is governed by the “articles of organization” and an “operating agreement” respectively. The operating agreement is often a lengthy, comprehensive contract detailing each member’s ownership interest (either percentage-based, or preferably, measured in ownership units), economic rights (distribution of profits and losses), governance and voting rights (addressing “tie-breaker” scenarios if necessary), and rights between members with respect to ownership interests (e.g., right of first refusal, buy-sell agreements, or other restrictions on transfers).

LLCs can either be “member managed” (all members approve major decisions and can act on behalf of the LLC) or “manager managed” (members may elect one or more managers with ultimate decision-making authority, but otherwise have no governance authority themselves). In the latter case, managers may also delegate responsibility for day-to-day business operations to officers, similar to the Board of Directors and Officers in a corporation. Since the operating agreement is essentially a contract between the members, which can be drafted with almost infinite variation, LLCs are known for being extremely flexible, but therefore less predictable for outside investors.

Since the operating agreement is less susceptible to standardization, it is wise to consult an experienced attorney to establish the desired governance and capitalization structure. Also, since equity issuance and compensation is less straightforward in the LLC context, most of the remaining sections below (except for the last) are specific to corporations, though many of the underlying principles may still apply.

All of that is to say, upon formation, you should have a clear understanding of what roles each founder will play, what time commitment is expected, what the ownership structure will look like, and who will serve on the Board of Directors (or serve as managers of the LLC) and therefore how decisions will ultimately be made. In the Delaware corporation context specifically, the Delaware Incorporation Package from Cooley Go, or services like Clerky, provide founders streamlined options and helpful resources to understand the steps involved; and again, if you’re thinking about going the LLC route, consult with a knowledgeable lawyer to ensure you don’t foreclose or complicate viable investment options later on.

Issuing “founder stock” at initial formation

“Founders Stock” is simply the common stock issued to founders when a corporation is initially formed; if done correctly, it is non-taxable because: (1) it is equal in value to the small amount of cash founders pay into the company in exchange for receiving the stock at par value (another good reason to set the par value very low, again say, $0.00001, allowing for  minimal cash outlay); or (2) “property” has been contributed to the company in exchange for the stock under Section 351 of the Internal Revenue Code, which provides that no gain or loss is recognized if property is transferred to a corporation by a person or persons who together own at least 80% of the corporation.

“Property” has been broadly defined to include legally protectable know-how and trade secrets, but this definition is not infinite in scope, so don’t get carried away trying to avoid paying the par value price for the stock in cash. Instead, one recommended hybrid approach involves each founder paying a portion of the par value purchase price of their stock to the company in cash, with the remainder covered by or attributable to an assignment by each founder to the company of their pre-existing intellectual property. This approach covers all the bases in terms of valid consideration (i.e., the cash payment) while ensuring that the pre-existing intellectual property of each founder is properly owned by the company.

Founder vesting and section 83(b) within 30 days

Where co-founders have contributed cash or other property to the company in exchange for their shares at par value, they own the stock outright. Thus, to achieve vesting and protect all founders from any particular co-founder leaving early with a large chunk of the company, each founder should enter a “Restricted Stock Purchase Agreement” (directly with the company), which gives the company the right to buy back that founder’s shares, often at par value. This right gradually lapses over time with respect to more and more of the founder’s shares, creating the effect of vesting for those shares no longer subject to the company’s repurchase right.

For co-founders involved immediately upon initial formation, you could reasonably argue that a “cliff” is not necessarily required, but the typical vesting schedule is 4 years, with 25% of the total shares vesting after the first year in a single chunk (this first year representing the “cliff” since nothing will vest if this one-year mark is not reached) then monthly vesting thereafter. Founders should also be aware of single and double-trigger acceleration provisions, which typically become more relevant once institutional investors are involved — more on that via Cooley Go.

Once the Restricted Stock Purchase Agreement is signed, however, certain tax implications are raised, because technically the founder’s stock is now at a “substantial risk of forfeiture” (since founders might forfeit stock if they leave the company). This means that by the time the stock actually “vests” it will almost certainly be worth more than the par value for which it was purchased. The IRS will want taxes paid on that delta, since technically that increase in value is taxable gain.

The solution? Internal Revenue Code Section 83(b), which allows founders and employees to elect treatment of non-vested shares as fully transferred at the very beginning of the vesting schedule, rather than over time as the shares vest. This allows for immediate taxation at the relatively lower current value, which in the case of a newly formed corporation is only some nominal amount based on the par value. This Section 83(b) election must be made in a written document actually signed and filed by the taxpayer within 30 days of the date the stock was made subject to restriction (or in the case of stock options, the date granted). While relatively simple to carry out, this process is important enough that getting oversight from experienced corporate counsel is prudent. See Holloway Guides for more discussion.

Raising capital

Capitalization, accredited vs. non-accredited investors. “Capitalization” in the startup context generally means the funding necessary for a startup to open for business, while “capital structure” refers to the types of capital (broadly, either equity or debt) available to fund business operations. Capital structure often consists of common stock and preferred stock (equity), as well as convertible notes (debt). A “capitalization table” (or “cap table”) will provide a summary of all securities (stock) issued by the company, along with the fully diluted percentage ownership of each shareholder based on all issued shares (not the total authorized shares).

Capitalization of your startup may include issuance of convertible notes or the sale of preferred stock and other securities, all of which are subject to the federal “Securities Act of 1933” as well as various “Blue Sky” state laws, essentially intended to prevent fraudsters from selling shares in worthless companies to unwitting investors. In determining compliance with these laws, the distinction between ‘Accredited’ and ‘Non-Accredited’ investors is important; in brief, raising money from accredited investors generally means there is less to worry about.

“Accredited Investors” by definition must have net worth of $1 million (excluding a principal residence) or annual income for the current and past two years of at least $200,000 (or $300,000 jointly with a spouse). If you are planning on raising money from Non-Accredited Investors, which founders should NOT do but often will do anyway, then in addition to familiarizing yourself with Rule 502(b)(1) and related Rules 504-506 of Regulation D (which provide relevant exemptions in this context), you should absolutely consult with an experienced securities attorney to make sure your reliance on these rules is not misplaced, as they are deceptively complex, though essentially can be summarized as follows:

Rule 504 provides an exemption for the sale of up to $1 million in securities within any 12 month period;

Rule 505 provides an exemption for the sale of up to $5 million in securities within any 12 month period to any number of accredited investors and up to 35 unaccredited investors; and

Rule 506 provides an exemption to an unlimited number of accredited investors and up to 35 other purchases, provided, however, that all non-accredited investors are “sophisticated” — having sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment.

Failure to comply with federal and state securities laws is a big deal: non-compliance gives rise to a rescission right for investors (legally they can demand their money back) and there are serious civil and criminal penalties for any materially false statements or omissions made during the offer or sale of any securities.

Selling preferred stock. Once you’ve found investors, outside of convertible notes and similar instruments discussed below, you should only be selling preferred stock to them, typically in the context of a “priced round.” If you sell common stock to investors, you will be setting the price of the common stock too high for purposes of granting attractive stock options to employees / advisers later on — that is, the “strike” or exercise price for the options will simply reflect the enterprise value of the company when sold, eliminating any real upside for employees (as well as the incentive to work extra hard) since there will be little or no spread between the strike price of the option and the ultimate price per share in an acquisition.

Selling preferred stock to investors in the context of a “priced round” requires that the company be assigned a specific valuation, however, which can be difficult and time consuming at the beginning of a company’s life. This is why convertible notes and SAFEs (discussed below) are so popular in the very early stages.

Preferred stock is so called because it carries certain “liquidation preferences” — meaning that if the company is sold or liquidated and there is not enough money to pay out all shareholders (e.g., the total investment was greater than the final acquisition price), then preferred shareholders get their money back before the common shareholders, i.e., the founders, will receive anything. The exact terms of the liquidation preference is negotiated (usually one to three times the amount of cash invested) and may be either “participating” or “nonparticipating” — though founders will want the “nonparticipating” variety.

A number of other special rights are also negotiated for preferred stock in a priced round, including those listed below; more info at Cooley Go, but for now, simply understand that these terms are complex enough that experienced corporate counsel is absolutely required when selling preferred stock in a priced round to investors:

Valuation/Dilution (pre/post-money)

Dividend preferences;

Redemption rights;

Conversion rights;

Anti-dilution protections (in order of most to least founder-friendly: “weighted average — broad based,” “weighted average – narrow based,” or “ratchet based”);

Voting rights (election of “x” number of members to the Board of Directors, approval of a sale or merger, issuing more shares, etc);

Registration rights;

Protective provisions, which can include certain affirmative covenants (e.g., investor access to financial information of the company) and certain negative covenants (e.g., agreement not to take certain actions without approval of the preferred shareholders)

Right of first refusal; and

Co-sale rights.

Convertible notes. For startups looking to raise less than ~$500K (sometimes more), rather than selling preferred stock and negotiating all the particulars above, alternatives exist which do not require setting a specific company valuation, namely:

Convertible Notes: As in “promissory note,” so technically a loan and therefore debt which carries interest, which in most circumstances converts to equity as preferred stock upon a later “qualified financing” when preferred stock is sold at a specific price. Usually the note converts at a 10%-30% “discount” to the preferred share price, or subject to a valuation “cap” that is effectively lower than the preferred share price, in order to reward the earlier investment for the additional risk. More info via 500 Startups.

KISS and SAFE Instruments: The relatively more recent “KISS” (from 500 Startups) and “SAFE” (from Y-Combinator) both remove the debt element of the convertible note, but otherwise operate in a similar fashion. Even more recently, Y-Combinator adjusted the terms of its SAFE from a “pre-money” to “post-money” valuation cap structure, which effectively means the new SAFE structure is now relatively more dilutive to current stockholders when issued (often the founders and early employees), but it is also now easier to calculate the amount of ownership sold to investors via the SAFE on a percentage basis (because the percentage no longer changes based on the potential addition or increases to the employee option pool in a later priced round).

“Finders” and brokers. The startup ecosystem is filled with certain people — known as “finders” or “connectors” — who promise to find investment for startups in exchange for a fee. These “finders” typically are not registered securities brokers, so technically they should not do any of the following: participate in negotiations with respect to investing in securities, provide counsel to investors or recommend securities as investments, and perhaps most of all, receive percentage-based compensation on amounts invested.

If presented with a written agreement from a “finder” who is offering to assist in fundraising, be sure that the agreement is non-exclusive and that there is no percentage-based compensation on the funds raised; instead, seek true “advisors” who can offer real business insights, have deep industry knowledge and connections, then pay them via an hourly rate, monthly retainer, and/or properly issued stock options, generally 0.10% to 1% vesting over 2-3 years.

Correctly issuing stock options to employees and advisers

Stock options are not stock, but merely the option to buy a certain amount of stock at a given price — the “exercise” or “strike” price. Employee stock options typically vest over four years, subject to a one-year “cliff” (i.e., the employee must work for at least one year to meet the “cliff” in order to vest any options at all; after that, vesting continues in monthly increments).

Startups generally get into trouble here for two reasons: (1) they fail to establish and formally adopt through appropriate corporation action (i.e., written board consent) a written “Equity Incentive Compensation Plan” (or “option plan”) pursuant to which the options are granted; and (2) they make a promise to grant stock options at a certain time (which implies a certain strike price at that time), but then do not take the necessary corporate action to actually make the stock option grant; namely, a written board consent approving the option grant with an exercise price equal to the fair market value of the stock, as determined by the board of directors, as of the date of grant (ideally with reference to a recent and valid 409A valuation).

It is critical that the board of directors accurately set the exercise price of the stock option to be equal to the fair market value of the optioned stock as of the date of grant. The 409A valuation, when done by a qualified third-party, is really the only way to completely safeguard the Board of Directors’ determination of fair market value of the stock in this regard should the IRS or some other financial auditor later take interest. Not getting this right could later blow up crucial deals — including investment rounds and potential acquisitions — due to the accounting and tax implications. Fortunately, there are now a number of companies which provide 409A valuation services at affordable rates, including Carta, Capshare, and more recently Meld Valuation.

Moreover, unless you want to commit securities fraud, you cannot “backdate” option grants (so that the option granted reflects a previous, lower price). That said, you can set the vesting commencement date to some point in the past in order to give credit for time served. Also, for those interested, there is an important distinction, with corresponding tax implications, between Statutory or Incentive Stock Options (“ISOs”), which can only be issued to employees, and Nonstatutory or Non-Qualified Stock Options (“NSOs”), sometimes issued to non-employee advisors — more on that via the Internal Revenue Service and Investopedia.

One last point worth mentioning in this section: very early on, when company valuation is still extremely low, it is possible and still practical (since tax liability will be minimal in light of the low valuation) to grant “restricted stock” even to non-founders – though you still need an Equity Incentive Plan in place first. In fact, restricted stock is the best option for non-founders involved in the very beginning of a startup’s life because aside from some immediate tax liability (which again, should be light given the relatively low valuation of a new company), ultimate tax treatment will likely be at capital gain rates and so much more favorable as compared to stock options, which usually end up being taxed as ordinary income.

Check out Holloway Guides for more discussion of equity compensation topics.

S Corp and LLC equity compensation

In the S corp and LLC contexts respectively, stock options or equivalent instruments are not as easily issued, and thus again, corporate counsel is appropriate. In the case of the S corp, if an option holder exercises an option who is not a qualified S corp shareholder (e.g., they are a nonresident alien), the S corp could lose its “S election” for pass-through taxation entirely. For LLCs, exercising an option on an interest in the LLC requires complex accounting entries, plus the person exercising the option will then become a member of the LLC, so they will receive “IRS Form 1065, Schedule K-1” and may be required to pay tax on the income of the LLC (in some cases whether or not they actually receive it).

While LLCs can create ���profit interests” for its employees, which may entitle recipients to receive a percentage of the future appreciation in enterprise value, these plans are fairly complex to administer. A simpler alternative, used by many S corps and LLCs alike, is “phantom stock” which can be placed on a vesting schedule as well. Phantom stock is essentially a creature of contract, promising that a certain amount of the company’s ultimate acquisition price shall be reserved for distribution to holders of the “phantom stock units.” The amount so reserved is then divided by the number of phantom stock units established in the operating agreement and taken “off the top” from the final acquisition price, to be distributed to each phantom stock holder in accordance with the number of phantom stock units held.

Conclusion

Admittedly, the foregoing covered a bit of ground. As a founder, it is important that you have at least basic familiarity with an incredibly broad range of legal topics — corporate law being one of the most important. Such familiarity will allow you to identify and distinguish between situations that your team can readily handle internally, from those that require outside legal counsel. If you’ve made it this far, a congrats are in order — you are well on your way to startup success.

Daniel T. McKenzie, Esq., manages the Law Office of Daniel McKenzie, specializing in the representation of startups and startup founders. Prior to establishing his law office, Daniel McKenzie co-founded and served as lead in-house counsel for Reelio, Inc., backed by eVentures, and acquired in 2018 by Fullscreen (a subsidiary of Otter Media and AT&T).

Thank you to Stephane Levy, a partner at Cooley, for providing comments on this article.

DISCLAIMER: This post discusses general legal issues, but it does not constitute legal advice in any respect. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction. TechCrunch, the author and the author’s law firm, expressly disclaim all liability in respect of any actions taken or not taken based on any contents of this post.

  source https://techcrunch.com/2019/02/19/startup-law-a-to-z-corporate-matters/

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Startup Law A to Z: Corporate Matters

Founders are a special breed — independent, self-reliant, and resourceful. Yet these same attributes, critical in taking an idea from zero to one, can eventually cause first-time founders to misjudge situations and tackle problems without appropriate guidance. This is particularly true (sometimes tragically so) in the legal arena, where founders generally have little or no experience and the risks are difficult to quantify.

To solve this, Extra Crunch is offering up well-sourced lists of the best lawyers for startups, alongside articles and resources written by experts who navigate tricky legal issues for startups on a daily basis. This article is the first of a five-part series covering the legal terrain you should endeavor to navigate with the help of an experienced guide, including:

Corporate: Business Formation, Capitalization and Financing, Securities and Options, etc.

Intellectual Property: Patents, Trade Secrets, Trademarks, and Copyright, etc.

Business Transactions: Master Services / SaaS Agreements, Terms of Use, NDAs, etc.

Compliance and Regulatory: Business Qualification, Privacy, and FTC Regulation, etc.

Human Resources: Employee Compensation, Contractors, Discrimination, Immigration, etc.

While none of this will be legal advice per se, it is perhaps the next best thing: a simple checklist followed by in-depth summaries helpful to evaluate whether and when formal legal counsel is needed in key areas. With the information from this article and those to follow, alongside other Extra Crunch resources, you can analyze your business circumstances and evaluate your risk exposure. Should you identify legal risks in the above or related areas, simply reference the list of best startup lawyers compiled by Extra Crunch, then reach out to those lawyers focused on serving companies at your stage with experience in the matters at hand.

This article will examine “corporate law” as it relates to startups, which includes the body of laws, rules and practices that govern the formation and operation of corporations, including most importantly for founders, ownership and investment in securities (or stock) of a company. Yuval Harari, author of Sapiens, calls corporations (and limited liability companies more broadly) “among humanity’s most ingenious inventions” — so it is worth knowing a thing or two about them.

Two final caveats here: first, TechCrunch readers include everyone from first-time founders still bootstrapping a concept on nights and weekends to serial entrepreneurs with multiple large exits behind them. Overall this article will skew in the direction of the former, since those with more experience should have less need for guidance in these areas, but even experienced entrepreneurs should find this and subsequent articles helpful.

Second, for those unfamiliar with the legal profession, there is an important distinction between transactional and litigation practice. Most TechCrunch readers already understand this difference, but simply to address it here: transactional lawyers do deals and ensure compliance with laws and regulations, while litigators file lawsuits and go to court. That’s an over-simplification, but understand that great transactional lawyers are not likely to be especially great litigators in case you become involved in a lawsuit.

This and subsequent articles will focus on transactional issues, but litigation could arise within any of the five areas above and in that unfortunate event you should seek a lawyer (or team of lawyers) focused on litigating within the specific area(s) relevant to your lawsuit.

Read on for the official Extra Crunch corporate law checklist for startups.

Threshold matters: Pre-existing IP and trademarks

Although technically not matters of corporate law, two threshold items relating to intellectual property should be mentioned form the outset. First, make sure you understand whether the intellectual property you are creating is subject to any claims from the prior or existing employers of the founders. We’ll discuss this topic further in a later article, but it is worth mentioning now so it is on your radar.

Second, because your startup will need to brand itself to attract customers and/or users, put some effort in on the front end to make sure your business name is available and it will not result in trademark disputes down the road. This is easy enough to do using the USPTO’s trademark database, for example, but ultimately it could be a state-by-state question.

Entity selection and incorporation – C corp/S corp/LLC

While many types of legal business structures exist, assuming you are interested in starting a high-growth technology company, really only two matter: the corporation and the limited liability company, or “LLC.” Each allows for multiple individuals to share in the ownership of the company and most of the time will shield owners’ personal assets from the obligations of the business — that is, unless otherwise agreed by the owners themselves, or due to some malfeasance of the owners (such as mixing personal and business expenses, something which founders have been known to do unfortunately). In the latter case, where a business owner’s personal assets can be held to account for liabilities of the company, courts have creatively termed this “piercing the corporate veil.”

For startups ultimately looking to pursue a traditional VC route, incorporating in Delaware as a C corp is the obvious choice — there is no reason to overthink it. Under your certificate of incorporation (sometimes called a “charter”), you’ll typically want to authorize 10 million shares of stock at a “par value” price of $0.00001. (“Par value” is simply the lowest price at which a corporation may issue shares upon initial offering.) Of these 10 million “authorized” shares, only about 4-6 million shares of common stock are typically “issued” to founders from the outset (and don’t worry, percentage ownership is calculated based only on the issued shares).

This will leave available additional “authorized but unissued” shares which can later be issued to create a stock option pool for incentivizing employees, or issued as preferred stock to investors in exchange for cash. With respect to the latter use specifically, it is generally not necessary to specifically authorize a separate class of preferred stock upon initial formation — this can always be done by amending the charter in connection with the actual investment round later on, since the round is likely to require a charter amendment in any case.

One final note on initial formation: more recently, a new class of stock called “Series FF Stock” is sometimes included during initial formation for issuance to founders (essentially, a hybrid of common and preferred stock) in order to later facilitate stock sales by the founders themselves to investors in future equity financings, effectively allowing founders to personally realize some liquidity before an actual sale or IPO. If this sounds appealing to you as a founder, which it should, it is definitely worth asking your lawyer about.

If you are not looking at a traditional VC path, however, S corps and LLCs can provide better options in certain situations, particularly if your business will remain relatively small over the long term (tens of employees and not hundreds). In terms of tax treatment, these entities are typically advantageous, especially in the early years, since business income and losses are “passed through” to the owners and taxed on an individual basis using Schedule K-1, with no separate layer of tax liability for the company itself.

Also, in states like Delaware, California, and others that allow for “statutory conversion,” LLCs can relatively easily convert to a C corp later down the road, should the need arise, through a tax-free transaction under Internal Revenue Code Section 351; provided, however, that the operating agreement is initially well-drafted to anticipate this event (for example, using “membership units” rather than simple percentages to indicate the ownership interests of members).

Finally, if you incorporate outside the state where you will be primarily running the business, you will also need to “qualify as a foreign entity” in your home state (in this case, “foreign” means different state, not country). Put differently, you will need to register your “foreign” company with the state where you are primarily “transacting business” and perhaps your specific county too depending on the nature of your business and any required business licenses. In both cases, the process is very simple (see, for example, New York and California) and most of the time a lawyer is not truly required here, but many, many founders just skip this step entirely, creating problems later on.

Corporate governance

From a high level, a corporation is owned by the shareholders, who in turn have the power to elect individuals to the Board of Directors. The “Directors” govern the corporation on important matters outside the “ordinary course of business” and have the power to elect (and remove) the “Officers” of the corporation, who are responsible for day-to-day management of the business. The following offices must generally be filled right from the start: President (often the CEO), Treasurer (often the CFO or COO), and Secretary.

That said, all three offices can usually be filled by the same person; for example, in California and Delaware both, a corporation may have only a single shareholder and Director. In California, however, once a corporation has two shareholders, it must have at least two board members, and once it has three shareholders or more, it must have at least three board members. Corporations must also typically hold certain required meetings wherein formal minutes are recorded, including in most states at least one annual meeting of the Board of Directors and one annual meeting of the Stockholders (or written consents in lieu thereof).

Since the Board of Directors is the governing body of a corporation, a shareholder owning even a majority of the shares can be outvoted at the Board level with respect to important governing matters (e.g., sales of additional stock or election/removal of officers). Shareholders can remove Directors, of course, but this is a relatively drastic move, so selecting those who will occupy seats on the Board of Directors is extremely important for founders. In the beginning, the Board of Directors should only include founders and ideally an odd number of them to avoid voting deadlock on important company decisions. If you must have an even number of Directors on the Board, e.g., two 50/50 co-founders, then at least make sure you’ve included specific “tie-breaker” provisions in the governing documents of the company.Now, once the “certificate of incorporation” (or “charter”) is filed with the Secretary of State, the initial Directors of the company will be formally appointed by a written document called the “Initial Action by the Sole Incorporator” (often company counsel will perform this action). The initial Directors will then elect the Officers, authorize and issue stock to the founders, authorize the opening of a business bank account including establishing a federal Employment Identification Number (EIN), and paying expenses, etc. All of this is generally done through a “unanimous written consent” of the Board of Directors, which is a document signed by all Directors, rather than through votes taken in a formal in-person organizational meeting.

Other matters often addressed through this first “unanimous written consent” may include adoption of the following:

Bylaws, which set out board election and voting procedures;

Restricted Stock Purchase Agreement, which imposes “vesting” and rights of first refusal on founder/employee stock, as well as an assignment of pre-existing intellectual property to the company in certain cases;

Equity Incentive Plan (i.e., stock option plan), which sets forth the terms on which stock options can be granted and exercised;

Proprietary Information and Invention Assignment Agreement (PIIA), which will be signed by all founders, employees, and consultants, assigning to the company ownership of all intellectual property created in the business;

Selection of applicable fiscal year; and

Election of S Corp tax treatment (if desired).

Note finally, going forward, separate from any income taxes owed, corporations (as well as LLCs) must generally file certain information with the Secretary of State and pay franchise taxes each year as well (e.g., see Delaware’s Annual Report and California’s Statement of Information). For further discussion of corporate governance structure, see Holloway Guides.

For LLCs, rather than shareholders, each owner is called a “member” and instead of the “certificate of incorporation” and “bylaws,” the LLC is governed by the “articles of organization” and an “operating agreement” respectively. The operating agreement is often a lengthy, comprehensive contract detailing each member’s ownership interest (either percentage-based, or preferably, measured in ownership units), economic rights (distribution of profits and losses), governance and voting rights (addressing “tie-breaker” scenarios if necessary), and rights between members with respect to ownership interests (e.g., right of first refusal, buy-sell agreements, or other restrictions on transfers).

LLCs can either be “member managed” (all members approve major decisions and can act on behalf of the LLC) or “manager managed” (members may elect one or more managers with ultimate decision-making authority, but otherwise have no governance authority themselves). In the latter case, managers may also delegate responsibility for day-to-day business operations to officers, similar to the Board of Directors and Officers in a corporation. Since the operating agreement is essentially a contract between the members, which can be drafted with almost infinite variation, LLCs are known for being extremely flexible, but therefore less predictable for outside investors.

Since the operating agreement is less susceptible to standardization, it is wise to consult an experienced attorney to establish the desired governance and capitalization structure. Also, since equity issuance and compensation is less straightforward in the LLC context, most of the remaining sections below (except for the last) are specific to corporations, though many of the underlying principles may still apply.

All of that is to say, upon formation, you should have a clear understanding of what roles each founder will play, what time commitment is expected, what the ownership structure will look like, and who will serve on the Board of Directors (or serve as managers of the LLC) and therefore how decisions will ultimately be made. In the Delaware corporation context specifically, the Delaware Incorporation Package from Cooley Go, or services like Clerky, provide founders streamlined options and helpful resources to understand the steps involved; and again, if you’re thinking about going the LLC route, consult with a knowledgeable lawyer to ensure you don’t foreclose or complicate viable investment options later on.

Issuing “founder stock” at initial formation

“Founders Stock” is simply the common stock issued to founders when a corporation is initially formed; if done correctly, it is non-taxable because: (1) it is equal in value to the small amount of cash founders pay into the company in exchange for receiving the stock at par value (another good reason to set the par value very low, again say, $0.00001, allowing for  minimal cash outlay); or (2) “property” has been contributed to the company in exchange for the stock under Section 351 of the Internal Revenue Code, which provides that no gain or loss is recognized if property is transferred to a corporation by a person or persons who together own at least 80% of the corporation.

“Property” has been broadly defined to include legally protectable know-how and trade secrets, but this definition is not infinite in scope, so don’t get carried away trying to avoid paying the par value price for the stock in cash. Instead, one recommended hybrid approach involves each founder paying a portion of the par value purchase price of their stock to the company in cash, with the remainder covered by or attributable to an assignment by each founder to the company of their pre-existing intellectual property. This approach covers all the bases in terms of valid consideration (i.e., the cash payment) while ensuring that the pre-existing intellectual property of each founder is properly owned by the company.

Founder vesting and section 83(b) within 30 days

Where co-founders have contributed cash or other property to the company in exchange for their shares at par value, they own the stock outright. Thus, to achieve vesting and protect all founders from any particular co-founder leaving early with a large chunk of the company, each founder should enter a “Restricted Stock Purchase Agreement” (directly with the company), which gives the company the right to buy back that founder’s shares, often at par value. This right gradually lapses over time with respect to more and more of the founder’s shares, creating the effect of vesting for those shares no longer subject to the company’s repurchase right.

For co-founders involved immediately upon initial formation, you could reasonably argue that a “cliff” is not necessarily required, but the typical vesting schedule is 4 years, with 25% of the total shares vesting after the first year in a single chunk (this first year representing the “cliff” since nothing will vest if this one-year mark is not reached) then monthly vesting thereafter. Founders should also be aware of single and double-trigger acceleration provisions, which typically become more relevant once institutional investors are involved — more on that via Cooley Go.

Once the Restricted Stock Purchase Agreement is signed, however, certain tax implications are raised, because technically the founder’s stock is now at a “substantial risk of forfeiture” (since founders might forfeit stock if they leave the company). This means that by the time the stock actually “vests” it will almost certainly be worth more than the par value for which it was purchased. The IRS will want taxes paid on that delta, since technically that increase in value is taxable gain.

The solution? Internal Revenue Code Section 83(b), which allows founders and employees to elect treatment of non-vested shares as fully transferred at the very beginning of the vesting schedule, rather than over time as the shares vest. This allows for immediate taxation at the relatively lower current value, which in the case of a newly formed corporation is only some nominal amount based on the par value. This Section 83(b) election must be made in a written document actually signed and filed by the taxpayer within 30 days of the date the stock was made subject to restriction (or in the case of stock options, the date granted). While relatively simple to carry out, this process is important enough that getting oversight from experienced corporate counsel is prudent. See Holloway Guides for more discussion.

Raising capital

Capitalization, accredited vs. non-accredited investors. “Capitalization” in the startup context generally means the funding necessary for a startup to open for business, while “capital structure” refers to the types of capital (broadly, either equity or debt) available to fund business operations. Capital structure often consists of common stock and preferred stock (equity), as well as convertible notes (debt). A “capitalization table” (or “cap table”) will provide a summary of all securities (stock) issued by the company, along with the fully diluted percentage ownership of each shareholder based on all issued shares (not the total authorized shares).

Capitalization of your startup may include issuance of convertible notes or the sale of preferred stock and other securities, all of which are subject to the federal “Securities Act of 1933” as well as various “Blue Sky” state laws, essentially intended to prevent fraudsters from selling shares in worthless companies to unwitting investors. In determining compliance with these laws, the distinction between ‘Accredited’ and ‘Non-Accredited’ investors is important; in brief, raising money from accredited investors generally means there is less to worry about.

“Accredited Investors” by definition must have net worth of $1 million (excluding a principal residence) or annual income for the current and past two years of at least $200,000 (or $300,000 jointly with a spouse). If you are planning on raising money from Non-Accredited Investors, which founders should NOT do but often will do anyway, then in addition to familiarizing yourself with Rule 502(b)(1) and related Rules 504-506 of Regulation D (which provide relevant exemptions in this context), you should absolutely consult with an experienced securities attorney to make sure your reliance on these rules is not misplaced, as they are deceptively complex, though essentially can be summarized as follows:

Rule 504 provides an exemption for the sale of up to $1 million in securities within any 12 month period;

Rule 505 provides an exemption for the sale of up to $5 million in securities within any 12 month period to any number of accredited investors and up to 35 unaccredited investors; and

Rule 506 provides an exemption to an unlimited number of accredited investors and up to 35 other purchases, provided, however, that all non-accredited investors are “sophisticated” — having sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment.

Failure to comply with federal and state securities laws is a big deal: non-compliance gives rise to a rescission right for investors (legally they can demand their money back) and there are serious civil and criminal penalties for any materially false statements or omissions made during the offer or sale of any securities.

Selling preferred stock. Once you’ve found investors, outside of convertible notes and similar instruments discussed below, you should only be selling preferred stock to them, typically in the context of a “priced round.” If you sell common stock to investors, you will be setting the price of the common stock too high for purposes of granting attractive stock options to employees / advisers later on — that is, the “strike” or exercise price for the options will simply reflect the enterprise value of the company when sold, eliminating any real upside for employees (as well as the incentive to work extra hard) since there will be little or no spread between the strike price of the option and the ultimate price per share in an acquisition.

Selling preferred stock to investors in the context of a “priced round” requires that the company be assigned a specific valuation, however, which can be difficult and time consuming at the beginning of a company’s life. This is why convertible notes and SAFEs (discussed below) are so popular in the very early stages.

Preferred stock is so called because it carries certain “liquidation preferences” — meaning that if the company is sold or liquidated and there is not enough money to pay out all shareholders (e.g., the total investment was greater than the final acquisition price), then preferred shareholders get their money back before the common shareholders, i.e., the founders, will receive anything. The exact terms of the liquidation preference is negotiated (usually one to three times the amount of cash invested) and may be either “participating” or “nonparticipating” — though founders will want the “nonparticipating” variety.

A number of other special rights are also negotiated for preferred stock in a priced round, including those listed below; more info at Cooley Go, but for now, simply understand that these terms are complex enough that experienced corporate counsel is absolutely required when selling preferred stock in a priced round to investors:

Valuation/Dilution (pre/post-money)

Dividend preferences;

Redemption rights;

Conversion rights;

Anti-dilution protections (in order of most to least founder-friendly: “weighted average — broad based,” “weighted average – narrow based,” or “ratchet based”);

Voting rights (election of “x” number of members to the Board of Directors, approval of a sale or merger, issuing more shares, etc);

Registration rights;

Protective provisions, which can include certain affirmative covenants (e.g., investor access to financial information of the company) and certain negative covenants (e.g., agreement not to take certain actions without approval of the preferred shareholders)

Right of first refusal; and

Co-sale rights.

Convertible notes. For startups looking to raise less than ~$500K (sometimes more), rather than selling preferred stock and negotiating all the particulars above, alternatives exist which do not require setting a specific company valuation, namely:

Convertible Notes: As in “promissory note,” so technically a loan and therefore debt which carries interest, which in most circumstances converts to equity as preferred stock upon a later “qualified financing” when preferred stock is sold at a specific price. Usually the note converts at a 10%-30% “discount” to the preferred share price, or subject to a valuation “cap” that is effectively lower than the preferred share price, in order to reward the earlier investment for the additional risk. More info via 500 Startups.

KISS and SAFE Instruments: The relatively more recent “KISS” (from 500 Startups) and “SAFE” (from Y-Combinator) both remove the debt element of the convertible note, but otherwise operate in a similar fashion. Even more recently, Y-Combinator adjusted the terms of its SAFE from a “pre-money” to “post-money” valuation cap structure, which effectively means the new SAFE structure is now relatively more dilutive to current stockholders when issued (often the founders and early employees), but it is also now easier to calculate the amount of ownership sold to investors via the SAFE on a percentage basis (because the percentage no longer changes based on the potential addition or increases to the employee option pool in a later priced round).

“Finders” and brokers. The startup ecosystem is filled with certain people — known as “finders” or “connectors” — who promise to find investment for startups in exchange for a fee. These “finders” typically are not registered securities brokers, so technically they should not do any of the following: participate in negotiations with respect to investing in securities, provide counsel to investors or recommend securities as investments, and perhaps most of all, receive percentage-based compensation on amounts invested.

If presented with a written agreement from a “finder” who is offering to assist in fundraising, be sure that the agreement is non-exclusive and that there is no percentage-based compensation on the funds raised; instead, seek true “advisors” who can offer real business insights, have deep industry knowledge and connections, then pay them via an hourly rate, monthly retainer, and/or properly issued stock options, generally 0.10% to 1% vesting over 2-3 years.

Correctly issuing stock options to employees and advisers

Stock options are not stock, but merely the option to buy a certain amount of stock at a given price — the “exercise” or “strike” price. Employee stock options typically vest over four years, subject to a one-year “cliff” (i.e., the employee must work for at least one year to meet the “cliff” in order to vest any options at all; after that, vesting continues in monthly increments).

Startups generally get into trouble here for two reasons: (1) they fail to establish and formally adopt through appropriate corporation action (i.e., written board consent) a written “Equity Incentive Compensation Plan” (or “option plan”) pursuant to which the options are granted; and (2) they make a promise to grant stock options at a certain time (which implies a certain strike price at that time), but then do not take the necessary corporate action to actually make the stock option grant; namely, a written board consent approving the option grant with an exercise price equal to the fair market value of the stock, as determined by the board of directors, as of the date of grant (ideally with reference to a recent and valid 409A valuation).

It is critical that the board of directors accurately set the exercise price of the stock option to be equal to the fair market value of the optioned stock as of the date of grant. The 409A valuation, when done by a qualified third-party, is really the only way to completely safeguard the Board of Directors’ determination of fair market value of the stock in this regard should the IRS or some other financial auditor later take interest. Not getting this right could later blow up crucial deals — including investment rounds and potential acquisitions — due to the accounting and tax implications. Fortunately, there are now a number of companies which provide 409A valuation services at affordable rates, including Carta, Capshare, and more recently Meld Valuation.

Moreover, unless you want to commit securities fraud, you cannot “backdate” option grants (so that the option granted reflects a previous, lower price). That said, you can set the vesting commencement date to some point in the past in order to give credit for time served. Also, for those interested, there is an important distinction, with corresponding tax implications, between Statutory or Incentive Stock Options (“ISOs”), which can only be issued to employees, and Nonstatutory or Non-Qualified Stock Options (“NSOs”), sometimes issued to non-employee advisors — more on that via the Internal Revenue Service and Investopedia.

One last point worth mentioning in this section: very early on, when company valuation is still extremely low, it is possible and still practical (since tax liability will be minimal in light of the low valuation) to grant “restricted stock” even to non-founders – though you still need an Equity Incentive Plan in place first. In fact, restricted stock is the best option for non-founders involved in the very beginning of a startup’s life because aside from some immediate tax liability (which again, should be light given the relatively low valuation of a new company), ultimate tax treatment will likely be at capital gain rates and so much more favorable as compared to stock options, which usually end up being taxed as ordinary income.

Check out Holloway Guides for more discussion of equity compensation topics.

S Corp and LLC equity compensation

In the S corp and LLC contexts respectively, stock options or equivalent instruments are not as easily issued, and thus again, corporate counsel is appropriate. In the case of the S corp, if an option holder exercises an option who is not a qualified S corp shareholder (e.g., they are a nonresident alien), the S corp could lose its “S election” for pass-through taxation entirely. For LLCs, exercising an option on an interest in the LLC requires complex accounting entries, plus the person exercising the option will then become a member of the LLC, so they will receive “IRS Form 1065, Schedule K-1” and may be required to pay tax on the income of the LLC (in some cases whether or not they actually receive it).

While LLCs can create “profit interests” for its employees, which may entitle recipients to receive a percentage of the future appreciation in enterprise value, these plans are fairly complex to administer. A simpler alternative, used by many S corps and LLCs alike, is “phantom stock” which can be placed on a vesting schedule as well. Phantom stock is essentially a creature of contract, promising that a certain amount of the company’s ultimate acquisition price shall be reserved for distribution to holders of the “phantom stock units.” The amount so reserved is then divided by the number of phantom stock units established in the operating agreement and taken “off the top” from the final acquisition price, to be distributed to each phantom stock holder in accordance with the number of phantom stock units held.

Conclusion

Admittedly, the foregoing covered a bit of ground. As a founder, it is important that you have at least basic familiarity with an incredibly broad range of legal topics — corporate law being one of the most important. Such familiarity will allow you to identify and distinguish between situations that your team can readily handle internally, from those that require outside legal counsel. If you’ve made it this far, a congrats are in order — you are well on your way to startup success.

Daniel T. McKenzie, Esq., manages the Law Office of Daniel McKenzie, specializing in the representation of startups and startup founders. Prior to establishing his law office, Daniel McKenzie co-founded and served as lead in-house counsel for Reelio, Inc., backed by eVentures, and acquired in 2018 by Fullscreen (a subsidiary of Otter Media and AT&T).

Thank you to Stephane Levy, a partner at Cooley, for providing comments on this article.

DISCLAIMER: This post discusses general legal issues, but it does not constitute legal advice in any respect. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction. TechCrunch, the author and the author’s law firm, expressly disclaim all liability in respect of any actions taken or not taken based on any contents of this post.

  Via Daniel McKenzie https://techcrunch.com

[theconservativebrief]

If there is an age when Kidz Bop is cool, I was never that age. Kidz Bop’s mission is to make “kid-friendly versions of today’s biggest pop music hits,” which translates to compilation albums of kids covering popular songs stripped of obscenities and suggestive language. As a kid, an ensemble of nasal voices singing castrated covers of the most overplayed songs on the radio was always upsetting to me (even in the condensed form of a one-minute commercial between Spongebob episodes). Now it’s something I forget exists unless I unfortunately stumble on it during one of the few times a year I have access to cable.

Yet somehow Kidz Bop has proven to be an enduring brand. As of this year, it has released more than 38 albums. The Kidz Bop Kids were Billboard’s No. 1 kids’ album artists from 2011 to 2017 and have had 22 Top 10 albums on the Billboard Top 200 chart — more than Madonna or Elton John. Since its genesis in 2001, the brand has expanded to live music, merchandise, and brand partnerships. The rotating roster of Kidz Bop Kids have gone on six national tours, serenading audiences across the country. There is a Sirius XM channel that plays Kidz Bop music 24/7 (something that seems specifically manufactured by the Bad Place).

What makes Kidz Bop such a confusing success is that it fails in its primary mission: Though it sanitizes popular songs, the music that results could not fairly be called “kid-friendly.”

A 2017 study on the effects of censorship in Kidz Bop found that replacing phrases does not actually wipe lyrical recognition from children’s minds if they have already heard the original song. Even if it did, what Kidz Bop is enforcing is also not kid-appropriate: The study says the music perpetuates the sociological phenomenon of “kids getting older younger” (KGOY), which claims that marketing is pushing kids out of their childhood earlier and earlier. The study says that repackaging adult music as kids’ music doesn’t eliminate the adult messages, even though some words and phrases are changed.

One source quoted in the study is Christopher Bell, an associate professor of media studies at the University of Colorado in Colorado Springs who is an expert on how race, class, and gender intersect with children’s media. He has hosted a TED talk on female superheroes, is currently consulting on an upcoming Pixar movie (which he cannot talk about because of a very long NDA), and is an avowed Kidz Bop hater.

He sees the product as both lazy and emblematic of our mistaken views on what censorship accomplishes. Kids’ media may take out “bad words,” but it doesn’t fix the problem of violence and oversexualization of women in media and pop culture. I asked him about how what is censored, in Kidz Bop and otherwise, can affect what children learn. Our conversation has been edited for length and clarity.

Aditi Shrikant

We all know Kidz Bop censorship to be kind of odd and annoying, but is it actually insufficient?

Christopher Bell

Kidz Bop is an abomination because it censors language but it doesn’t censor content. I don’t need a sanitized version of “Despacito” — I need 8-year-olds not to be singing “Despacito” because that [song] is super dirty. And Kidz Bop doesn’t always make that distinction. Fundamentally, I don’t understand why Kidz Bop has to exist. It’s like censorship of the most banal kind.

It’s very gender conformist and racial conformist. You’ve got kids posturing in ways that I don’t know if they understand what they are doing, but the people filming definitely understand. Kids are doing dances that are sanitized but sexual at the same time because no one understands content; they just understand form.

“We are weird about what we censor and weird about what we care about”

Aditi Shrikant

Do you think kids can recognize context even with the censors Kidz Bop applies?

Christopher Bell

I believe they can. People don’t give children enough credit for cognitive development. I think it’s lazy parenting. I think it’s listening to a song where someone says a quote-unquote bad word and then taking the bad word out without ever being like, “What is this song about?” I think it’s super lazy.

Aditi Shrikant

Do you think what Americans censor in general align with what Kidz Bop censors?

Christopher Bell

Well, look around: Our culture prioritizes censoring language over violence. Take a movie like The Avengers: Black Widow shows up in a skintight black latex outfit for the visual, sexual pleasure of the audience. She engages in horrific physical violence — kicks the holy shit out of eight guys on the screen. Tasers them, electrocutes them, kicks them in the face, throws them across the room. That is a PG-13 movie, but if it had said the word “fuck” once, it would have been rated R. That’s the nature of our society.

We are weird about what we censor and weird about what we care about. And violence is always at the bottom of that list. With language, say two “bad words” and you have to be rated R, but go ahead and shoot 15 people in the face. We censor words and we censor explicit sex, but we don’t censor sexual content and we absolutely don’t censor violence.

Aditi Shrikant

Does this lack of censorship when it comes to sexual content and violence affect boys and girls differently? Especially when it comes to KGOY?

Christopher Bell

I do think it’s geared toward girls. Particularly in terms of this whole getting older younger thing. We have the exact opposite effect when it comes to boys, and if you don’t believe me, you haven’t been paying attention for the past two weeks. This whole idea that “boys will be boys” — no, grown-ass men will be responsible for their actions. It’s a complete double standard in our culture.

Aditi Shrikant

So boys don’t have the pressure to grow up faster?

Christopher Bell

Our boys are getting older younger, too, but it manifests itself differently. With girls, it manifests itself with sexualization. With boys, it manifests itself with violence and this sort of never-ending stream of violent content and the ideology that violence is an acceptable means to solve your problems.

For girls, adulthood is tied to their sexuality; for boys, adulthood is tied to the ability to win. And winning, in our culture, almost always has the baseline that is violence.

“At the end of the day, no culture in our society gets produced if it can’t sell”

Aditi Shrikant

Pixar hired you to consult. Are you seeing a change in companies wanting to learn how to craft more conscientious kids’ content?

Christopher Bell

I think a generation of people who have been in charge of things for a very long time are slowly moving out of those positions of power, and the people coming in after them have a different sensibility.

If you look at the acquisition of Lucasfilm, for example, the way George Lucas runs that company is not the way Kathleen Kennedy is running that company. We see the direct result of what happens when there is a woman in charge and not a man. We get The Force Awakens, we get Rogue One, we get Forces of Destiny, we get all these great things.

When you look at things like Moana, that couldn’t have been made 25 years ago. We know Moana couldn’t have been made 25 years ago because 25 years ago they were making Pocahontas, which is an incredibly horrific film. We live in a time where they’re contemplating canonizing the fact that Elsa from Frozen is a lesbian. They had to redesign the Transformers series because it got too Michael Bay violent for no reason and people stopped going because it had no soul.

It’s showing that there’s a market for inclusiveness. There’s a market for dealing with sex and violence differently in our culture. It can be profitable. And at the end of the day, no culture in our society gets produced if it can’t sell.

Aditi Shrikant

How are the effects of companies not understanding what should be censored felt today?

Christopher Bell

This whole cultural concept of boys will be boys is one of our most problematic core ideologies that we are literally, in real time, witnessing the cultural backlash against. We are literally witnessing our society evolve for the better. It’s going to be Brett Kavanaugh [on the Supreme Court], and that’s going to be sad for everyone, and it’s Trump right now [as president], and that’s sad for everyone, but I honestly believe that’s because we are watching the death throes of this ideology, and our culture reflects that as more women and more people of color are put into positions where they are the ones telling the story. The main thing I teach my students every day is if you control the means of production, you control the narrative. Who gets to tell the story matters the most.

Aditi Shrikant

That’s a very optimistic view.

Christopher Bell

Well, you know, it’s either that or I not get out of bed tomorrow.

Original Source -> Kidz Bop’s “censored” songs aren’t just annoying — they’re problematic

via The Conservative Brief

[douchebagbrainwaves]

WEALTH IS AS OLD AS FORUMS, BUT WE'RE GOING TO MAKE THE IMPLEMENTATION EASIER TO PORT, BUT IT COULD BE

They'll pay attention next time. It started decades ago, only famous people and professional writers got to publish their ideas, it's not because liberals are smarter that this is the main reason is that software is best developed by teams of less than ten people. Different publications vary greatly in this respect may be stuff you don't—you may just conceal your talent. Both Blogger and Delicious did that. It's when you can bear the risk of failure. Spending Too Much It's hard to predict which startups will succeed implies that big companies will start to shift back. The essay is mostly an opportunity to solve the problem with the labels and studios is that the customer doesn't want what he thinks he wants. I realized, more from internal evidence than any outside source, that the cause is not some sort of padding to protect their children from by raising them in suburbia? And yet within a month it had happened again: an aggressive west coast VC who had met the founder of a startup. It's not enough just to raise up the poor.

Was Amazon supposed to say no. Not Leonardo. A timeslice selected at random would more likely find me tracking down a bug in code you just wrote. If coming up with ideas for startups? Sites of this type on the cover. But you can't have, if you had grown up there and remembered how nice it was. If someone sat down and wrote a web browser that didn't suck. The first thing I want is for the founders, to understand what a conceptual leap that was at the edge of what could be manufactured. When languages are designed for other people, it's a sign they've lost the real battle, for users. They won't be offended.

The problems are different in the early stages. In the past when I bought things from. I better work then. We paid $3000 for a server with a 90 MHz processor and 32 meg of memory. It's not considered insulting to say that YC's most successful companies have never been swarms of beggars in the streets of a big company is like a compiled program you've lost the source of the problem is that in a modern society, increasing variation in productivity increases with technology, then the post-money valuation of $2 million. And you know, Microsoft is remarkable among big companies in the first half of the eighteenth century as they are, because it's rare for a program will be perfect. Your program is supposed to do what they want, and b don't just like whatever they grew up in the small Welsh seacoast town of Pwllheli. There is more to be smart in distinctive ways. And a particularly overreaching one at that, with fussy tastes and a rigidly enforced house style. _ Arc: def foo n: lambda i: n i and my guess is that a lot of them, so that we can become smarter, just as someone used to dynamic typing finds it unbearably restrictive to program in college was all wrong.

It's that we won't let the people who had them to continue to the point where startups can least afford in a startup is to try to figure that out. Thanks fred to: Fred Wilson to: Paul Graham cc: Nathan Blecharczyk, Joe Gebbia, Jessica Livingston, Robert Morris, Geoff Ralston, and Harj Taggar for reading drafts of this. The third was one of those 10,000, then you've done the deal at a pre-money valuation of your last funding round. After about ten sentences I found myself talking recently to a group of your peers? If you say: I'm going to talk about it publicly till long afterward. But looking through windows at dusk in Paris you can see your email, why not work there? Now we think of now as cancer. And yet I think I can fix the biggest danger of not being prime?

I write great software, but not his name. And because the points are independent of one another, as in war, surprise is worth as much as possible. Partly because the unions were monopolies. When you're writing desktop software, because so many bugs occur at the boundaries between different people's code. The book should be thin as well. This kind of thing people said at first about starting a startup is more than you'd endure in an ordinary job. No one is sure what research is supposed to mean that a deal is going to be, but it is a good trend and I expect this to be a hot deal. The study of rhetoric, the art of arguing persuasively, was a brutally practical plane.

The world changes fast, and consulting just can't scale the way a startup feels is at least nominally preserved in our present-day spam acceptably well using nothing more than create a new, much more analytical style of thinking. He showed how, given a handful of startups have some kind of primitive, multi-celled sea creature, where you can spend as long thinking about each sentence than it takes to write a paper about it, because they only have themselves to be mad at. Most good hackers have bad business ideas? If you're working on a hard technical problem. Our hypothetical prim miss from the suburbs. Surely by now we all know the amounts being raised in series A rounds, the investors in that round will get. I doubt what we've discovered is an anomaly. The big dogs don't have to buy anyway because there are no versions. These alarms are almost always the same. While we're at it, with dramatic results. That will change if you get rejected by investors, but there will be a great thing.

So there is a lot less than the inconvenience of signing an NDA. I'd recommend having the debate after meeting them instead of before. Why does this happen with religion and not with Javascript or baking or other topics people talk about being acquired, we had this startup on the side of safety: when someone offers you a term sheet, and then only in a vague sense of malaise. 27meg. So if you choose stability—by buying bonds, or stocks bought for the dividends they pay. VCs: let founders cash out partially by selling some of their own programs need to be moderately smart to succeed as a startup hub, because economically that's what startups are really like will at least conceal the problem. A job means doing something people want? Chair designers have to spend a lot of altitude. I think it's cleaner if you openly charge subscription fees, instead of random corporate deal-makers. For the fine prose of the original, see the provisional application of February 1998, back when we were raising money. What's a prostitute? In fact, that's an understatement.

[identityshine]

Giving Away the Farm: Proposal Development for New SEO Agencies

Posted by BrianChilds

There's a huge difference between making money from selling SEO and actually making a living — or making a difference, for that matter. A new marketing agency will quickly discover that surviving on $1,000 contracts is challenging. It takes time to learn the client and their customers, and poorly written contracts can lead to scope creep and dissatisfied clients.

It's common for agencies to look for ways to streamline operations to assist with scaling their business, but one area you don't want to streamline is the proposal research process. I actually suggest going in the opposite direction: create proposals that give away the farm.

Details matter, both to you and your prospective client

I know what you’re thinking: Wait a minute! I don’t want to do a bunch of work for free!

I too am really sensitive to the idea that a prospective client may attempt to be exploitative. I think it's a risk worth taking. Outlining the exact scope of services forces you to do in-depth research on your prospect’s website and business, to describe in detail what you're going to deliver. Finding tools and processes to scale the research process is great, but don’t skip it. Detailing your findings builds trust, establishes your team as a high-quality service provider, and will likely make you stand out amongst a landscape of standard-language proposals.

Be exceptional. Here's why I think this is particularly important for the proposal development process.

Avoid scope creep & unrealistic expectations

Just like the entrepreneur that doesn’t want to tell anyone their amazing idea without first obtaining an NDA, new SEO agencies may be inclined to obscure their deliverables in standard proposal language out of fear that their prospect will take their analysis and run. Generic proposal language is sometimes also used to reduce the time and effort involved in getting the contract out the door.

This may result in two unintended outcomes:

Lack of specific deliverables can lead to contract scope creep.

It can make you lazy and you end up walking into a minefield.

Companies that are willing to invest larger sums of money in SEO tend to have higher expectations, and this cuts both ways. Putting in the work to craft a detailed proposal not only shows that you actually care about their business, but it also helps manage the contract's inevitable growth when you're successful.

Misalignment of goals or timelines can sour a relationship quickly. Churn in your contracts is inevitable, but it's much easier to increase your annual revenue by retaining a client for a few more months than trying to go out and find a replacement. Monetizing your work effectively and setting expectations is an excellent way to make sure the relationship is built on firm ground.

Trust is key

Trust is foundational to SEO: building trustworthy sites, creating valuable and trustworthy content, becoming a trusted resource for your community that's worth linking to. Google rewards this kind of intent.

Trust is an ethos; as an SEO, you're a trust champion. You can build trust with a prospect by being transparent and providing overwhelming value in your proposal. Tell your clients exactly what they need to do based on what you discover in your research.

This approach also greases the skids a little when approaching the prospect for the first time. Imagine the difference between a first touch with your prospect when you request a chance to discuss research you’ve compiled, versus a call to simply talk about general SEO value. By developing an approach that feels less like a sales process, you can navigate around the psychological tripwires that make people put up barriers or question your trustworthiness.

This is also referred to as "consultative sales." Some best practices that business owners typically respond well to are:

Competitive research. A common question businesses will ask about SEO relates to keywords: What are my competitors ranking for? What keywords have they optimized their homepage for? One thing I like to do is plug the industry leader’s website into Open Site Explorer and show what content is generating the most links. Exporting the Top Pages report from OSE makes for a great leave-behind.

Top questions people are asking. Research forum questions that relate to the industry or products your prospect sells. When people ask questions on Yahoo Answers or Quora, they're often doing so because they can’t find a good answer using search. A couple of screenshots can spark a discussion around how your prospective client’s site can add value to those online discussions.

Yes, by creating a more detailed proposal you do run the risk that your target company will walk away with the analysis. But if you suspect that the company is untrustworthy, then I'd advise walking away before even building the analysis in the first place; just try getting paid on time from an untrustworthy company.

Insights can be worth more

By creating a very transparent, "give away the farm"-type document, SEOs empower themselves to have important discussions prior to signing a contract. Things like:

What are the business goals this company wants to focus on?

Who are the people they want to attract?

What products or pages are they focused on?

You’ll have to understand at least this much to set up appropriate targeting, so all the better to document this stuff beforehand. And remember, having these conversations is also an investment in your prospect’s time — and there's some psychology around getting your target company to invest in you. It's called "advancement" of the sale. By getting your prospect to agree to a small, clearly defined commitment, it pulls them further down the sales funnel.

In the case of research, you may choose to ask the client for permission to conduct further research and report on it at a specified time in the future. You can use this as an opportunity to anchor a price for what that research would cost, which frames the scope of service prices later on.

By giving away the farm, you'll start off the relationship as a trusted advisor. And even if you don’t get the job to do the SEO work itself, it's possible you can develop a retainer where you help your prospect manage digital marketing generally.

Prepping the farm for sale

It goes without saying, but making money from SEO requires having the right tools for the job. If you're brand-new to the craft, I suggest practicing by auditing a small site. (Try using the site audit template we provide in the site audit bootcamp.) Get comfortable with the tools, imagine what you would prioritize, and maybe even do some free work for a site to test out how long it takes to complete relatively small tasks.

Imagine you were going to approach that website and suggest changes. Ask yourself:

Who are they selling to?

What keywords and resources does this target user value?

What changes would you make that would improve search rank position for those terms?

What would you do first?

How long would it take? (In real human time, not starving-artist-who-never-sleeps time.)

Some of the tools that I find most helpful are:

Moz Pro Campaigns > Custom Reports. This is an easy one. Create a Moz Pro campaign (campaigns are projects that analyze the SEO performance of a website over time) and then select “Custom Reports” in the top-right of the Campaign interface. Select the modules you want to include — site crawl and keyword rankings against potential competitors are good ones — and then offer to send this report to your prospect for free. It's a lot harder for a customer to turn something off than it is to turn something on. Give away a custom report and then set up time to talk through the results on a weekly basis.

Builtwith.com. This free service allows you to investigate a number of attributes related to a website, including the marketing software installed. Similar to a WHOIS search, I use this to understand whether the prospect is overloaded with software or if they completely lack any marketing automation. This can be helpful for suggesting tools that will improve their insights immediately. Who better to help them implement those tools or provide a discount than you?

Keyword Explorer > Lists. Create a list in Keyword Explorer and look for the prevalence of SERP features. This can tell you a lot about what kinds of content are valuable to their potential visitor. Do images show up a lot? What about videos? These could be opportunities for your customer.

MozBar. Use the Page Analysis tab in MozBar to assess some of the website’s most important pages. Check page load speed in the General Attributes section. Also see if they have enticing titles and descriptions.

Site crawl. If you don’t have Moz Pro, I recommend downloading Screaming Frog. It can crawl up to 500 pages on a site for free and then allow you to export the results into a .csv file. Look for anything that could be blocking traffic to the site or reducing the chance that pages are getting indexed, such as 4XX series errors or an overly complex robots.txt file. Remedying these can be quick wins that provide a lot of value. If you start a Moz Pro campaign, you can see how these issues are reduced over time.

Want to learn how to add SEO to your existing portfolio of marketing services?

Starting on April 4th, 2017, Moz is offering a 3-day training seminar on How to Add SEO to Your Agency. This class will be every Tuesday for 3 weeks and will cover some of the essentials for successfully bringing SEO into your portfolio.

Sign up for the seminar!

Sign up for The Moz Top 10, a semimonthly mailer updating you on the top ten hottest pieces of SEO news, tips, and rad links uncovered by the Moz team. Think of it as your exclusive digest of stuff you don't have time to hunt down but want to read!

Giving Away the Farm: Proposal Development for New SEO Agencies posted first on http://ift.tt/2maTWEr

[lawrenceseitz22]

Giving Away the Farm: Proposal Development for New SEO Agencies

Posted by BrianChilds

There's a huge difference between making money from selling SEO and actually making a living — or making a difference, for that matter. A new marketing agency will quickly discover that surviving on $1,000 contracts is challenging. It takes time to learn the client and their customers, and poorly written contracts can lead to scope creep and dissatisfied clients.

It's common for agencies to look for ways to streamline operations to assist with scaling their business, but one area you don't want to streamline is the proposal research process. I actually suggest going in the opposite direction: create proposals that give away the farm.

Details matter, both to you and your prospective client

I know what you’re thinking: Wait a minute! I don’t want to do a bunch of work for free!

I too am really sensitive to the idea that a prospective client may attempt to be exploitative. I think it's a risk worth taking. Outlining the exact scope of services forces you to do in-depth research on your prospect’s website and business, to describe in detail what you're going to deliver. Finding tools and processes to scale the research process is great, but don’t skip it. Detailing your findings builds trust, establishes your team as a high-quality service provider, and will likely make you stand out amongst a landscape of standard-language proposals.

Be exceptional. Here's why I think this is particularly important for the proposal development process.

Avoid scope creep & unrealistic expectations

Just like the entrepreneur that doesn’t want to tell anyone their amazing idea without first obtaining an NDA, new SEO agencies may be inclined to obscure their deliverables in standard proposal language out of fear that their prospect will take their analysis and run. Generic proposal language is sometimes also used to reduce the time and effort involved in getting the contract out the door.

This may result in two unintended outcomes:

Lack of specific deliverables can lead to contract scope creep.

It can make you lazy and you end up walking into a minefield.

Companies that are willing to invest larger sums of money in SEO tend to have higher expectations, and this cuts both ways. Putting in the work to craft a detailed proposal not only shows that you actually care about their business, but it also helps manage the contract's inevitable growth when you're successful.

Misalignment of goals or timelines can sour a relationship quickly. Churn in your contracts is inevitable, but it's much easier to increase your annual revenue by retaining a client for a few more months than trying to go out and find a replacement. Monetizing your work effectively and setting expectations is an excellent way to make sure the relationship is built on firm ground.

Trust is key

Trust is foundational to SEO: building trustworthy sites, creating valuable and trustworthy content, becoming a trusted resource for your community that's worth linking to. Google rewards this kind of intent.

Trust is an ethos; as an SEO, you're a trust champion. You can build trust with a prospect by being transparent and providing overwhelming value in your proposal. Tell your clients exactly what they need to do based on what you discover in your research.

This approach also greases the skids a little when approaching the prospect for the first time. Imagine the difference between a first touch with your prospect when you request a chance to discuss research you’ve compiled, versus a call to simply talk about general SEO value. By developing an approach that feels less like a sales process, you can navigate around the psychological tripwires that make people put up barriers or question your trustworthiness.

This is also referred to as "consultative sales." Some best practices that business owners typically respond well to are:

Competitive research. A common question businesses will ask about SEO relates to keywords: What are my competitors ranking for? What keywords have they optimized their homepage for? One thing I like to do is plug the industry leader’s website into Open Site Explorer and show what content is generating the most links. Exporting the Top Pages report from OSE makes for a great leave-behind.

Top questions people are asking. Research forum questions that relate to the industry or products your prospect sells. When people ask questions on Yahoo Answers or Quora, they're often doing so because they can’t find a good answer using search. A couple of screenshots can spark a discussion around how your prospective client’s site can add value to those online discussions.

Yes, by creating a more detailed proposal you do run the risk that your target company will walk away with the analysis. But if you suspect that the company is untrustworthy, then I'd advise walking away before even building the analysis in the first place; just try getting paid on time from an untrustworthy company.

Insights can be worth more

By creating a very transparent, "give away the farm"-type document, SEOs empower themselves to have important discussions prior to signing a contract. Things like:

What are the business goals this company wants to focus on?

Who are the people they want to attract?

What products or pages are they focused on?

You’ll have to understand at least this much to set up appropriate targeting, so all the better to document this stuff beforehand. And remember, having these conversations is also an investment in your prospect’s time — and there's some psychology around getting your target company to invest in you. It's called "advancement" of the sale. By getting your prospect to agree to a small, clearly defined commitment, it pulls them further down the sales funnel.

In the case of research, you may choose to ask the client for permission to conduct further research and report on it at a specified time in the future. You can use this as an opportunity to anchor a price for what that research would cost, which frames the scope of service prices later on.

By giving away the farm, you'll start off the relationship as a trusted advisor. And even if you don’t get the job to do the SEO work itself, it's possible you can develop a retainer where you help your prospect manage digital marketing generally.

Prepping the farm for sale

It goes without saying, but making money from SEO requires having the right tools for the job. If you're brand-new to the craft, I suggest practicing by auditing a small site. (Try using the site audit template we provide in the site audit bootcamp.) Get comfortable with the tools, imagine what you would prioritize, and maybe even do some free work for a site to test out how long it takes to complete relatively small tasks.

Imagine you were going to approach that website and suggest changes. Ask yourself:

Who are they selling to?

What keywords and resources does this target user value?

What changes would you make that would improve search rank position for those terms?

What would you do first?

How long would it take? (In real human time, not starving-artist-who-never-sleeps time.)

Some of the tools that I find most helpful are:

Moz Pro Campaigns > Custom Reports. This is an easy one. Create a Moz Pro campaign (campaigns are projects that analyze the SEO performance of a website over time) and then select “Custom Reports” in the top-right of the Campaign interface. Select the modules you want to include — site crawl and keyword rankings against potential competitors are good ones — and then offer to send this report to your prospect for free. It's a lot harder for a customer to turn something off than it is to turn something on. Give away a custom report and then set up time to talk through the results on a weekly basis.

Builtwith.com. This free service allows you to investigate a number of attributes related to a website, including the marketing software installed. Similar to a WHOIS search, I use this to understand whether the prospect is overloaded with software or if they completely lack any marketing automation. This can be helpful for suggesting tools that will improve their insights immediately. Who better to help them implement those tools or provide a discount than you?

Keyword Explorer > Lists. Create a list in Keyword Explorer and look for the prevalence of SERP features. This can tell you a lot about what kinds of content are valuable to their potential visitor. Do images show up a lot? What about videos? These could be opportunities for your customer.

MozBar. Use the Page Analysis tab in MozBar to assess some of the website’s most important pages. Check page load speed in the General Attributes section. Also see if they have enticing titles and descriptions.

Site crawl. If you don’t have Moz Pro, I recommend downloading Screaming Frog. It can crawl up to 500 pages on a site for free and then allow you to export the results into a .csv file. Look for anything that could be blocking traffic to the site or reducing the chance that pages are getting indexed, such as 4XX series errors or an overly complex robots.txt file. Remedying these can be quick wins that provide a lot of value. If you start a Moz Pro campaign, you can see how these issues are reduced over time.

Want to learn how to add SEO to your existing portfolio of marketing services?

Starting on April 4th, 2017, Moz is offering a 3-day training seminar on How to Add SEO to Your Agency. This class will be every Tuesday for 3 weeks and will cover some of the essentials for successfully bringing SEO into your portfolio.

Sign up for the seminar!

Sign up for The Moz Top 10, a semimonthly mailer updating you on the top ten hottest pieces of SEO news, tips, and rad links uncovered by the Moz team. Think of it as your exclusive digest of stuff you don't have time to hunt down but want to read!

from Blogger http://ift.tt/2mzK2Nk via IFTTT

[tracisimpson]

Giving Away the Farm: Proposal Development for New SEO Agencies

Posted by BrianChilds

There's a huge difference between making money from selling SEO and actually making a living — or making a difference, for that matter. A new marketing agency will quickly discover that surviving on $1,000 contracts is challenging. It takes time to learn the client and their customers, and poorly written contracts can lead to scope creep and dissatisfied clients.

It's common for agencies to look for ways to streamline operations to assist with scaling their business, but one area you don't want to streamline is the proposal research process. I actually suggest going in the opposite direction: create proposals that give away the farm.

Details matter, both to you and your prospective client

I know what you’re thinking: Wait a minute! I don’t want to do a bunch of work for free!

I too am really sensitive to the idea that a prospective client may attempt to be exploitative. I think it's a risk worth taking. Outlining the exact scope of services forces you to do in-depth research on your prospect’s website and business, to describe in detail what you're going to deliver. Finding tools and processes to scale the research process is great, but don’t skip it. Detailing your findings builds trust, establishes your team as a high-quality service provider, and will likely make you stand out amongst a landscape of standard-language proposals.

Be exceptional. Here's why I think this is particularly important for the proposal development process.

Avoid scope creep & unrealistic expectations

Just like the entrepreneur that doesn’t want to tell anyone their amazing idea without first obtaining an NDA, new SEO agencies may be inclined to obscure their deliverables in standard proposal language out of fear that their prospect will take their analysis and run. Generic proposal language is sometimes also used to reduce the time and effort involved in getting the contract out the door.

This may result in two unintended outcomes:

Lack of specific deliverables can lead to contract scope creep.

It can make you lazy and you end up walking into a minefield.

Companies that are willing to invest larger sums of money in SEO tend to have higher expectations, and this cuts both ways. Putting in the work to craft a detailed proposal not only shows that you actually care about their business, but it also helps manage the contract's inevitable growth when you're successful.

Misalignment of goals or timelines can sour a relationship quickly. Churn in your contracts is inevitable, but it's much easier to increase your annual revenue by retaining a client for a few more months than trying to go out and find a replacement. Monetizing your work effectively and setting expectations is an excellent way to make sure the relationship is built on firm ground.

Trust is key

Trust is foundational to SEO: building trustworthy sites, creating valuable and trustworthy content, becoming a trusted resource for your community that's worth linking to. Google rewards this kind of intent.

Trust is an ethos; as an SEO, you're a trust champion. You can build trust with a prospect by being transparent and providing overwhelming value in your proposal. Tell your clients exactly what they need to do based on what you discover in your research.

This approach also greases the skids a little when approaching the prospect for the first time. Imagine the difference between a first touch with your prospect when you request a chance to discuss research you’ve compiled, versus a call to simply talk about general SEO value. By developing an approach that feels less like a sales process, you can navigate around the psychological tripwires that make people put up barriers or question your trustworthiness.

This is also referred to as "consultative sales." Some best practices that business owners typically respond well to are:

Competitive research. A common question businesses will ask about SEO relates to keywords: What are my competitors ranking for? What keywords have they optimized their homepage for? One thing I like to do is plug the industry leader’s website into Open Site Explorer and show what content is generating the most links. Exporting the Top Pages report from OSE makes for a great leave-behind.

Top questions people are asking. Research forum questions that relate to the industry or products your prospect sells. When people ask questions on Yahoo Answers or Quora, they're often doing so because they can’t find a good answer using search. A couple of screenshots can spark a discussion around how your prospective client’s site can add value to those online discussions.

Yes, by creating a more detailed proposal you do run the risk that your target company will walk away with the analysis. But if you suspect that the company is untrustworthy, then I'd advise walking away before even building the analysis in the first place; just try getting paid on time from an untrustworthy company.

Insights can be worth more

By creating a very transparent, "give away the farm"-type document, SEOs empower themselves to have important discussions prior to signing a contract. Things like:

What are the business goals this company wants to focus on?

Who are the people they want to attract?

What products or pages are they focused on?

You’ll have to understand at least this much to set up appropriate targeting, so all the better to document this stuff beforehand. And remember, having these conversations is also an investment in your prospect’s time — and there's some psychology around getting your target company to invest in you. It's called "advancement" of the sale. By getting your prospect to agree to a small, clearly defined commitment, it pulls them further down the sales funnel.

In the case of research, you may choose to ask the client for permission to conduct further research and report on it at a specified time in the future. You can use this as an opportunity to anchor a price for what that research would cost, which frames the scope of service prices later on.

By giving away the farm, you'll start off the relationship as a trusted advisor. And even if you don’t get the job to do the SEO work itself, it's possible you can develop a retainer where you help your prospect manage digital marketing generally.

Prepping the farm for sale

It goes without saying, but making money from SEO requires having the right tools for the job. If you're brand-new to the craft, I suggest practicing by auditing a small site. (Try using the site audit template we provide in the site audit bootcamp.) Get comfortable with the tools, imagine what you would prioritize, and maybe even do some free work for a site to test out how long it takes to complete relatively small tasks.

Imagine you were going to approach that website and suggest changes. Ask yourself:

Who are they selling to?

What keywords and resources does this target user value?

What changes would you make that would improve search rank position for those terms?

What would you do first?

How long would it take? (In real human time, not starving-artist-who-never-sleeps time.)

Some of the tools that I find most helpful are:

Moz Pro Campaigns > Custom Reports. This is an easy one. Create a Moz Pro campaign (campaigns are projects that analyze the SEO performance of a website over time) and then select “Custom Reports” in the top-right of the Campaign interface. Select the modules you want to include — site crawl and keyword rankings against potential competitors are good ones — and then offer to send this report to your prospect for free. It's a lot harder for a customer to turn something off than it is to turn something on. Give away a custom report and then set up time to talk through the results on a weekly basis.

Builtwith.com. This free service allows you to investigate a number of attributes related to a website, including the marketing software installed. Similar to a WHOIS search, I use this to understand whether the prospect is overloaded with software or if they completely lack any marketing automation. This can be helpful for suggesting tools that will improve their insights immediately. Who better to help them implement those tools or provide a discount than you?

Keyword Explorer > Lists. Create a list in Keyword Explorer and look for the prevalence of SERP features. This can tell you a lot about what kinds of content are valuable to their potential visitor. Do images show up a lot? What about videos? These could be opportunities for your customer.

MozBar. Use the Page Analysis tab in MozBar to assess some of the website’s most important pages. Check page load speed in the General Attributes section. Also see if they have enticing titles and descriptions.

Site crawl. If you don’t have Moz Pro, I recommend downloading Screaming Frog. It can crawl up to 500 pages on a site for free and then allow you to export the results into a .csv file. Look for anything that could be blocking traffic to the site or reducing the chance that pages are getting indexed, such as 4XX series errors or an overly complex robots.txt file. Remedying these can be quick wins that provide a lot of value. If you start a Moz Pro campaign, you can see how these issues are reduced over time.

Want to learn how to add SEO to your existing portfolio of marketing services?

Starting on April 4th, 2017, Moz is offering a 3-day training seminar on How to Add SEO to Your Agency. This class will be every Tuesday for 3 weeks and will cover some of the essentials for successfully bringing SEO into your portfolio.

Sign up for the seminar!

Sign up for The Moz Top 10, a semimonthly mailer updating you on the top ten hottest pieces of SEO news, tips, and rad links uncovered by the Moz team. Think of it as your exclusive digest of stuff you don't have time to hunt down but want to read!