When "But we're a startup" isn't cute
- Claire Baker
- May 25
- 2 min read
Founders love to say, “But we’re a startup.” Like sloppiness is a badge of honor.
It's less cute when it comes up in diligence.
Here are three dumb mistakes that could have tanked a deal, and the simple fixes that saved them.
1️⃣ They forgot to attach the IP agreement.
Every offer letter should include a PIIA (the contract that assigns intellectual property ownership to the company).
Except the PIIA template was a separate file from the offer letter.
It was left off once or twice. Understandable mistake—except that it meant the company didn’t really own its product.
Luckily, we caught it before anyone else did. If the investor leading their next round had caught it in diligence, they might have pulled the deal.
The fix: Add the PIIA to the same file as the offer letter so it couldn’t be forgotten. Easy peasy.
2️⃣ The “contractors” looked a lot like employees.
The dev team was overseas. They worked full time, used company laptops, joined team meetings, got PTO and stipends.
Just like employees. Except they weren’t. They were contractors.
No one pointed it out until it came up in diligence. That’s when they called me in to stand up an EOR (Employer of Record) ASAP.
An EOR is a local entity that employs international workers as a service. It handles the legal and financial risks of hiring internationally.
But there's a lot of paperwork.
Even when you’re in a hurry, the process takes time. And it can interfere with pay cycles.
The funding was delayed 2 months and it probably cost them more favorable terms.
If only someone knew how to spot the risk sooner to facilitate a less hasty transition.
3️⃣ No one owned the 83(b).
“WTF is an 83(b)?” she thought. “If the lawyers expect me to go to the post office for this, they have another thing coming.”
So she let it slip to the bottom of her priority list.
That trip to the post office could be the difference between a fairytale and financial ruin someday.
Miss the 30 day filing deadline, and equity holders might owe millions in taxes at IPO, before the equity being taxed was even liquid.
She didn’t have to understand the tax code, she just had to make sure the forms were filed on time.
We built a failsafe: a reminder that triggered with every early exercise and sent daily hasslers until the proof of mailing was filed.
3 silly boo-boos, 3 possibly catastrophic outcomes, 3 stupid-simple fixes.
You don’t need a full-time hire to avoid a full-blown fire.
You need full-stack PeopleOps to debug what keeps breaking.
Founders, what silly mistake almost blew up in your face (or “a friend’s”)?
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