On the way to your Beta version, search of  investors and the much desired EXIT, there are  lots of people who will help you along the way. Some of them more, some less, but the common ground for all of them will be not getting a piece of the company. Meaning none of them will become a co-founder or shareholder.

In fact, following completion of their work, you probably won’t see them again or at least will desire not to.

The better scenario will be if the independent consultant would  actually diligently fulfill his/her tasks, get paid and  won’t bother you again.

In the  worst case, moments before seed round or even round A it will suddenly appear your contractor  has rights in your work. Even more so, his boss (a.k.a a company he/she works for)  has rights…

This are few of the facts you should get yourself familiar with:

1. Most of you will ask them to sign an NDA and presume it will protect them from all wrongs. It won’t. Unless the  NDA has provisions of an average licensing agreement including transfer of rights it will remain a non-disclosure agreement and nothing more. Meaning your contractor will be liable for disclosing your secrets to others or competing with you, but he/she will still be the sole owner of the work he/she done for you.

   Yep. Surprising.

2. As mentioned before, the following situation is much worse. Many of those independent contractors have “day jobs” and they helping with your project on the side or while working full time for a big company or an established start-up. It doesn’t mean they slacking in their work for you. There is a different problem. Usually the work as employees in the same area of business and have signed an employment agreement.

   The vast majority of those agreements include provisions which allocate all the rights in the employee’s work product inside or outside the work place to the employer /company. So, eventually all the work that those independent contractors had done for you and your start-up will belong to his/ her boss.

   To avoid that you must confirm your freelancer is actually a freelancer and is not employed or working on your project from some company’s lab or on it’s equipment  and in any case sign them on a waiver.

3. The waiver of rights or grant of rights document can be one page long and is priceless as far as investors concern. The fact your independent contractors granted you/ your company all the rights in his work done for you, will also   prevent his employer (if he has one) to get a piece of your company.

4. Don’t rely on the fact you paid for the job to save you in this situation. The fact the contractor was fully compensated does not mean the work they done for you belongs to you. It belongs to them until they transfer those rights to you. In writing.