With the double whammy of Manti T’eo and Lance Armstrong, ethics and all the issues wrapped up in that are in the news. Ethics are a big deal-but a moving target. What’s ethical to you might not be ethical to me.
Recently, I was discussing ethics with a good friend of mine. He told me, “95% of the time, good liars tell the truth. It’s how they can keep their game alive.”
The great swindlers in life do tell you the truth most of the time. There is enough truth wrapped up in the sting that they are able to lead you along. If you don’t protect yourself then they get you.
When we were trading on the trading floor, it was relatively simple to check someone out. All you had to do was ask. Because trading was so transparent, eventually you just knew who the bad guys were and you stayed away from them.
In my case, when it’s a venture deal I always have a due diligence process that I follow rigorously. I have been burned enough in the past that I learned the hard way. One weakness most people have, they fall in love with ideas and ignore jockeys.
When you ignore the jockey, the jockey can manipulate things.
Even after the due diligence process is over, it helps to reframe it with an attorney. A good attorney doesn’t just write the language on contracts. Good attorneys ask some probing questions that cause you to think harder about certain aspects. It can be a pain in the ass and time consuming-but a good attorney can turn over stones you might have missed in your diligence process.
Probably at this point, you are thinking, “Why so gosh darned cynical?”. It’s kind of a bad way to start out building a trusting relationship. However, Manti T’eo implicitly trusted someone and see where that got him.
One of the first things I ask entrepreneurs is if they have a good attorney. Entrepreneurs need attorneys that have been down the road so they cover their butts. Bad things can happen with a poorly negotiated operating agreement. Bad deal structure can doom a company just as easily as bad execution. Investors call it “hair on the deal”. If you can’t shave the hair off, the deal doesn’t go forward.
A lot of people will tell you to trust you gut. It’s hard to do when you don’t have experience. There is enough out there on the internet these days to read that you ought to at least be able to form an opinion about what’s ethical and what’s not.
Because entrepreneurship is risky, we sometimes mistake feelings in our gut. We get confused with the risk associated with the deal, and the trust issues we are having in a particular relationship surrounding the deal. Could be partners, could be employees, could be financiers. If you can find a trusted third party that will help you sort things out, it can allow you to take a deep breath and sort things out.
I have a great person that works with me. We have developed our relationship over the past five years. I recommend her, but also recommend some other attorneys I know that do a great job. There are a handful in Chicago that I trust. I haven’t done business with everyone in the business, so get opinions from a couple of people. Before you hire an attorney, ask a few people with experience in the entrepreneurial business to recommend a couple. Then, interview them. Find out how many deals they have done-and if you have rapport with them. The attorney you hire is someone you will build a long term relationship with. It’s not a gun for hire.
If you have used a good attorney for entrepreneurship in the past, you might leave their name in the comments so others can find them. Leaving their name will be vouching for them.
As the entrepreneurial ecosystem nationwide expands the liars will find their way into it. They simply want to make a quick buck, leech a little cash out of the system, or take full advantage of an unwitting person. They are Grinfuckers. They suck. As participants, let’s set up land mines for them to blow themselves up on. The best thing we can do is protect ourselves with some sharp legal representation, and let others in the community know who the good guys are, and who aren’t. Peer pressure will drive the bad ones away.