10 ms·

YC Open-Source Sales Agreement

271 points by rachbelaid 12y ago

macmac 12y ago
Firstly: The idea of open sourcing docs like this is great. Secondly: 4 columns of approx 25 characters - that has to be the most annoying layout ever applied to any legal document. Thirdly: The document could be significantly improved. If enough people are interested in a markup + comments from a customer and vendor perspective based on 15+ years experience drafting, reviewing and negotiating docs like this, I am happy to provide such within a few days. Please indicate your interest below.
- greattypo 12y ago
  Thanks for the feedback (I helped create this document). 1. The formatting should be 2 columns per page of ~50 characters, not 4. Do you see something different than this? http://screencast.com/t/SnkQDCeO http://screencast.com/t/SnkQDCeO 2. We'd welcome comments + markup to make it better -- drop me an email (tyler at clever dot com) if you're up for it.
  - lostsock 12y ago
    I'm using LibreOffice Writer and I also see it as four columns
    - kefka 12y ago
      How peculiar. I've also been noticing in my classes that Libre office is outputting files that are mangled when opened with MS office. I'm not sure if its an Open source fail or MS up to their usual tricks again.
      - davidgerard 12y ago
        If you can report it as a bug, please do so! Compatibility issues like this are the sort of thing they dive upon to fix.
mcos 12y ago
This is a great move. Unfortunately it's still in Microsoft Word format and there's no license associated with it. Would love to see this somewhere like GitHub, where it could be forked and changed by others.
- lukasm 12y ago
  This +1 There is s huge need for open source documents and ease of collaboration.
- joewadcan 12y ago
  I'm guessing it's in Word format because most procurement departments use (and expect a Word document) for terms. But I very much agree, that it'd be great to have it on GitHub for collaboration. I'd even suggest this tool (http://ben.balter.com/2015/02/06/word-diff/ http://ben.balter.com/2015/02/06/word-diff/) my colleague (@benbalter) made to collaborate on Word docs using GitHub.
  - HarveyKandola 12y ago
    That looks good. We're doing something a little more at Documize -- see my comment above.
bthomas 12y ago
This is great, but would be much more helpful as an annotated doc that explained why the various phrasings were chosen, as well as what was left out and why. What's the best platform for that? It can't be Word comments...
- mcintyre1994 12y ago
  Genius is a YC company and would probably work pretty well for this
  - artursapek 12y ago
    legal.genius.com? Yes please. Only problem is finding lawyers who will read more legal documents just for fun.
    - kemitchell 12y ago
      Believe it or not, some of us can't get enough of this stuff.
- dpeck 12y ago
  Seems like a good job for genius.com
- HockeyPlayer 12y ago
  Casetext? They already did a annotated SAFE: https://casetext.com/contract/simple-agreement-for-future-equity https://casetext.com/contract/simple-agreement-for-future-eq...
  - miket 12y ago
    +1 for Casetext, it's designed for this.
- mark212 12y ago
  not to be flippant, but this is exactly why lawyers go to law school and then work on such docs for years to develop expertise. The value of a lawyer is precisely in what to leave out and what to put in -- and how to phrase it. The annotations just for California law would be 10x the size of the document.
deleted 12y ago
[deleted]
tptacek 12y ago
Note that .DOC is the industry standard for contract negotiation, whether you like it or not (I don't!). A template sales contract that is going to be redlined is going to be a DOC file, because it more or less has to be. People suggesting that this instead be released on Genius or Github should also remember that there are corner cases in contracts where formatting actually matters. Not only is .DOC the most pragmatic choice for a high-profile template contract, but it's also the safest.
- diziet 12y ago
  .doc files also allow one to make edits and make comments and email back and forth between lawyers & stake holders during the negotiation phase.
  - MichaelGG 12y ago
    I wonder how often this is abused. Are people relying on change tracking, or actually using the diff functionality? I've seen at least one where people just used change tracking. It would have been easy to change something and accept changes and could have slipped by or changed negotiations.
    - HarveyKandola 12y ago
      You tend to get legal "assistants" that end up taking multiple documents from different people and manually consolidating changes. Terrible state of affairs!
    - kemitchell 12y ago
      Great question. This actually rises to the level of a professional responsibility rules issue in many jurisdictions. Take, for example, this recent-ish opinion from the California Bar's ethics committee: http://ethics.calbar.ca.gov/Portals/9/documents/Opinions/CAL%202013-189%20%5B11-0002%5D.pdf http://ethics.calbar.ca.gov/Portals/9/documents/Opinions/CAL... The best practice is clearly to run the diff from your own last revision, but that may not be available to the attorney. Sometimes clients forward opposing markups of drafts that were prepared without an attorney, perhaps based on a form. Business people may tweak a draft between attorney revisions, as they closed on deal points. It might be worthwhile to go over and attribute each unrecognized change, but not always. Clients may vouch that all changes needing review are in Track Changes. Sometimes speed matters more. Between repeat-player attorneys, or when reputations for ethics and rigor otherwise precede each side, the risk of this kind of thing approaches zero, and everybody saves money. I have seen things "slipped in", often inadvertently (turned Track Changes off, diffed the wrong files), but sometimes maliciously. I have also done very long days of nothing but verifying execution copies of documents as they were closed out in the run up to big-dollar closings and low-dollar slug-fests. When the transaction is large or important enough, attorneys will handle exchanging drafts across sides and enforce more rigorous change control.
minimaxir 12y ago
A 99.9% SLA by default? That seems overly ambitious for a startup. :p
- macmac 12y ago
  If you factor in the carve outs, notice requirements and the calculation model, it's not that bad :-)
  - greattypo 12y ago
    :-)
- ryanbrunner 12y ago
  The penalty is rather low though, and in my experience no one particularly ever cares to exercise credits unless it's something egregious, so provided you're not consistently below 99.9% every single month (which is pretty bad even for a startup), it's generally pretty safe to assume a little bit of a risk if you only miss it occasionally. Bigger customers will absolutely look for 99.9%, and anything less will be a huge red flag during procurement.
mark212 12y ago
James Riley works at Goodwin Procter (sp)[1] and kudos to him -- this is a big contribution to the startup ecosystem. Also, many thanks for not including an arbitration clause and class action waiver as a default term. Not only is it incredibly sleazy (in my opinion) but also many companies will have significant push-back on such a term. Usually requires their own in-house counsel to look at it, and that's the last thing you want. [1] http://www.ycombinator.com/documents/#sales http://www.ycombinator.com/documents/#sales
bendyBus 12y ago
I've had to spend money at various points getting documents drafted which, like this, are pretty much cut & paste anyway. I would just like to see MORE of this. Recently came across lawbite https://www.lawbite.co.uk/ https://www.lawbite.co.uk/ which looks useful at least for UK based companies. Haven't used the service so cannot endorse. Basic employment contracts, vesting schedules, t&cs, keep them coming!
- kemitchell 12y ago
  As with programmers, it's often hard to tell the lazy from the great, because economy of motion runs with competence. Sometimes copy-and-paste gives you the wrong agreement for your deal, but it's cheap and easy for the lawyer. A different lawyer may glance dozens of alternative precedents in their mind's eye before choosing which form (or pieces of forms) to compose into an agreement for you. When you dress for an occasion, you start by picking items out of your closet. If you don't have what you need, you may go to the store and buy off the rack. If the occasion or your needs are very special, you may have ready-made items tailored, or may even have something made for you. Good lawyers work similarly.
HarveyKandola 12y ago
At the risk of getting down-voted for self-promotion... I see a lot of comments around Word being not the right format for "distributing, sharing, commenting". My startup Documize [1] is just a week old and is currently being tried out by a handful of legal professionals and the like for handling what happens around structured documents. The premise is that MS Word is where structured documents are born in the enterprise world. It's what happens after they come into being that is the problem: network drives, file sync folders, email tennis, Word-track-changes, manual consolidation, etc. A real pain. Documize aims to help people distribute documents, collate feedback, provide version control and even allow for private notes. From a browser. Working towards that vision at the moment -- just thought I'd throw this out there. [1] https://documize.com https://documize.com
- kemitchell 12y ago
  You may be interested in some open source work I am doing: https://github.com/commonform https://github.com/commonform https://asciinema.org/a/16221 https://asciinema.org/a/16221
  - HarveyKandola 12y ago
    Many thanks -- will look into it!
- bmulholland 12y ago
  We are solving many of the same problems at Contractually [0]. Word import, contract generation, private editing, version control, redlining, commenting, e-signatures, and more. [0] http://www.contractual.ly/ http://www.contractual.ly/
guipsp 12y ago
Google docs version: https://docs.google.com/document/d/1kUm03Zr3QsmX3SRT-Xv3-i675h4Z55u_PwlEmTlQ25Y/pub https://docs.google.com/document/d/1kUm03Zr3QsmX3SRT-Xv3-i67...
rsp1984 12y ago
Is there any difference in it being "open sourced" as opposed to just being a free sales agreement template?
ar7hur 12y ago
Kudos for sharing this. Only caveat: I've sold SaaS to large enterprises (like AT&T, Coke, etc.) for ten years, and unfortunately most of them insisted that we use THEIR template, which was a huge pain point for us.
- greattypo 12y ago
  Great point. Once you start to sell to companies past a certain size, all the rules go out the window.
teachingaway 12y ago
I help clients negotiate SAAS deals, and I like this as a template. It's better than 95% of the contracts I see. But since this is the internet, I will use the rest of this post to complain about things: 1. Formatting: One column of text is better than 2. It's digital, we don't need to cram words in to save paper. 2. Information Architecture. Contracts longer than 2 pages should have a table of contents. In most use cases, people are only looking for 1 or 2 specific terms in the contract. ToC helps. 3. Naming is Hard. Names should suggest some unique aspect of the thing they represent. In this contract, the parties are defined as "Company" and "Client." But both parties are companies. Using "Company" to refer to only one of the two companies invites confusion. Yes, it's defined. Yes, it's standard practice. But a better defined term might be "ASP" or "Host" or "Provider", etc. 4. "Herein." I don't like herein. 4.1 Herein is stuffy. No one talks like that. 4.2 Herein is ambiguous. http://www.adamsdrafting.com/herein/ http://www.adamsdrafting.com/herein/ 4.3 Instead, use "in this agreement" or "in this paragraph." 5. Arbitration? Going to court is a hugely expensive distraction. Arbitration is slightly less expensive and distracting. Any reason not too ask for arbitration?
- kemitchell 12y ago
  I have a personal rule never to throw MCSD at opposing's draft, but this is a form, so I'm down. Ken Adams has a posse. We should make t-shirts. On the other hand, from a practical point of view, all the nits you pick add up to a certain kind of camouflage over the agreement. If the point is not what the contract says, but that YC said it, now it's "standard", and you can not think about it, then enlightened style is at odds with (facilitated indifference to) substance. For a first sale in particular, the immediate benefit of the fact of a sale probably outweighs probability times cost of any conceivable drafting flaw that doesn't produce uncapped liability, a cloud on IP, or some other existential threat. When I look for a ray of hope, it's the number of blanks. If this thing has to go back and forth, and nobody is going to sign it as presented, then by all means make it as modern as possible. If it's going to be read and handled, it ought to read and handle well.
  - bobbles 12y ago
    > it ought to read and handle well. " For a first sale in particular, the immediate benefit of the fact of a sale probably outweighs probability times cost of any conceivable drafting flaw that doesn't produce uncapped liability, a cloud on IP, or some other existential threat." I had to parse this sentence about 10 times and still don't entirely get what you're saying
notahacker 12y ago
When selling to larger enterprises, particularly high-value company-wide licenses, it's also often worth having a section in there defining who the customer is for the purposes of the agreement. (Do wholly or partially owned subsidiaries generally [or by express permission] get access? What about their subcontractors/joint-ventures/acquisitions?) I'd be surprised if many larger enterprises agreed to 30 day payment terms and a late payment penalty clause - particularly one with interest compounding monthly - since they regularly take more than 30 days to pay invoices (the standard hack is to offer a reduction for payment within a certain time frame instead) If I were the customer I'd also be extremely reticent about signing a contract which gives the vendor the right to increase the renewal rate thirty days ahead and also obliges me to automatically renew for the next period if I don't give thirty days notice. That could be an expensive decision to make in the space of an afternoon...
- Spooky23 12y ago
  Yeah, I chuckled when I saw those clauses too. Businesses do annual budgets. Try to push a 30-day notice of price changes at my employer, and we would kick you out or get painful concessions immediately. Ditto with auto-renewal. These are consumer gym membership-like terms, I'm really surprised anyone gets good results with this doc as it stands.
- slgeorge 12y ago
  But, as a small company/start-up you should absolutely stand firm on 30 day payment, 45 at the most. It's completely ludicrous that large companies cannot pay in reasonable time-frames - it's just bullying, and is only done so that the large company can conserve cash. Most small businesses fail because of cash, and failure to pay by large customers is a big reason they get overstretched.
kevin 12y ago
Thanks for all the comments everyone. We're currently looking into getting these documents on git. Because Word Docs are not ideal for versioning, we'll probably convert them to markdown and use Pandoc to offer Word and RTF versions. We'll probably also attach an explicit license as well. We've similarly described the Series AA and Safe as open sourced documents and honestly didn't really think too much about it after that. Mostly, it's to efficiently tell you that the documents are free to use and change as you see fit. Obviously, we're not trying to trick anyone. Suing founders is not part of our business model.
- bad_user 12y ago
  I don't think anybody assumed you're out to trick people, however "open source" has a very clear definition [1] which implies that the work in question must be accompanied with a license respecting that definition, in order to modify the work and further distribute it. We as software developers have learned to search for and take note of permissive licenses and are very cautious of fake open source, like for example Microsoft's infamous "shared source" initiative. My disappointment is when people are diluting this term, because it doesn't mean just free as in beer and it doesn't mean just having access to the source code. It's much more than that and the definition couldn't be clearer. Many companies have tried capitalizing on this term without delivering and this has left a sour taste amongst many of us. And YCombinator amongst all organizations should be aware of this, let alone the lawyer that drafted this document. But anyway, thanks for sharing. [1] http://opensource.org/osd http://opensource.org/osd
thebyrd 12y ago
As founder of an early stage SaaS company, this is amazing. Thank you!
reubenswartz 12y ago
Really nice contribution. Especially for companies who are starting from nothing. Note that if you have big customers, they will probably want to negotiate every last thing. Smaller companies may or may not care about the details, as long as the software works as promised and support is good. This is a contract, without any of the "this is why you should use this awesome sauce", which I generally like to include before going into the nitty gritty, but just for fun, I created a sample proposal in my app (Mimiran Online Proposals) from the doc, incorporating @teachingaway's feedback that 1 column with decent sized text is more readable, especially online (you can always generate the PDF version). http://www.mimiran.com/sample-proposal/ycombinator-sales-agreement-proposal/ http://www.mimiran.com/sample-proposal/ycombinator-sales-agr...
sogen 12y ago
YC Open-Source Sales Agreement with eye pleasing formatting: https://news.ycombinator.com/item?id=9036635 https://news.ycombinator.com/item?id=9036635
4714 12y ago
I've been waiting for this since Tyler Bosmeny mentioned it during the startup lecture series. Thank you for sharing!
borski 12y ago
This is, almost word for word, our sales agreement from Gunderson Dettmer. We've added a number of company-specific (to us) provisions, but the /vast/ majority of it is all entirely the same. Furthermore, there are a few clauses in here I plan on stealing for our own contract. This is incredible for YC to do. We spent almost $3000 getting our first draft contract. Lawyers are expensive. :(
- grabeh 12y ago
  Hey, at least you can sue GD if they have been negligent in their drafting and you suffer loss as a result. Although of course the likelihood of this happening in the context of a basic sales contract is negligible to non-existent!
  - borski 12y ago
    Oh, don't get me wrong - I /love/ our counsel. He has saved us, fought for us, taught us and walked us through negotiating with investors, customers, partners, etc. I'm incredibly glad we have him on our side, and I would recommend him to anyone - startup or otherwise. I just wish, sometimes, that he weren't $500/hr. :) Re: the lawsuit, for this type of contract you're right that it's pretty safe to say there isn't much to be negligent about, especially as they're a reputable firm. The fact that YC's docs were almost word-for-word our docs makes me much more comfortable too. Granted, we had it 3.5 years ago, and YC's docs came out today, so not like we had any other choice. :)

271 points by rachbelaid 12y ago

Firstly: The idea of open sourcing docs like this is great. Secondly: 4 columns of approx 25 characters - that has to be the most annoying layout ever applied to any legal document. Thirdly: The document could be significantly improved. If enough people are interested in a markup + comments from a customer and vendor perspective based on 15+ years experience drafting, reviewing and negotiating docs like this, I am happy to provide such within a few days. Please indicate your interest below.

greattypo 12y ago
Thanks for the feedback (I helped create this document). 1. The formatting should be 2 columns per page of ~50 characters, not 4. Do you see something different than this? http://screencast.com/t/SnkQDCeO http://screencast.com/t/SnkQDCeO 2. We'd welcome comments + markup to make it better -- drop me an email (tyler at clever dot com) if you're up for it.
- lostsock 12y ago
  I'm using LibreOffice Writer and I also see it as four columns
  - kefka 12y ago
    How peculiar. I've also been noticing in my classes that Libre office is outputting files that are mangled when opened with MS office. I'm not sure if its an Open source fail or MS up to their usual tricks again.
    - davidgerard 12y ago
      If you can report it as a bug, please do so! Compatibility issues like this are the sort of thing they dive upon to fix.

mcos 12y ago

This is a great move. Unfortunately it's still in Microsoft Word format and there's no license associated with it. Would love to see this somewhere like GitHub, where it could be forked and changed by others.

lukasm 12y ago
This +1 There is s huge need for open source documents and ease of collaboration.
joewadcan 12y ago
I'm guessing it's in Word format because most procurement departments use (and expect a Word document) for terms. But I very much agree, that it'd be great to have it on GitHub for collaboration. I'd even suggest this tool (http://ben.balter.com/2015/02/06/word-diff/ http://ben.balter.com/2015/02/06/word-diff/) my colleague (@benbalter) made to collaborate on Word docs using GitHub.
- HarveyKandola 12y ago
  That looks good. We're doing something a little more at Documize -- see my comment above.

bthomas 12y ago

This is great, but would be much more helpful as an annotated doc that explained why the various phrasings were chosen, as well as what was left out and why. What's the best platform for that? It can't be Word comments...

mcintyre1994 12y ago
Genius is a YC company and would probably work pretty well for this
- artursapek 12y ago
  legal.genius.com? Yes please. Only problem is finding lawyers who will read more legal documents just for fun.
  - kemitchell 12y ago
    Believe it or not, some of us can't get enough of this stuff.
dpeck 12y ago
Seems like a good job for genius.com
HockeyPlayer 12y ago
Casetext? They already did a annotated SAFE: https://casetext.com/contract/simple-agreement-for-future-equity https://casetext.com/contract/simple-agreement-for-future-eq...
- miket 12y ago
  +1 for Casetext, it's designed for this.
mark212 12y ago
not to be flippant, but this is exactly why lawyers go to law school and then work on such docs for years to develop expertise. The value of a lawyer is precisely in what to leave out and what to put in -- and how to phrase it. The annotations just for California law would be 10x the size of the document.

deleted 12y ago

[deleted]

tptacek 12y ago

Note that .DOC is the industry standard for contract negotiation, whether you like it or not (I don't!). A template sales contract that is going to be redlined is going to be a DOC file, because it more or less has to be. People suggesting that this instead be released on Genius or Github should also remember that there are corner cases in contracts where formatting actually matters. Not only is .DOC the most pragmatic choice for a high-profile template contract, but it's also the safest.

diziet 12y ago
.doc files also allow one to make edits and make comments and email back and forth between lawyers & stake holders during the negotiation phase.
- MichaelGG 12y ago
  I wonder how often this is abused. Are people relying on change tracking, or actually using the diff functionality? I've seen at least one where people just used change tracking. It would have been easy to change something and accept changes and could have slipped by or changed negotiations.
  - HarveyKandola 12y ago
    You tend to get legal "assistants" that end up taking multiple documents from different people and manually consolidating changes. Terrible state of affairs!
  - kemitchell 12y ago
    Great question. This actually rises to the level of a professional responsibility rules issue in many jurisdictions. Take, for example, this recent-ish opinion from the California Bar's ethics committee: http://ethics.calbar.ca.gov/Portals/9/documents/Opinions/CAL%202013-189%20%5B11-0002%5D.pdf http://ethics.calbar.ca.gov/Portals/9/documents/Opinions/CAL... The best practice is clearly to run the diff from your own last revision, but that may not be available to the attorney. Sometimes clients forward opposing markups of drafts that were prepared without an attorney, perhaps based on a form. Business people may tweak a draft between attorney revisions, as they closed on deal points. It might be worthwhile to go over and attribute each unrecognized change, but not always. Clients may vouch that all changes needing review are in Track Changes. Sometimes speed matters more. Between repeat-player attorneys, or when reputations for ethics and rigor otherwise precede each side, the risk of this kind of thing approaches zero, and everybody saves money. I have seen things "slipped in", often inadvertently (turned Track Changes off, diffed the wrong files), but sometimes maliciously. I have also done very long days of nothing but verifying execution copies of documents as they were closed out in the run up to big-dollar closings and low-dollar slug-fests. When the transaction is large or important enough, attorneys will handle exchanging drafts across sides and enforce more rigorous change control.

minimaxir 12y ago

A 99.9% SLA by default? That seems overly ambitious for a startup. :p

macmac 12y ago
If you factor in the carve outs, notice requirements and the calculation model, it's not that bad :-)
- greattypo 12y ago
  :-)
ryanbrunner 12y ago
The penalty is rather low though, and in my experience no one particularly ever cares to exercise credits unless it's something egregious, so provided you're not consistently below 99.9% every single month (which is pretty bad even for a startup), it's generally pretty safe to assume a little bit of a risk if you only miss it occasionally. Bigger customers will absolutely look for 99.9%, and anything less will be a huge red flag during procurement.

mark212 12y ago

James Riley works at Goodwin Procter (sp)[1] and kudos to him -- this is a big contribution to the startup ecosystem. Also, many thanks for not including an arbitration clause and class action waiver as a default term. Not only is it incredibly sleazy (in my opinion) but also many companies will have significant push-back on such a term. Usually requires their own in-house counsel to look at it, and that's the last thing you want. [1] http://www.ycombinator.com/documents/#sales http://www.ycombinator.com/documents/#sales

bendyBus 12y ago

I've had to spend money at various points getting documents drafted which, like this, are pretty much cut & paste anyway. I would just like to see MORE of this. Recently came across lawbite https://www.lawbite.co.uk/ https://www.lawbite.co.uk/ which looks useful at least for UK based companies. Haven't used the service so cannot endorse. Basic employment contracts, vesting schedules, t&cs, keep them coming!

kemitchell 12y ago
As with programmers, it's often hard to tell the lazy from the great, because economy of motion runs with competence. Sometimes copy-and-paste gives you the wrong agreement for your deal, but it's cheap and easy for the lawyer. A different lawyer may glance dozens of alternative precedents in their mind's eye before choosing which form (or pieces of forms) to compose into an agreement for you. When you dress for an occasion, you start by picking items out of your closet. If you don't have what you need, you may go to the store and buy off the rack. If the occasion or your needs are very special, you may have ready-made items tailored, or may even have something made for you. Good lawyers work similarly.

HarveyKandola 12y ago

At the risk of getting down-voted for self-promotion... I see a lot of comments around Word being not the right format for "distributing, sharing, commenting". My startup Documize [1] is just a week old and is currently being tried out by a handful of legal professionals and the like for handling what happens around structured documents. The premise is that MS Word is where structured documents are born in the enterprise world. It's what happens after they come into being that is the problem: network drives, file sync folders, email tennis, Word-track-changes, manual consolidation, etc. A real pain. Documize aims to help people distribute documents, collate feedback, provide version control and even allow for private notes. From a browser. Working towards that vision at the moment -- just thought I'd throw this out there. [1] https://documize.com https://documize.com

kemitchell 12y ago
You may be interested in some open source work I am doing: https://github.com/commonform https://github.com/commonform https://asciinema.org/a/16221 https://asciinema.org/a/16221
- HarveyKandola 12y ago
  Many thanks -- will look into it!
bmulholland 12y ago
We are solving many of the same problems at Contractually [0]. Word import, contract generation, private editing, version control, redlining, commenting, e-signatures, and more. [0] http://www.contractual.ly/ http://www.contractual.ly/

guipsp 12y ago

Google docs version: https://docs.google.com/document/d/1kUm03Zr3QsmX3SRT-Xv3-i675h4Z55u_PwlEmTlQ25Y/pub https://docs.google.com/document/d/1kUm03Zr3QsmX3SRT-Xv3-i67...

rsp1984 12y ago

Is there any difference in it being "open sourced" as opposed to just being a free sales agreement template?

ar7hur 12y ago

Kudos for sharing this. Only caveat: I've sold SaaS to large enterprises (like AT&T, Coke, etc.) for ten years, and unfortunately most of them insisted that we use THEIR template, which was a huge pain point for us.

greattypo 12y ago
Great point. Once you start to sell to companies past a certain size, all the rules go out the window.

teachingaway 12y ago

I help clients negotiate SAAS deals, and I like this as a template. It's better than 95% of the contracts I see. But since this is the internet, I will use the rest of this post to complain about things: 1. Formatting: One column of text is better than 2. It's digital, we don't need to cram words in to save paper. 2. Information Architecture. Contracts longer than 2 pages should have a table of contents. In most use cases, people are only looking for 1 or 2 specific terms in the contract. ToC helps. 3. Naming is Hard. Names should suggest some unique aspect of the thing they represent. In this contract, the parties are defined as "Company" and "Client." But both parties are companies. Using "Company" to refer to only one of the two companies invites confusion. Yes, it's defined. Yes, it's standard practice. But a better defined term might be "ASP" or "Host" or "Provider", etc. 4. "Herein." I don't like herein. 4.1 Herein is stuffy. No one talks like that. 4.2 Herein is ambiguous. http://www.adamsdrafting.com/herein/ http://www.adamsdrafting.com/herein/ 4.3 Instead, use "in this agreement" or "in this paragraph." 5. Arbitration? Going to court is a hugely expensive distraction. Arbitration is slightly less expensive and distracting. Any reason not too ask for arbitration?

kemitchell 12y ago
I have a personal rule never to throw MCSD at opposing's draft, but this is a form, so I'm down. Ken Adams has a posse. We should make t-shirts. On the other hand, from a practical point of view, all the nits you pick add up to a certain kind of camouflage over the agreement. If the point is not what the contract says, but that YC said it, now it's "standard", and you can not think about it, then enlightened style is at odds with (facilitated indifference to) substance. For a first sale in particular, the immediate benefit of the fact of a sale probably outweighs probability times cost of any conceivable drafting flaw that doesn't produce uncapped liability, a cloud on IP, or some other existential threat. When I look for a ray of hope, it's the number of blanks. If this thing has to go back and forth, and nobody is going to sign it as presented, then by all means make it as modern as possible. If it's going to be read and handled, it ought to read and handle well.
- bobbles 12y ago
  > it ought to read and handle well. " For a first sale in particular, the immediate benefit of the fact of a sale probably outweighs probability times cost of any conceivable drafting flaw that doesn't produce uncapped liability, a cloud on IP, or some other existential threat." I had to parse this sentence about 10 times and still don't entirely get what you're saying

notahacker 12y ago

When selling to larger enterprises, particularly high-value company-wide licenses, it's also often worth having a section in there defining who the customer is for the purposes of the agreement. (Do wholly or partially owned subsidiaries generally [or by express permission] get access? What about their subcontractors/joint-ventures/acquisitions?) I'd be surprised if many larger enterprises agreed to 30 day payment terms and a late payment penalty clause - particularly one with interest compounding monthly - since they regularly take more than 30 days to pay invoices (the standard hack is to offer a reduction for payment within a certain time frame instead) If I were the customer I'd also be extremely reticent about signing a contract which gives the vendor the right to increase the renewal rate thirty days ahead and also obliges me to automatically renew for the next period if I don't give thirty days notice. That could be an expensive decision to make in the space of an afternoon...

Spooky23 12y ago
Yeah, I chuckled when I saw those clauses too. Businesses do annual budgets. Try to push a 30-day notice of price changes at my employer, and we would kick you out or get painful concessions immediately. Ditto with auto-renewal. These are consumer gym membership-like terms, I'm really surprised anyone gets good results with this doc as it stands.
slgeorge 12y ago
But, as a small company/start-up you should absolutely stand firm on 30 day payment, 45 at the most. It's completely ludicrous that large companies cannot pay in reasonable time-frames - it's just bullying, and is only done so that the large company can conserve cash. Most small businesses fail because of cash, and failure to pay by large customers is a big reason they get overstretched.

kevin 12y ago

Thanks for all the comments everyone. We're currently looking into getting these documents on git. Because Word Docs are not ideal for versioning, we'll probably convert them to markdown and use Pandoc to offer Word and RTF versions. We'll probably also attach an explicit license as well. We've similarly described the Series AA and Safe as open sourced documents and honestly didn't really think too much about it after that. Mostly, it's to efficiently tell you that the documents are free to use and change as you see fit. Obviously, we're not trying to trick anyone. Suing founders is not part of our business model.

bad_user 12y ago
I don't think anybody assumed you're out to trick people, however "open source" has a very clear definition [1] which implies that the work in question must be accompanied with a license respecting that definition, in order to modify the work and further distribute it. We as software developers have learned to search for and take note of permissive licenses and are very cautious of fake open source, like for example Microsoft's infamous "shared source" initiative. My disappointment is when people are diluting this term, because it doesn't mean just free as in beer and it doesn't mean just having access to the source code. It's much more than that and the definition couldn't be clearer. Many companies have tried capitalizing on this term without delivering and this has left a sour taste amongst many of us. And YCombinator amongst all organizations should be aware of this, let alone the lawyer that drafted this document. But anyway, thanks for sharing. [1] http://opensource.org/osd http://opensource.org/osd

thebyrd 12y ago

As founder of an early stage SaaS company, this is amazing. Thank you!

reubenswartz 12y ago

Really nice contribution. Especially for companies who are starting from nothing. Note that if you have big customers, they will probably want to negotiate every last thing. Smaller companies may or may not care about the details, as long as the software works as promised and support is good. This is a contract, without any of the "this is why you should use this awesome sauce", which I generally like to include before going into the nitty gritty, but just for fun, I created a sample proposal in my app (Mimiran Online Proposals) from the doc, incorporating @teachingaway's feedback that 1 column with decent sized text is more readable, especially online (you can always generate the PDF version). http://www.mimiran.com/sample-proposal/ycombinator-sales-agreement-proposal/ http://www.mimiran.com/sample-proposal/ycombinator-sales-agr...

sogen 12y ago

YC Open-Source Sales Agreement with eye pleasing formatting: https://news.ycombinator.com/item?id=9036635 https://news.ycombinator.com/item?id=9036635

4714 12y ago

I've been waiting for this since Tyler Bosmeny mentioned it during the startup lecture series. Thank you for sharing!

borski 12y ago

This is, almost word for word, our sales agreement from Gunderson Dettmer. We've added a number of company-specific (to us) provisions, but the /vast/ majority of it is all entirely the same. Furthermore, there are a few clauses in here I plan on stealing for our own contract. This is incredible for YC to do. We spent almost $3000 getting our first draft contract. Lawyers are expensive. :(

grabeh 12y ago
Hey, at least you can sue GD if they have been negligent in their drafting and you suffer loss as a result. Although of course the likelihood of this happening in the context of a basic sales contract is negligible to non-existent!
- borski 12y ago
  Oh, don't get me wrong - I /love/ our counsel. He has saved us, fought for us, taught us and walked us through negotiating with investors, customers, partners, etc. I'm incredibly glad we have him on our side, and I would recommend him to anyone - startup or otherwise. I just wish, sometimes, that he weren't $500/hr. :) Re: the lawsuit, for this type of contract you're right that it's pretty safe to say there isn't much to be negligent about, especially as they're a reputable firm. The fact that YC's docs were almost word-for-word our docs makes me much more comfortable too. Granted, we had it 3.5 years ago, and YC's docs came out today, so not like we had any other choice. :)