Early on, when one of our startups were in beta, we signed a deal with one of our biggest clients that resulted in tens of thousands of dollars in revenue and a ton of exposure for our product. Things looked good and we grew 40% week over week just from the exposure alone.
Then one day, several months after we had signed the deal, we got a cease-and-desist letter from the client. Turns out, there had been a exclusivity statement hidden within the stack of documents, something the lawyer we outsourced had missed (neglected) to tell us.
The exclusivity statement essentially meant no other customers besides our client could use it, and that mean he was really “acquiring” us for mere tens of thousands of dollars a month.
We could’ve opted to break the agreement, but the penalty would have been $200,000, an amount none of us could afford to pay. We sought legal advice but the only solution we found would’ve been to give up the product.
I decided to call the client directly and told him about our situation and how this was something that we overlooked and regretted. When I was finally finished, he laughed and said:
“No problem, we can re-draft the agreement. I didn’t even know our legal team had reached out to you — the C&D is just a formality to ensure our assets are protected, but it was never my intention signing the deal to put you in this situation.”
Sometimes, you just need to ask without assuming. Most people assume the worst and don’t even try asking and if you don’t ask, the answer will always be ‘no’.
That’s the takeaway. Oh, and don’t outsource your lawyer.