Successful founders looking to scale need a great lawyer.

Here at Andreyev Lawyers, we love Masters of Scale – a podcast hosted by the legendary Reid Hoffman, (co-founder of LinkedIn and investor at Greylock). In this show Hoffman interviews Natalie Massenet, (founder of Net-a-Porter and Imaginary Ventures).

Massenet has some great advice to founders about the value of getting a great lawyer on your team early:

HOFFMAN: Since we’re talking about looking into the future, I asked Natalie what she might do differently if she could receive a call from her future self.

MASSENET: I would definitely say get a lawyer. That’s the one thing. A lot would be different just with that one act.

HOFFMAN: If Natalie could have glimpsed this future, she would have seen that the contract she signed with Richemont as a strategic investor gave them far too much power over Net-a-Porter’s future direction.

MASSENET: I now spend all of my time telling founders, don’t take money from strategics, and make sure that they don’t have first right of refusal.

HOFFMAN: This part of Natalie’s story is common, especially for first-time entrepreneurs. And I tend to advise new founders, there are situations in which you’re actually better off dying quickly than taking money from the wrong investors. In those cases, an early bad deal severely limits your future outcomes and upside. And it can immobilize you during critical inflection points. It’s a brutal decision. Because when you’re scaling, every day is about trying to survive. It’s natural to want to make decisions that keep you alive today. You say, “That’s a problem for future me to deal with.” But our future selves always have a way of becoming our present selves. And the more entrenched a mistake becomes, the harder it is to undo. Let’s leave that idea to simmer for a minute. In the moment, Net-a-Porter survived their cash-flow problems. And Natalie’s talent for bringing media and commerce together flourished. Her business continued to scale – adding beloved labels that drove more customers to their site.

Later in the show Hoffman and Massenet revisit this critical issue in the context of a potential merger of her booming business:

MASSENET: I now spend all of my time telling founders: “Don’t take money from strategics, and make sure that they don’t have first right of refusal.”

HOFFMAN: Back in 2010, Natalie had been approached by an outside interest to buy the company. But because of their right of first refusal, Richemont could match it. And match it they did.

MASSENET: By 2010 I had a great lawyer, but I had a really bad contract that I’d signed in 2001.

Put simply, an uninformed decision to grant a strategic investor a ‘first right of refusal’ came back to bite 10 years later. This early decision resulted in the difference between Natalie being able to lead the business she had founded in the future direction she believed in, versus the company being acquired by the strategic investor, and Natalie departing for other ventures.

For Natalie’s full story, listen to the Masters of Scale podcast here.

To get a great lawyer on your team, call us now on 1300 654 590.

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If we sound like people you can work with, call us now on 1300 654 590 and speak directly with a great lawyer.

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