Best Practices
In my last post, I discussed when to use your paper when you’re selling to a customer or partner. In today’s post, I discuss two more topics around creating your own templates – when to create them and how often to update them.
As an early stage startup, you should have your own template NDA and customer agreement. The NDA template should be ready to use very early on, and as soon as you start disclosing non-public information to potential vendors and customers (most VCs will not sign NDAs). As soon as you have a prototype that’s ready to sell or test externally, you should have a customer agreement template ready to send over.
A commercial attorney can help prepare both templates. An NDA is quick to put together, while a customer agreement template will take more time. You’ll have to decide whether you’re selling your product through an online Terms of Service and Privacy Policy or through a negotiated agreement, or both. An attorney can create a custom template that takes into account your business, payment model, support, data privacy, and other important areas. If you haven’t ironed out these details, now’s the time to do it! Also, many early stage startups may be tempted to use off-the-shelf templates they find online, and while they may help you close your first couple sales, as I discussed in my last post, they’ll be insufficient in the long-run.
If your NDA is middle-of-the-road, industry-standard, and doesn’t contain any hidden gotchas, you shouldn’t have to update it often. Most companies update their NDA templates every couple of years.
Your customer agreement (TOS, Privacy Policy or otherwise) should be updated more frequently, as your product is constantly evolving and your target audience may shift over time. Ideally, you review your templates every time you have a new major product release or update, and every time new legislation comes into effect necessitating updates in disclosures. If that’s not possible, update your TOS and customer agreement at least once per year. In that timeframe, your product will have evolved enough where your template may not accurately represent it while addressing risks; the same goes for your target customer. You’ll also have more data points in the last year as to which terms are the most contentious and subject to negotiation, and incorporate those redlines into your template.
When I was in-house, I had a yearly tickler at the start of every year to review our templates, and throughout the year I kept a wishlist document I’d add to periodically. It’s helpful to start that practice and share the wishlist with your counsel so they have a good gauge of needed edits.
Your Privacy Policy should be updated every time you change how you collect, track, disclose and share information collected from visitors on your site, and every time there is a major change in legislation necessitating new disclosures. These updates could happen more than once a year. If your Privacy Policy hasn't been updated recently, you should check with a commercial attorney or privacy counsel to understand whether your Privacy Policy is due for a review.
