Launch HN: Common Paper (YC W23) – SAFEs for Commercial Contracts

Hey HN, we’re Ben and Jake, founders of Common Paper (https://commonpaper.com). We provide standard, open-source contracts and a platform for getting them signed quickly. See https://youtu.be/f7maIapJpU4 for an overview, and https://youtu.be/A1PWjWiheFk for a demo of sending and signing a contract.

I (Jake) was a co-founder of two B2B SaaS companies, RJMetrics (where Ben and I met), and Stitch. Everything about contracts was frustrating, both at those startups and the larger companies that acquired us.

Way too often, the contracting process with a customer got adversarial—arguing over whose template to use, emailing Word docs back and forth, huge legal fees, and unpredictable delays that made it hard to know if a deal would ever close. Then, when we finally got the customer to sign, we had to keep track of all of the promises embedded in the contract. This is difficult when you have hundreds of customers and contract PDFs full of unstructured text.

The breaking point came when one of our customers was acquired by Oracle. They wanted to keep using our product, but had to move from our original contract to the one that Oracle uses. In exchange for this, they were willing to increase the price they were paying from $6,000 to $24,000 per year.

It took us 9 months to get the new contract in place, just to enable them to keep using the product. We spent more on attorneys than we gained from the upsell. And there was basically nothing we could do to improve that process as a single company operating in a system where standards don’t exist.

Contrast that to the standardization that the SAFE, or Simple Agreement for Future Equity, brought to seed investments, and the potential is obvious. (Past discussion of the SAFE at https://news.ycombinator.com/item?id=33639191)

If you’re a startup raising money on a SAFE, the process is simple, whether you’re raising $10k from an angel or $1M from a VC. Everyone already uses, or at least is familiar with, the same basic contract. There are a few variables that change on a deal-by-deal basis, but the transactions are vastly more efficient because everyone is on the same standard contract.

If you start with standard contracts, you can build very different software to manage them compared to traditional contracts. Our business model is to provide the standard contracts for free and charge money from companies who use our software to sell to their customers (more on this below).

The standard contracts we create are all related to buying and selling B2B software. This includes a non-disclosure agreement, (https://commonpaper.com/standards/mutual-nda/), sales contract (https://commonpaper.com/standards/cloud-service-agreement/), SLA, DPA, ToS, etc. The full list is at https://commonpaper.com/standards/.

The process for creating and revising the contracts is modeled after an open-source software project, and they are released for free (as in both speech and beer) under the Creative Commons CC BY 4.0 license.

We have a committee of 40+ attorneys from tech companies and law firms who are analogous to code contributors (https://commonpaper.com/committee). An attorney on our team, who you can think about like a maintainer, collects all of their feedback and synthesizes it into a version for release (eg the Design Partner Agreement v1.0). We post the agreements as DOCX, PDF, and HTML on our website and host markdown on Github.

Most of the usage of the agreements happens outside of our platform, and we don’t have any visibility into that unless people choose to tell us. However, we do know that thousands of companies have signed the agreements, and millions of dollars worth of deals have been closed on them.

Each agreement is split into two sections: the standard terms, which are the same across all instances, and a cover page, with variables that can be customized for a particular company and deal. The latter is basically a schema for each agreement type, and that leads to the fundamental trade-off in how we build our software. We have less flexibility around types of contracts (because we’re focused on the standard agreements, not arbitrary DOCX files), but in exchange, every agreement type has a consistent data model, which means that we can build integrations and features that work across all customers. This gain is huge.

For example, we can use the data in the fees section of our standard Cloud Service Agreement to automatically generate invoices and subscriptions using Stripe. Similarly, it’s trivial to use our API (https://api.commonpaper.com/docs) to check if an active NDA is in place before sharing confidential information or to keep a spreadsheet up to date with the SLA obligations for different customers.

Traditional contract management tools are built around adding electronic signatures to documents full of unstructured text and/or creating a custom data model from a particular company’s bespoke contract. There’s no way they can offer features like this without a custom project for each particular contract. It’s basically the difference between custom software and a software product.

Part of our feature set overlaps with the traditional tools. We can do things like send a contract to the other side, propose changes, approve, and sign. But our negotiation model is different in that it encourages both sides to keep changes narrowly scoped to the variables in the cover page. That makes it faster both to propose the changes and for each side to understand, and accept or reject, the changes proposed by their counterparty.

We believe that, just as with SAFEs in the investment world, the potential efficiency gains and positive side effects of this model are so big that the transition is inevitable. We’d love for you all to try it out and let us know your feedback and suggestions. The agreements are free forever, and our software is free as well until you use it to close deals with 5 customers. https://commonpaper.com/product/.

We’re interested to hear about any experiences you’ve had with contracts and how you’ve worked with them. We look forward to your comments!

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Comments

@nocoiner 6d
It feels to me like where this is going to fall down is first contact with any business term that isn’t neatly covered by one of the form agreements. Not to say that this can’t be great for ordinary course arrangements that neatly fit within one of the defined buckets, but I’d be pretty wary (as either a business or a legal advisor) of any impulse to fit even a minimally bespoke deal into one of these templates.

Contracts exist in a weird state of counterpoise where they’re both supremely important (even the oft-maligned “boilerplate”) and totally inessential to the achievement of practical business objective. I’ve had clients sign contracts for nine-figure deals where no one has ever read the agreement after closing. But as soon as there’s a mismatch between the commercial expectations on either side, then every word matters.

And it’s just hard for me to understand how this is going to capture all the nuances of arrangements among sophisticated commercial parties. For instance, I saw on the site, several variations of alternative anti-assignment provisions. OK, so either the contact can or cannot be assigned. Simple enough. Does it also prohibit an assignment of the contract if the company is sold via a sale of all assets? (Should an ordinary course commercial contract really purport to dictate the form of a corporate-level transaction?) What about a pledge to secure debt? What about in an assignment for the benefit of creditors? What about an internal reorganization or transfer to an affiliate? What about a merger? What if the company issues new stock representing 19.99% ownership? 49%? 51%? And so on and so on ad nauseam.

Maybe these are all in fact selectable boxes and there’s language that addresses each of these fact patterns. But even aside from agreed language that, let’s assume, is good enough to implement the business understanding in each of these scenarios, these are weighty commercial decisions that require careful consideration.

@anrope 6d
This is a great market that nobody has run away with yet. If you find the right combination of features around contract lifecycle, it could be yours.

Common docs (clerky), redlining (ms word), esigning, tracking self serve contracts (ironclad), contract lifecycle management (pandadoc), employee onboarding (gusto).

There’s a lot of good criticism here about edge cases and getting buyin from large customers. But at the end of the day there are a ton of companies with zero game plan around their contracts process, plenty of room for a good product.

Curious how you’re thinking about dealing with ms word and ‘track changes’. Every lawyer wants to live there. Do you fight this or build your product to work word-first?

@primeobsession 6d
I’ve been using CommonPaper since they first put up their concept and it’s all sorts of awesome. Awesome in principle and very convenient for my boutique security consulting business.

Absolute no brainer for us to use what they have built. It was instrumental in getting us off the ground.

Congrats team on YC and the launch.

@tayloramurphy 6d
Big fans of Jake and the team at Common Paper - we're happy users at Meltano. Congrats on the launch!
@cm 6d
How would this work for my 18th century agrarian business?
@meghan_rain 6d
Why the ceremony around signing with on-screen mouse movements, if the resulting digital signature could be copy-pasted into any other draft?
@keeptrying 6d
My lawyers charged me $7k for a trial contract after I gave them the verbiage.

This is a badly needed solution.

@francoismassot 6d
This is awesome.

I really like the fact that templates are available on GitHub: https://github.com/CommonPaper

I cofounded a company that develop and sells an OpenSource software and it's a huge pain to write the contract. It's also costly... as I don't trust myself to write a contract and ask a lawyer to do it...

I see that templates are more for cloud based offering but that would be great to extend this to on-premise contrat too. I would be happy to contribute.

@fblp 6d
Great work! Please also do this for brick and mortar businesses. Eg supply agreements for physical products.
@r_hoods_ghost 6d
As far as I can tell there is no information provided about what information security measures are in place to protect this hugely juicy target full of commercially sensitive info, and an explicit disclaimer saying "hey folks we offer no guarantees about reliability, uptime or whether we'll disappear in a puff of smoke with all your contracts." Bit worrying
@jordigg 6d
There has been an effort to standardize MNDAs with oneNDA (https://onenda.org/), at least in tech and I've seen it work well for SaaS deals. I think they also released oneDPA but I haven't used it yet to understand if it accepted or not.

I wish more companies would use standard contracts, definitely helpful for smaller orgs with non-existen or very small legal teams. Now we just need them to be well accepted...

@neilv 6d
I can't tell from the Privacy Policy who can end up getting access to information about what contracts I'm signing, and with whom. Nor can I tell for what purposes they may use that information once they have access to it.

I suppose what I really want from business legal document facilitation is lawyer-like confidentiality, which is the opposite of the typical mindset of tech companies.

@karinwolok12 6d
Congrats! This is awesome!!