Wednesday, September 19, 2007

Selling the Startup: Can you sell your subscriber base?

When it comes to the legal framework for a web service or community, there's a real culture of scraping. Many startups will simply scrape and edit the terms of use, license agreements and privacy policies from other sites in order to save money.

I think that's fine out of the gate, so long as you review and re-assess this approach once the business begins to fire on all cylinders. With the increase in acquisitions in the web services space, you don't want to be caught short. Recently, a new client received a very favourable takeover offer for her business, including its subscriber base. Problem: the privacy policy did not permit her to provide the account information for her subscriber base to the acquiror. Same thing with the user license: it was non-transferable. We had to go back and rectify the matter in a ponderous way before closing.

A quick tour through some local communities and networks indicates my client isn't the only one with this oversight.

Here's what Facebook has added to their privacy policy for users. Please do a quick check on your and see if you've covered the issue:

"If the ownership of all or substantially all of the Facebook business, or individual business units owned by Facebook, Inc., were to change, your user information may be transferred to the new owner so the service can continue operations. In any such transfer of information, your user information would remain subject to the promises made in any pre-existing Privacy Policy."