Goldilocks fine print: Customer terms that build trust and fuel growth
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At Pilot, we use technology and SaaS solutions from many startups, including those with cutting-edge offerings. Having reviewed numerous customer agreements, we've learned firsthand how important customer terms can be to the growth and trustworthiness of early-stage startups. Here’s our advice on how to strike the right balance—not too complicated, not too lax—just right.
Where most startups go wrong
Startups generally aim to remove friction from customer onboarding to accelerate growth, secure marquee clients, and establish credibility. But sometimes, their customer agreements unintentionally do the opposite:
Overlawyered terms:
We once reviewed a 29-page contract for a simple SaaS product. Another had seven different definitions of customer data. Some include EU privacy terms for US-only products.
Your sophisticated customers, often supported by legal teams (and increasingly AI tools), carefully review vendor agreements. Overcomplicated terms slow down this legal review process, triggering unnecessary negotiations, which in turn can delay—or even kill—deals and provide ammunition for competitors.
Grabby terms:
Some startups include overly broad provisions to grant themselves rights "just in case" they're needed later. For instance, vendors may include expansive rights to use customer data in unspecified ways or comprehensive publicity provisions allowing them to use customer names and logos without explicit consent. Terms like these often lead to objections from potential customers, slowing down deals and eroding trust.
Non-committal terms: Occasionally, we’ve seen "cute" clauses that don't genuinely commit vendors to important obligations. Examples include uptime guarantees without remedies or confidentiality clauses that prevent disclosure but allow improper use. We've disqualified potential vendors based on concerns over such gaps.
No terms: Surprisingly, some startups provide technology without clear terms or fail to incorporate agreement consent in their purchase workflows. From our perspective, the uncertainty this creates is worse than accepting imperfect terms.
How startups can create Goldilocks terms that work
At Pilot, we’ve learned a few principles to craft customer terms that are well-balanced and effective:
Put terms in context: Consider who your customers are (B2B, B2C, small businesses, midsize companies, or large enterprises) and meet their reasonable expectations of your commitments. For example, a large enterprise will have significantly different expectations for indemnity obligations, data security commitments, etc. than a small business. Research your competitors’ agreements and understand market norms. Do not stick out from the crowd in a bad way.
Address concerns head-on: When Microsoft was launching GitHub Copilot, IP infringement was a major customer concern. Microsoft took that off the table by providing a well thought out IP indemnity in the Copilot terms. The lesson? Address potential customer concerns proactively and transparently to facilitate adoption of your product.
Make terms easy to review and understand: Terms should be written clearly in plain English, avoiding overly technical language and complicated "nested" structures requiring multiple clicks. Clear and straightforward language accelerates reviews and shortens sales cycles, especially now as AI tools increase the incidence of customer legal reviews.
Make terms look professional: Your terms reflect your company’s operational quality. Treat them as seriously as you would a resume: perfect spelling, grammar, and formatting. Ensure all internal cross-references work ("as set forth in section 4.2 below"), hyperlinks lead to the correct documents, defined terms are consistent (“Party” or “party”), and there’s consistency across all customer-facing documents like privacy policies and uptime commitments.
Choose your legal counsel wisely: Ultimately, your legal advisor should be responsible for all of the above. Their legal and business savvy will significantly impact the quality of your terms, not just as a contract but also as a step in your sales funnel. Choose a counsel who understands your business objectives and can craft balanced, professional terms that support your sales process rather than hinder it.
The bottom line
Your customer terms are not just legal requirements—they are critical tools for growth and building customer trust. Crafting terms that clearly communicate your reliability and professionalism accelerate your sales pipeline, enhance your reputation, and foster strong customer relationships from day one.
Pilot helps startups with bookkeeping, accounting, and fractional CFO services so you can focus on growing your business without the back-office headaches. Ready to streamline your financial stack? We’re here to help.
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