In the above audio you hear an interview with Jerry Heller, co founder of Ruthless Records. Ice Cube left the label because he accused Eazy-E and Jerry of stealing money and taking advantage of them not knowing the paperwork. I first heard the term “Paper Gangster” when hip hop trio The Lox went live on the radio to rally the people, in hopes of pressuring Diddy to release them from their record deal. They referred to him as a “paper gangster.” So what exactly is a paper gangster? My definition is anyone who takes advantage of you through the use of legal documents and loop holes for their own financial gain. In the hip hop industry paper gangsters are mostly the real “ballers” and “shot callers.” Some of these individuals are not evil, and some just plain are. They come in the form of lawyers, managers, label executives, event promoters and more.

“The whole Puff situation, of course, that was a learning experience. We got there. Big was there. Craig Mack. Then getting off Bad Boy, because that was unheard of at the time. Puff goes hard. He’s strong in the business world with lawyers. To be that young and to have to go through lawyer work and paper work that you really don’t understand. It was critical for us. We were nowhere near to go to war with him with money, and you don’t want to sit in court with him.” As proof that Puff’s an excellent paper gangster, scan the credits on Sheek’s current publishing and you’ll find Justin Combs Pub. (named after P. Diddy’s son) listed. “He still got his hands all over us,” sighs Sheeks. “He still touching us up. He’s still feeling on us from far. We learned a lot dealing with Puff. We’re off [his label] but everybody got their hands in everything. He got some of our publishing. – http://bit.ly/MhGnwA

Sometimes someone having ownership over your creativity can go very far. Who are the paper gangsters in the startup world? I think you have an idea but for the most part VC’s, angels, and consultants. For this post i’ll stick to investors because I have been screwed over before personally myself in the past. I took a raw deal because I was so eager to get an idea off the ground and unknowingly someone else benefited off of my own hard work, while I got next to nothing. The moral of this hip hop story is: Be Informed. Thats the ONLY way to not end up like some of your favorite rappers.

Having information that the other side doesn’t have gives [VCs] an advantage… they take advantage of entrepreneurs who haven’t been through this before… they were totally willing to take advantage of us. – Mitch Kapor

The PG Startup Prevention Program

The first thing thats really important in any deal is to have the upper hand. Thats not always the case for startups, even for myself. But, if you have a product thats highly in demand and getting loads of traction then you really have more of a chance to get the deal you want rather than the other way around.

Another is to just read VC blogs. I think you learn a great deal from Fred Wilson and Ben Horowitz alone. I feel smarter and can act on a large percentage of the topics they cover. Brad Feld released a really good book as well, do yourself a favor and read it.

You know any other cool resources for us to check out to get smarter? Look for an expanded version of this topic in our book later this year.

- Anthony Frasier | @anthonyfrasier