5 Legal Tips That Can Save Your Startup

Startup entrepreneurs are rarely legal experts and as a result there is an inherent risk that the smallest contractual loophole or badly written IP clause can expose their entire enterprise. This was (and continues to be) perfectly demonstrated in popular TV show Silicon Valley, where cheap lawyers and poorly constructed contracts cause never-ending problems for the Pied Piper guys . Though obviously for comedic effect, it’s not so funny in the real world and this made me think about my own experiences leading up to, and during, the sale of E-Tale. For the small percentage of startups that successfully navigate the early years and scale to the point of sale, organising your legal documents in advance will save you a lot of time and stress  (and cost!) at the due-diligence stage.

 

5 things you can do now to get your legals on-point

1. Set up a ‘Deal Room’ 

Organising your documents in a tidy, cloud-based solution like Google Drive or Dropbox is a great way to start getting your house in order. It makes it easy to see what you’ve got, identify any gaps that need filling, and gives clarity when you come to reviewing and updating it all. The advantage of building out a ‘deal room’ early, is to avoid confusion later on in retrospectively trying to compile bundles of documents. Basically, when you begin looking for a buyer, or you’re approached about a buyout, you are hit with the realisation that you need to give the buyer access to ALL your contracts and legal documents. Storing these digitally would cut out a lot of manual search time, and you can update them easily. You can also share your confidential documents and data in real-time with the involved parties, whilst keeping them secure.

 

2. Don’t try to do legal documents on the cheap!

If you intend on selling your company, raising money or just want to have a well-run business, your legal docs need to be watertight! Downloading templates you find online puts you at high risk of getting it seriously wrong. I see them the same way as i see pre-built website themes – they look ok, but still require a lot of customisation to work to your specific requirements. The devil is in the detail. Some of the terms may not apply and you may not even be sure if it’s right for your business model. There is a reason people study law for years rather than just downloading generic templates and filling in the blanks. Try and work with a reputable law firm to create a template for your documents, contracts and shareholder agreements.

 

3. Get a standard commercial contract 

Come up with a great standard commercial contract in favour of your company. Every company should have a standard form contract when dealing with customers or clients. The paradox is, there really isn’t a “standard form contract,” as every contract can be tailored to be more favourable to one side or the other. The key is to start with YOUR form of contract, make sure it’s broad enough to cover all eventualities, and hope the other side doesn’t negotiate it too much. Your standard contract should outline all the key responsibilities undertaken by each employee, their conduct, as well as their stock options or salary. It should also highlight your company’s confidentiality and intellectual properties, along with any competition clauses, forbidding employees to discuss any of your companies details externally. Confidentiality is crucial to the success of your company and the protection of your USP

 

4. Chose a decent lawyer

If you have ever purchased a house you will know the quality and the services lawyer provide can vary wildly. Ideally you need a firm that is big enough to cope with complex scenarios and small enough to care about you. Meet them and get a feel for how proactive they will be. Cutting corners when choosing a legal representative may seem like a good idea to save a few hundred but can cost thousands in the long run, especially if they don’t have the level of expertise you require. Contact different lawyers, check out their portfolio of work, get recommendations from business associates and others that you trust. Think of it as a long-term relationship with someone – you need to know that you are compatible with them!

 

5. Get your employment contracts in order 

Startups often run into problems when they don’t maintain adequate employment documentation. You should prepare a core group of employment documents that each employee is required to sign. A starting list of employment documents for a new company would typically include Stock Option documents, confidentiality agreements and IP ownership clarity. There numerous examples of companies that almost tripped up over this – one of the biggest is Facebook and the confusion it caused around ownership with some of founding partners.

 

Don’t leave yourself contractually exposed – put these tips in place and you will avoid looking like Silicon Valley’s Gavin Belson, when you realise your employment contracts aren’t valid and you just lose a lawsuit you thought you were guaranteed to win…

My 5 Keys To Successfully Funding Your Startup

It seems as though Brexit speculation will never end, for start-ups in particular, there is still a lot of uncertainty and it is important that entrepreneurs arm themselves with enough information to face whatever may come from the current political climate.

There have been some high profile investments in the news which are showing the continued strength of the UK’s tech hub status, such as Entrepreneur First – an accelerator business which has successfully funded 75 start-ups, with a further three investment deals signed since the EU Referendum result. WeSwap, the peer-to-peer travel money start-up has raised $6.5m, showing no signs of letting the referendum slow them down.

The Telegraph reported that European investors have not been put off by the referendum results, still aware of the benefits of investing in start-ups within the UK’s tech-hub. The wealth of education opportunities, tax benefits and the large English-speaking market are still huge benefits in the business world and the country’s politics do not seem to have impacted on the great reputation we have.

The drop in the value of the pound has given foreign investors and opportunity to invest in the companies which were previously too expensive to assist. No-one is sure how long the dip in value will last, but at least there is a silver-lining for start-ups in that foreign investors still know that UK start-ups are strong seeds and worth investing in, especially now that a window of opportunity is present.

However, while attracting investment is import if you’re looking to rapidly grow your businesses, there are a number of reasons why self-funding (or “bootstrapping”) is actually a better way for a start-up to grow.

Is It Absolutely Necessary?

My perspective on funding is that there are clearly benefits to have a bank full of cash. You can hire the right people, you can get the office where you want it to be (geographically and operationally). However, there is a beauty, and a certain clarity, in starting with nothing.

There is a saying: “the only thing scarier than a man with everything to lose, is one with nothing to lose”. I found that starting a business with no money taught me how to be frugal and go without certain expensive luxuries. It made me think carefully about where we were spending the money, and why. It also meant that we grew our company in line with our financial growth so that we never over committed. We didn’t have finance agreements for IT equipment – not because we didn’t want it – we simply couldn’t have it! So everything was bought and paid for up front. This meant that we retained ownership and therefore control in the direction of the company.

Another thing to keep in mind is that if you do have investors in place they will often look to put clauses in place where they can take control of the company if targets are not met. This combined with the fact that it’s more than common to be over optimistic when presenting projected figures to an investor put the founding team in a tricky spot.

 

My 5 Keys To Investment Success

1. Do you really need it?

Think about if you really need money, or if it would just be nice to have more. If there is no real plan as to where the ‘wanted’ money is going, it can become more of a burden – unspent money will prove to investors that you didn’t need the amount you asked for and will show bad planning skills, whilst money which is spent unnecessarily will cause problems further down the line.

 

2. Look for the Right Partners.

Investors who understand the realistic growth of the company are more valuable than those who are willing to throw money around without asking about goals. Investors should be partners and it is important for them to care about the growth of your business – and in order to care, they need to know what to expect. This applies the other way, too. If your investors grant money without fully understanding what they will be getting in return, you may find yourself in a situation where investors expect more than you can provide – or something completely different.

 

3. Don’t make ‘getting funded’ a goal unto itself.

Getting funding gives you the opportunity to started on your journey with a better chance of success. But it doesn’t mean that success is guaranteed. Try to avoid making funding into a big goal, it is merely an early step toward other business-oriented goals.

 

4. Treat the money as your own.

Bearing in mind that money spent will impact the business valuation. E.g. If you forecast that your valuation will be 8 times profit, then every single pound spent unnecessarily is £8 less for your valuation!

 

5. Be transparent.

I think that it’s good to keep your team in the loop about the company objectives including financial ones. So let them know what money is in the bank and when it runs out. You will find a few sense of team spirit is created when people know that there isn’t an everlasting pot of cash. However, the fact that the business has procured finance can boost work ethic and morale.

 

These are my top 5 tips and they worked for me; maybe you have a different take on them, or maybe you’ve taken a different route to financing your startup? I’d like to know more: DM me on Twitter: @bradindigital or leave a comment below and I’ll get back to you.

 

  –   –   –   –   –   –   –   –

How Funding Works

I came across this great infographic on the Funders and Founders website that neatly explains the funding process, and the roles of the key protagonists, from startup to sale:

how-funding-works-infographic

 

 

 

The Importance Of Agility

Now, more than ever, it is important for start-ups to look at the way they operate, and plan ahead to ensure that they are able to handle whatever the economy, politics and the business world tries to throw at them. The residual fallout from the Brexit results has shown that the unpredictable is always possible, even if it seems unlikely and start-ups find themselves in a vulnerable position in uncertain times such as these. So, how can new businesses prepare themselves for the journey ahead of them?

The founding principle of a start-up plan needs to be agility – or the ability to pivot an idea in reaction to – or even preparation for – an uncontrollable external factor.

 

Competitive Advantage

Adopting an agile, or flexible approach to your business gives you a competitive advantage. Big companies and brands are used to working with the larger agencies, where almost every business process seems to take twice as long as it should to be completed! Big companies will weigh the risks of working with start-ups against the sheer hunger, ambition and desire to raise the bar which is often seen in independent start-ups. This leads to the larger brands often working with smaller businesses and start-ups, in order to access the best talents and innovation on the market – regardless of how big business has been carried out in the past. This sort of change is already happening at places like financial services firm Fidelity who are using small incubator teams to solve specific problems.

Big organisations are also fond of working with businesses who are able to work around them, evolving and developing their products and services to match the brand’s needs perfectly. Being agile means that start-ups can bring Clients into their team and build products around them. Also, when you are a start-up working with a top tier brand, there is no question over who is the big fish and who is the little fish. When companies deal with large suppliers, they often feel like there is a power struggle. So the little start-up where the founder is on the phone can sound very appealing.

 

Changing Your Outlook – Becoming Agile

It may not be easy to change your outlook on business practices – education, tutorials and journals seem to be set in a certain mind-set of ‘this is how it’s always been done, therefore this way is correct’. However, a different way of thinking about how you market your products and how your products and services will benefit clients during times of uncertainty will make a huge difference to your business operations.

 

Meera Kaul, writing in Forbes, advises that start-ups should plan for the future based on their own rules, without trying to imitate those followed by small companies. She poses:

Start-ups are not companies. And they never will be. The parameters and thesis that define corporate success may not apply to them. A start-up is an experiment. The entrepreneur or a group of people with the acumen to identify an opportunity and match their skills, create a solution to meet the opportunity or gap. They possess the necessary skills to execute the vision, or have the capability of executing the skills.”

I think she is right, start-ups cannot be defined by the same rules as companies, especially those who have a reliable business model, which is so ingrained in society that changing times seem to leave them unaffected. Start-ups must be more experimental, ready to change and adapt with the times and flexible – just to survive long enough to become established.

Planning for Every Possible Outcome

Alison Freer advises that start-ups and small businesses need to plan for every potential outcome – even those less savoury and unwanted outcomes. Planning ahead gives the start-up the opportunity to see each eventuality and have a solid plan in place to overcome, circumvent and weather whatever situation happens. There’s a lot to be said for positive thinking, but denial that other outcomes are possible is sheer naivety.

As the effect of Brexit become more and more volatile and apparent, you will see more big businesses beginning to question the necessity of expenses as margins are squeezed. This means that highly agile and cost-effective suppliers are far more appealing. Therefore, providing that the start-up is themselves cost effective – i.e. not having a Soho office and a company Mercedes – you have the opportunity to take away business from the big guys,  especially when the barrier to entry is now so low.

Why Brexit Would Destroy UK Tech

 

Two major events are happening in the British tech industry this week – the EU referendum and London Tech Week. Of course, the possibility of Brexit becoming reality has been a hot topic within the opening speeches at London Tech Week, and the statements and statistics put forward have served to strengthen my belief that remaining in the EU is the best option for UK start-ups.

 

The UK is the home of the Unicorn

London Tech Week launched with a keynote speech from Gordon Innes, CEO of London & Partners, in which he stated that “London has become the best city in the world to create and scale tech companies”, and backed this up with figures showing that over $10bn has been invested in London’s tech sector.

London has built a reputation as a global tech hub through innovation and applying the productive benefits of technological advances to other areas of production – such as disability and medical aids, emission reduction and innovative building materials. My concern is that, in leaving the EU, London’s tech start-ups will lose access to many of the factors driving this success.

Currently, Europe is leading the way in producing sustainable start-ups, with European tech companies being valued at 18 times their revenue generation, in stark contrast to the US tech companies, which are valued at an average of 46 times their revenue generation. According to GP Bullhound’s Annual European Unicorns Report, Europe is currently home to 47 billion-dollar digital start-ups – a majority of which (18) are based in London – showing that London truly is the home of the Unicorn Start-up.

 

Brexit would likely destroy London’s ‘Tech Hub’ status.

I am not alone in this opinion, either. Many leading tech businesses have put their names to letters urging the UK to remain a member of the EU. The UK heads of IBM, Microsoft and SAP joined 32 other business leaders in signing an open letter, whilst are among 1,280 business leaders to have signed another and hundreds of tech start-ups and entrepreneurs have signed a separate letter. Former Google Chrome Marketing UK head and founder of the Sup App, Richard Pleeth also shares my sentiments, alongside 87% of Tech London Advocates, as does the highly respected entrepreneur Richard Branson:

 

This does not mean that voting to remain within the EU will mean that there will be no change to the British tech industry, however. Both potential results will trigger change within laws and regulations and tech companies – both start-ups and established businesses alike, will have to make rapid changes in order to keep up. But it is glaringly obvious that a ‘remain’ outcome is less likely to destroy Britain’s technology-driven capital and will mean less disruption for businesses overall.

If Britain was not in the EU, every stage of the process – from Business Development through to invoicing clients – would have been much harder for my business ‘E-tale’. Doing business in Europe and essentially exporting software was easy. We took this for granted until we began working in regions like Russia and Brazil where the level of paperwork and tax info required is out of hand! Brazil have various import taxes that make it really hard for an international supplier to be competitive, whilst Russia is less about the tax and more about the paperwork needed to ever get paid.

The admin costs of just finding out what the trading rules are outside Europe and the US is a cost that most start-ups are unable to bare. However, trading in the European Union was almost exactly like trading in the UK – sharing many of the same regulations and requirements and making understanding the whole process much simpler. In addition to this, having a strong European client base was a huge factor when E-tale was purchased by ChannelAdvisor in 2014.

I am not saying that I would have dismissed the thought of starting a business outside of the European Union, just that it would have been a lot harder, arduous and more expensive to do so. The opportunities for expansion and innovation would have been severely limited by not having access to EU markets and regulations.

For medium to large businesses, the impact of a Brexit result will be damaging, but will not be as devastating as the effects it will have on start-ups and entrepreneurs. New businesses and those still in the planning phase will be left stranded, lost and in need of severe guidance, should Thursday’s result see the UK leave the EU. A Brexit result would severely restrict, and in some cases destroy, those businesses currently starting up in London’s many tech hubs.

Why You Should Ignore Your Competitors

In the WWDC announcements earlier this week, Apple revealed that their voice recognition AI, Siri, will be made available on desktop. But the bigger news is that Siri is to be opened up to third-party developers to enable users to access third-party apps through Siri commands. This news has been met with varying opinions, but the loudest appears to be that Apple are falling behind when it comes to beating competitors to the punch. However, I am not so sure that this is true.

 

Too little, too late?

The popular opinion seems to be that Apple is having trouble keeping up with their competitors. Cortana was opened to third-party developers over two years ago, whilst Amazon’s assistant AI, Alexa, was released to developers almost a year ago – with the added incentive of a development fund for innovative uses of the software. Google appeared to be slightly late to the party, releasing their software only last month, so is Apple playing catch-up?

Amazon,  and Google already have stand-alone devices on the market, powered by their AI assistants, all released over the past two years, whilst Apple have only recently announced that they are developing their own stand-alone command centre for homes

The CEO of the Allen Institute for Artificial Intelligence and Washington university professor, Oren Etzioni, has said “Is it too little too late? Siri is five years old and still trying to learn how to play well with others.” (source)

 

My Take

Watching your competitors is one way of making sure that your products are relevant, but a much more effective method, is listening to your customers. If you are hearing your customer’s demands and working to make them happy, you don’t need to concern yourself with what your competitors are doing.

Apple have long proven that they are innovators, releasing amazing product, after amazing product, they refine their software and products based on the feedback they receive from their customers, which eliminates the need to copy what Amazon and Google are doing.

Although the announcement is still fairly new, Apple have been developing their stand-alone product since before Amazon Echo was released, taking the time to make sure that they are delivering a product that their customers actually want.

This is the best approach to handling competitors as it ensures that they are delivering products that their customers will want to buy. “A lot of our customers have told us they would love…” is a phrase that featured in many of their announcements, for example.

When developing my own services and brand, I made the conscious decision to stop watching my competitor’s every move to make sure that I was in line with them. I can see why people would ask how I could be sure that my business was relevant, if I didn’t know what my competitors were doing. To be honest, I didn’t know whether my products were on par with those of my biggest rivals, what I did know was that my products matched what my customers wanted and answered their needs.

By asking the right questions and using the information our customers provided, we were armed with all of the knowledge we needed about our market. Our customers didn’t want imitations of existing products – they were looking for innovation which answered their calls.

Whilst you are busy ignoring your competition and paving the way for satisfied customers yourself, there are a three key things to avoid:

  • Don’t give your competitors bad press, focus on your business, your innovation and keeping your customers satisfied and the rest will fall into place
  • Don’t assume that customers will fall into your lap; amazing products come with an amazing brand and maintaining world-class customer service will endear your customers to you even more.
  • Don’t price higher just because you can. Fair prices make everybody happy. Don’t be tempted to price too low, you still need to make a profit. On the other hand, do not fall into the mind-set that you can charge the earth just because you meet the customer’s needs better – many people will be tempted to accept lesser value for a more affordable product.

Remember that happy customers are the key ingredient in great business. Exceptional customer service, products which push all the right buttons, and prices which match your target market’s lifestyle will lead to better reviews and an increase in word-of-mouth marketing. Happy customers will lead to more customers. Increased trust in your brand leads to increased profits, and better quality of feedback, leads to better quality products, fuelling the cycle once again.

Start, Scale and Sell Masterclass – 3rd/4th December 2015

Earlier this year I was luckily invited to speak at the ‘Techpreneur Expo’ this coming December. The Techpreneur Expo is part of the 34th Business Show, which showcases other key speakers. The speakers include motivational speakers and business leaders, such as Touker Suleyman from the BBC show Dragons Den.

My masterclass will have the following itinerary across both days:

•    11:00 – Evaluating your Idea – How to know if you are onto a winner!

•    12:00 – From Start-up to Scale-up – Preparing for the big time.

•    13:00 – Booking Meetings – How to get in front of big companies without a big budget.

•    14:00 – The Competition – How to speak about the competition and remain credible.

•    15:00 – Selling Your Company – Part 1 – When should you sell your company.

•    16:00 – Selling Your Company – Part 2 – How to prepare for Due Diligence.

Having created and successfully sold a start-up in the tech sector, I am hopeful that I can share some of my learnings in the hope this will help others do the same. The masterclass sessions will very much be a workshop and I will be open to ANY questions on the day. I think this event should really be a great networking opportunity for everyone involved, including me! I always love to hear others ideas and hope I can help in some way, as I know how difficult the startup world can be.

Important information:

Date: 3rd and 4th December 2015.

Time: First masterclass at 11 am and run every hour until 4 pm on both days!

Price: FREE but you must register!

Location: Olympia London (Not far from Kensington Olympia station).

The Rocket Ship Drawing Rant

Here is something that is going to sound maybe a tad negative, but I promise there is also some positive takeaways, so be patient!

My hope is that this slight rant may help some people who are in the process of trying to attract early stage investors prevent an embarrassing situation. Here it goes…

A friend contacted me a couple of weeks ago and said that he had developed a new app, and was looking for some advice. When we met, he made it clear that he was looking for investment and wanted me to point him in the right direction. I asked to see the app, and he said that it was still in development. When I asked what framework he was using, he looked at me with a blank expression. I asked if the ‘coding’ had begun, and he said that it had not. “So what do you have?” I asked. “The designs” he replied “and they need polishing” he added.

Okay, rant time! …. Let’s be totally clear, designs are not enough (in the real world) to claim you have built something unless the end product is a drawing. Therefore, the app that you claim to have ‘built’ is as real as if I drew a picture of a rocket ship, and expected to use it to fly me and all my friends to the moon.

When you are making/drawing a shiny mock-up, you are not limited by real life. So you can literally do anything without actually thinking about the ‘how’. I promise you that any developer will tell you that the challenges starts with the code, not to mention when you actually take the product market.

I am not saying it’s not a good idea to make shiny mock ups. In fact, making something that looks ‘real’ is a really good way to lock your idea down and get early feedback. However, if you are after investment you need to go a few steps further. As a bare minimum you should have:

1. Software Specification: This is a document that outlines the features of the software and essentially demonstrates how the product will behave. I would also include wireframes to show every part of the user journey has really been thought through.

2. Architectural Overview: If you are not a developer, then you will need one for this part. This document is the ‘how’. You don’t need to write code, but you do need to show that you are actually able to build this ‘rocket ship’ if you had the money. This is also your chance to highlight how you would overcome common failures like over complicated registration processes or poor security standards.

So let me summarise: Showing you have an idea means next to nothing, however showing the idea AND that you have a clear plan to execute the idea makes a huge difference.

I would love to hear other people’s stories. Has this happened to you – how did you handle it? Have you ever won investment from mockups alone? Let me know below, or on Twitter @bradindigital.