Startup Legals 101
Whether you’re sitting at your kitchen table or moving into your first commercial space, you must take your startup seriously from the outset and establish the legal foundations you need to protect your future success.
You may be in the very early stages of your startup or further along in your journey but one thing is absolutely certain and that is that establishing strong legal foundations will allow you to dodge future bullets. A key lesson learned through our own startup experience is how important it is to sweat the details of any agreements around partnerships and shareholdings. There will be inevitable challenges ahead and, when they arise, those agreements will be what govern your future regardless of friendships, family, and the best of intentions. Remember also that your future valuations will be based largely on intangible assets reflected in your intellectual property around everything from processes through to trade secrets to product names so encircle those assets with solid legal foundations.
In this month’s Startup Bulletin, we’ll cover a quick intro to startup legal foundations provided courtesy of James & Wells, Parry Field, and Wynn Williams. We’ll also hear directly from Tracy Austin, founder of Doggone, on her story so far and how setting solid legal foundations has helped her startup’s success.
: ) Marian and the Ministry of Awesome team
Ten Takeaways of Startup Legalities:
At last month’s Startup Breakfast Club, we caught up with Jason Rogers – Partner at James & Wells, Steven Moe – Partner at Parry Field, and Amanda Douglas – Partner at Wynn Williams. Each provided a valuable overview of New Zealand business law as it pertains to startup founders.
These were the top ten takeaways:
Decide on the legal structure/entity your startup will fit within. Is it a company, a social enterprise?
Think about writing up a company constitution. This is a public document telling the world how your company operates.
Define your relationship with your co-founders and other shareholders. This should be written up in an agreement which is private.
Do you research on how you’ll be accessing funding; value what you have to offer and go from there. Also note, the rules around this as established under the FMA. Be clear about how you are accessing your funding and see if you apply for any exemptions under the FMA.
IP is an important way to protect your brand and prevent others from taking your ideas and claiming them as their own. Trademarks can be powerful and it remains an intangible asset for your startup.
Think about how you’re going to name your brand. Make it unique and something that will stand-out out on an international scale. Think Coca-Cola not The WarehouseThink about how you’re going to name your brand. Make it unique and something that will stand-out out on an international scale. Think Coca-Cola not The Warehouse.
When you are searching for more employees avoid using discriminatory words in the application form and be aware of potential employee’s rights.
It can be a good idea to carry out pre-employment assessments before hiring as it shows whether they are the right person for the role.
In writing up an employment contract there are must-have clauses such as the job and pay description.
It can also be helpful to add clauses about deducting from pay, suspension and job trialing.
Tracy Austin, Founder of Doggone App, tells her story
Tracy Austin, Founder of Doggone App, shares her startup story and how setting legal foundations from the outset have allowed her to grow her business.
Q1: What is your startup’s key value proposition?
Very simply, it is ‘Keeping dogs out of pounds and animal shelters, and at home where they belong.’
Q2: Who is involved in the business, how did you come together, and what are your respective roles?
At this stage, I am the only full-time employee, and as you can imagine, very hands on. Having said that, I do have a customer service team that is on call to help support the timely reply to queries. Further to this, I draw on expertise in the technical, communications, and legal spheres as required. I also have an advisory board of professionals with varied business skills, all of whom have been highly successful in their own careers.
Q3: Where did the idea begin and how long from inception to now?
This product actually began as a children’s watch, enabling parents to store their contact and emergency information on the device. It became clear the innovation was almost too early for the market, and that providing a perceived lower level of risk as an entry point was critical to develop engagement – and so Doggone was born. This has proven to be a game-changing decision for the business and, at the same time, we have provided a product that allows people to feel secure about their pets, who for many are a part of their family. We started development in 2017, and things have moved incredibly quickly since then – a testament to the inherent need for the service it provides.
Q4: What’s your point of difference from your competitors?
Fortunately for us, there are no direct competitors in New Zealand. The target for this product is specific and the product has been developed according to bespoke needs. However, aspects of the base technology itself exists in other areas – with other Bluetooth offerings to track your phone or car keys – but the functionality doesn’t compare to Doggone. The service we provide, is one that not only ensures the security of your dog, but also builds a community around people’s pets.
Overlaying this consumer appeal is, of course, the appeal of the proposition it presents to local government in assisting with the delivery of its animal management regulatory role. To that end, there are a number of globally unique functions that have been developed specifically as a direct response to this. It is this that really makes us stand out.
Q5: What is your business model?
We have a business to business proposition whereby Doggone offers an additional layer of service to Councils who are responsible for the welfare and safety of dogs under the Dog Control Act 1996 and who also have a responsibility to the wider public in providing a safe community.
Q6: What were your biggest challenges in developing your IP strategy and how have you overcome them?
IP strategy forms a key part of our overall business strategy. With IP comes a need for legal protection, having the right people around the table, and ensuring that we had a good understanding of the market. It was paramount that we did our due diligence to ensure that we had freedom to operate in the market, and part of this was talking to the right people. By having IP protection in place, a business can focus on constant refinements and improvements knowing that the core proposition is safe.
Q7: What advice would you give any new startup when they look at critical legal foundations for their business?
It is so important you do your homework when it comes to these types of things in business. For me, I think there are two rules. Firstly, make sure you protect your IP – without this you could lose the core value of your business. Secondly, look out for all those ancillary laws that could have an impact on your business. For us that was the Privacy Act. It would be easy enough to forget about other aspects of legal compliance, but they can often play an integral role in how you set up and protect your business.
Q8: If you knew what you know now at the start, what would you do differently?
Absolutely nothing. The joy of being a business owner is in the learning. I think in every business experience you will make mistakes. It is all about learning from them, and knowing how to apply your skill set – don’t be afraid to look at your problem through a completely different lens.