Are you considering a Tech Startup?
If you are considering a Tech Startup? You have come to the right place. IT Lawyers Brisbane specialises in helping entrepreneurs get their startups off the ground and heading in the right direction. Our principal has over 20 years’ experience in the tech industry and has university qualifications across all of IT, Business, Accounting, Law and Governance.
Whether you are considering a pure tech play or just using technology in your startup there are a raft of factors to consider and pitfalls to avoid. Let us help you navigate through the legal and governance issues while you focus on your product.
What are some of the legal considerations for a Tech Startup?
Every business is unique and has its own set of challenges. However, here are some of the common questions you will need to ask yourself as you embark on your journey:
Who will own the business? - This question is often simplified to what is the business structure, sole trader, trust or company? However, that is usually an oversimplification. In setting up a structure to operate your business you should also be thinking 5 and 10 years down the track and asking: will I be distributing income from the business to my husband, wife or children; what is my exit strategy and do I intend to list the entity on a stock exchange?
Who will own the intellectual property? – A Tech Startup is a high risk venture, have no doubt about it. Even when your product is successful and customers come flocking through the door the business still faces a range of risks. There are risks of bankruptcy, adverse litigation (that said we don’t believe any litigation is positive) or simply running out of working capital to support the growth of the business. If you are going to spend large sums of money or time on your intellectual property make sure you have the right asset protection structure in place.
Where do the funds come from? - Share capital, small scale capital raisings, venture capital or a personal loan from the entrepreneur themselves are all possibilities. There are a range of options to consider here and each has its own risks and rewards.
What are the pitfalls to avoid?
There are a range of pitfalls for the Tech Startup to avoid. The right advice and the right document can be the difference between make it or break it.
Protect your idea – A Confidentiality Agreement (aka Non-disclosure Deed) are cheap and simple forms of protection. Of course, nothing can protect you from someone who will break any law or breach any agreement. On a cost benefit analysis, a Confidentiality Agreement is a no brainer. Get one before you speak to a software developer or potential investor.
Proper governance – All day everyday your Tech Startup will face a barrage of challenges and demands on your time. But you must always keep your eye on the end game. Proper compliance and corporate governance will have direct impacts on profitability, risk and your ability to pass any due diligence conducted on your business when it comes time to sell or list.
The shark tank – Remember the channel 10 television show ‘The Shark Tank’. They didn’t call it ‘The Friendly Rich Philanthropist’ did they! Venture capitalists and private equity funds managers are trying to maximise their return. The documents they give you are designed to protect their interests. Make sure you know what you are in for and keep us in your court.
Owning your intellectual property – What is the value of a Tech Startup which does not own its intellectual property? Probably not much. Time and time again we hear stories of offshore developers writing business critical code without the necessary legal documents to assign the code to the entity which engaged them. There are formal requirements associated with the assignment of computer code and other works of copyright. Make sure you own your code or at least have the right licence to use it.
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