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Legal advice

Growing a startup and getting legal advice you can trust

Joe Bevan
Authored by Joe Bevan
Posted: Thursday, January 12, 2023 - 16:35

Acknowledging the pitfalls of growing a startup and taking the steps to avoid them can help startups ensure that all the hard work will pay off.

Hugo Walker, Head of Marketing and Digital at Bristol-based Gravitywell, spoke to London Law Collective Director Tim Herbert on why it’s important to invest in proper expert legal advice you can trust.

This interview was originally posted on londonlawcollective.com

Tim, pleasure to meet you. Why should a tech startup take notice of London Law Collective? 

London Law Collective has always helped tech startups, both in London and across the UK. Our expert team has countless years of experience in understanding their legal needs. We recognise that no startup is the same. We are aware of advisers who try and push startups towards a one size fits all set of documents. This is not us. Our approach is to listen to entrepreneurs and work with them to create documents that are tailored specifically to the relevant startup’s unique set of needs.

There is so much to do when starting a new business, and assuming budgets are restricted, what’s the minimum that entrepreneurs should consider in terms of legal? What sorts of costs should they expect? 

Not spending on legal advice is a common perceived cost-saving by startups. In general, we find that this is a false economy. While some startups survive without a legal basis for some time, at some point, almost inevitably, either (a) that basis is forced on them (e.g. by an external investor who wants a secure structure in which to invest), or (b) causes them difficulties, particularly if the startup is under stress and disputes arise. 

It is always hard to estimate what an initial budget for legal advice should be, as no startup is the same. I would say that if a startup is looking for legal advice, they should come and speak to us. Our experience enables us to understand the needs of a startup quickly and then provide an estimate on the basis of our knowledge.

Our approach is always to be competitive and transparent with our fees because it is not in our interests to bankrupt the startup before it has the chance to grow. We would rather it was successful, and that we build an ongoing, mutually beneficial relationship together.

Couldn’t agree more. What do you think of the approach of repurposing legal documents from other businesses’ websites? 

This is a prime example of an attempt to save costs that can, and often does, badly backfire. Almost all legal documents are based on a precedent: a document taken from another source. However, care has to be taken as to that precedent. If you take a legal document from another business’ website, it may well have been honed to specifically suit that business. 

The difficulty with then repurposing is identifying where that honing has occurred and therefore whether it is appropriate for the startup now using the document. This is the expertise startups pay for when they engage a solicitor, and going through this process can help avoid significant issues later in the day.

Founders, you’ve been warned! Why is B Corp certification important for London Law Collective? 

The impact we have and leave on our world, has from day one, been integral to what London Law Collective is and how we work. Our aim is not only to support our clients but also to create a culture where impact is as important as our work and where benefit is felt across the people we work with and where our values are lived by our team. That’s why we are a female-led organisation, why we publicise our pro-bono work, why we have an environmental action plan and why we have chosen to go for B Corp status.

Going B Corp, we feel, will ensure that we are driven to supporting our staff and suppliers, using our knowledge and skills to help others, creating a culture of inclusivity and looking after the world around us. Also, we want to take on clients that have a similar approach to us and B Corp certification will simply be an acknowledgment and confirmation of that commitment.

Thinking about tech/software startups, how (if at all) should entrepreneurs protect their ideas before they start speaking to investors and tech agencies? 

In any startup, the idea is key. Therefore, it needs as much protection as possible. In the early stages, this will probably take the form of a strong non-disclosure agreement, which binds a potential investor/tech agency to secrecy. As the idea is developed, more formal protections can be obtained in relation to the intellectual property forming or arising from the idea, such as patents and copyrights. This is an area of complexity and we would always urge startups to get good legal advice. We are happy to help.

Speaking of, do NDAs (non-disclosure agreements) carry any substantial weight and is it okay to use a stock version from the internet? 

We are often asked to advise on the contents of NDAs. Properly drafted, they can offer a strong protection for the discloser: although the hope is always that their existence is disincentive enough to avoid disclosure and that therefore, their actual terms do not need to be put to the test (no one wants to be in Court getting search orders and injunctions!). In terms of NDAs available on the internet, we would advise the same caution as with precedent documents. They are a one size fits all and often are not appropriate in every circumstance.

Sound advice. Now, what’s the best thing about working at London Law Collective? 

I am bound to say the people with whom I work. We have a close-knit team who are or have become good friends as well as seriously good colleagues. And importantly, we have a good time and enjoy our work, and how often can lawyers say that?

I’d imagine it’s rare! T&Cs for end users of a platform/app/service are often huge. How should entrepreneurs approach having them created and what sort of costs should they expect?
Our experience shows that entrepreneurs sometimes believe that they can draft terms and conditions themselves, often on the basis of templates found online.

The result is often a Frankenstein document, where various pieces have been taken from a range of precedents and pieced together with no real coherence. As long as these T&Cs are not challenged, this may suffice, however, a challenge may come further down the line, with potentially disastrous results. 

The best option for an entrepreneur is to look at various precedents on the internet and determine what clauses they think will be appropriate, maybe even providing a draft. We can then discuss those clauses or the draft with a view to putting together a bespoke document. In terms of costs, it is very hard to say as different industries have different requirements. For example, one business may require very different data protection terms to another. We’d be happy to provide an estimate based on a discussion.

What are some common mistakes that entrepreneurs make and what do you wish they had taken legal advice on? 

One of the most common mistakes we see is that startups assume that if co-founders are friends in the early days of the startup, they will remain friends all the way along.

This is the dream, and it does, from time to time, come true. However, more often than not the visions of co-founders diverge. If no document exists detailing what should happen in that situation (e.g. a shareholders’ agreement), this can end up being disastrous for everyone involved, including the startup itself.

My litigation experience teaches me that shareholder disputes are more usual than might be expected. This is particularly the case where family members are involved. Often the family bond is considered to negate the need for a shareholders’ agreement. It does not and is something that should be put in place early in the process.

A professional prenup, if you will. Finally, what’s the best-kept secret in London? 

I recently had to act as tour guide for my friend in London, who asked to go somewhere a little quirky. We ended up at the Sir John Soane’s Museum. Sir John was an architect and a collector of antiquities and the museum is at his house, where little has been changed in the 200 years since he lived there.

There are some wonderful antiquities; furniture, sculptures, architectural models and paintings, including a sarcophagus of an Egyptian pharaoh. The story of how the sarcophagus got to the house is interesting enough, let alone its history. And best of all: it’s entirely free!

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