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Ten Biggest Legal Mistakes Tech Start-ups Make

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Ten Biggest Legal Mistakes Tech Start-ups Make

By Karen Holden is Founder of A City Law Firm 

This month my company (A City Law Firm) marked our ten-year anniversary, which has made me think back to our first year, how we started and some of the early mistakes we made. For one thing, within a year of our launch, we had to restructure the entire business and there were so many hurdles we had to overcome – in the early days it really was about survival.

What’s fascinating is many of the mistakes we made back in 2008 are the same mistakes that many tech start-ups make time and time again. I know this because over the past decade we have represented hundreds of tech businesses – from start-ups to big businesses – and I find that time and time again the same issues crop up.

So, what are they? 

  1. Not having a strong shareholders agreement or discussing, formulating and documenting the business plan with co-founders 
Karen Holden

Karen Holden

I intended to found my business with three others, however, I soon realised that our goals and objectives were sadly not aligned; our work ethics were very different and our long-term motivations out of sync. Luckily, I had drafted a very good partnership agreement so managed to break free from what would have been a disastrous relationship. Luckily this enabled me to continue with A City Law Firm with just me at the helm, but not all businesses I have encountered can say the same.

Not only do you have to be careful to choose the right partners, but you need to clearly document your goals in a shareholder’s agreements. This means that as founders you can build upon the platform you have created together, but if it goes wrong you have a means to address the problem not just having to wind up the company. The key is choosing the right partners, talking candidly and asking the tough questions at the beginning. 

  1. Having poor contracts or no contracts hitting your cash flow 

You need to understand your marketplace, your competitors and what you need financially to be able to grow.

Cash is king. Be realistic with budgets and prices and ensure your contracts protect you – not only with clients but with employees, suppliers and contractors. It is fundamental that you closely monitor payment timescales with clients, especially if you are working on large projects. Corporate clients may expect 60 – 90-day payment terms but your sub-contractors will not.

It’s also important you pay yourself a reasonable salary, especially when you are seeking investment, otherwise, if the founder is distracted, the business is not going to progress. Any investor will want to see this factored into any business plans and financial models. 

  1. Not having good staff contracts or options to incentivise them 

A large part of any company’s budget will be put towards recruitment, training and retention of its employees. Despite this, there is a real risk that those key people could walk out of the door leaving you without the requisite skill pool you need, but worse yet, there is a real possibility that they may also take all of their knowledge of your business and pass it to a competitor.

Many businesses focus on many things but staff retention and protection against staff competition is often neglected. This is especially key in the tech world as the opportunities for work are so great. 

From a legal standpoint, it is important to: 

  • Have tight employment, contractor, consultancy and sub-contractor contracts in order to protect your IP and confidentiality. It is also important to have restrictive covenants to avoid staff taking your know-how in terms of clients, IP or staff to a competitor or setting up on their own.
  • Consider EMI options as they can give staff the feeling of being part of the fabric of the business and as you succeed so do they in terms of profit sharing without actual cost in the short term to you. This also can attract more specialist experts to the team where cash is not readily available;

Overall though the key is to find ways to incentivise and look after your team. If you can communicate your vision to the team so that they are working side by side with you, this inspires loyalty and dedication as you are all working from the same plan with the same goal. 

  1. Intellectual Property & the mistake of that handshake deal 

IP ownership can only be granted or transferred (“assigned”) in writing. As such, if your freelance coder or developer has no contract with your business then they could actually own the IP that they have helped design, not you.

If there is a dispute, then they could hold this to ransom causing a costly dispute or loss of your code or design. You need to ensure you have checked these contracts carefully and that you actually have one carefully drafted in your favour. Many tech companies work with friends and often make arrangements based on goodwill, but when a dispute arises without a contract you are at the mercy of the designer.

If you are bringing your designing or coding in-house, then it is especially key to convince an investor you have secured long-term staff and that the IP ownership will effectively transfer to you.

Many businesses fail to check that their proposed company name or branding is free to trademark. This should be carefully checked before a large budget (or large budget relative to the size of your business) is set aside for branding and marketing as otherwise, you may find yourself having to start all over again. 

  1. Rushing to Investment and giving up equity in the company 

I managed to self-finance my business throughout without taking in partners or investors. I did consider these at points along the way and even had offers of mergers and partners coming into the business but having carried out checks into these entities, I often found hidden skeletons and things I was too anxious to continue to explore.

If you are seeking investment, which is often a necessity for tech companies scaling up, it is vital that you carry out your due diligence on what’s available, what the risks are and who the investor actually is.

  •  Do they understand your sector?
  •  Have they got the resources to add more money at a later date if that’s what you need?
  •  Can you approach them if things go wrong?
  •  Do they have competing interests in the marketplace?
  •  What is your exit plan for them?
  •  Have you also explored grants available for tech, innovation offerings, R & D credits and other means of funding?

Many people are often dazzled by the cheque and sign a contract…  but that’s just the start of the journey.

It is important that you consider whether you want to get involved unless you are certain you have aligned goals, exit plan and can handle a crisis together. 

  1. Not being investor ready 

When start-ups do find the right investor, a common pitfall is they are not investor ready because they haven’t got their house in order.

For example, they have not allocated and issued shares correctly. Their articles do not reflect the workings of the company. If an investor picks this up, it can make tech founders look careless and could scare off the investor.

More broadly other things that put investors off include inaccurate statements that have been put in writing… such as:

  •  “This is unique to the market, no one else is doing this”. This is often a bold statement that just isn’t upheld or accurate;
  •  “I don’t need a salary for 1-2 years; I can use 100% investment on the business”; wrong! No one will invest in someone who can’t eat and pay their bills!
  •  “My business is valued at £10 million because it’s going to be worth that in two years when we build our technology”. Can you support that with figures and market research? Be realistic and able to evidence all assertions. 
  1. Not understanding how markets are regulated 

Many businesses, especially those in disruptive markets, need to be regulated or are covered by additional regulations or laws.

Many fintech or ICO companies need to be regulated and choose to risk investment or token raises prior to taking proper advice or considering the proper process exposing you to an FCA investigation.

This is not an issue which only affects those in financial markets but includes among many others those in advertising, legal services/legal tech, recruitment, packaged holidays etc. Knowing your marketplace, sector and taking advice is essential prior to any public offering. 

  1. Not taking experienced advice and creating an ecosystem

Tech developers are necessarily geared to be financial directors or HR managers yet running a business these roles become fundamental.  Not getting good advisors on board early enough is a common mistake. A good lawyer, accountant and tax advisor saves you money and pain at a later stage, especially if they can secure you EIS or another favourable structuring. A good FD helps secure investment and cash flow by managing the budgets and financial forecasts, they also add the commercial know-how into your passionate pitch deck. Downloading templates; googling advice I appreciate happens because of the costs involved, but if you want your business to succeed you need tailored, personal advice and support. I know this is something I have benefited from greatly as I brought in consultants to help me and train me in my areas of weakness. Admitting these gaps in my knowledge and bringing experts in has helped me scale up. 

  1. Not having skin in the game & asking too little 

If you are seeking investment for your tech business, you need to start with securing some capital yourself or through your contacts. This shows investors you have faith in your offering, which then means they are more likely to match. This is something I hear frequently from equity investors, so try friends and family first. Another common mistake is asking for too little which cannot be sustained and then you have to go back to the platform or investor for money which could result in them losing faith in your financial model. You need to forecast and present realistic figures, so you don’t ask for too much or too little. 

  1. Dont let the cat out of the bag 

If you don’t have a signed NDA and if you discuss a potential or pending patent you could lose the rights. Discuss the details of your tech, design or offering in as much detail as you can to secure an investor or client, but where possible secure an NDA to protect your confidential trade secrets or ideas or Patents. They may be hard to enforce, often a concern of many so they don’t bother, but it’s a deterrent; it protects you Patents and it’s a good starting point for an injunction if someone tries to reproduce your tech.

Business

Staff training crucial for SME recovery post-COVID

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Staff training crucial for SME recovery post-COVID 1
  • 47% of UK’s top performing SMEs provide regular, formalised training for all staff
  • Despite this, 15% of small businesses report to never training staff
  • New findings come as part of an independent, holistic study into small business success, commissioned by Allica Bank to support British businesses

A new study, commissioned by business bank, Allica Bank, shows that the practice of regular training correlates strongly with high performance in SMEs and will be vital to businesses’ prospects of a swift recovery post-COVID. The study analysed data from over 1,000 companies and ranked their success on a scale that evaluated factors including productivity, growth, consistency and outlook.

Post-pandemic, many businesses will be focussing on day-to-day survival; it might be easy to forget long-term planning, of which staff training is a key component. Allica Bank’s findings indicate that small businesses should incorporate training programmes into their recovery strategy to ensure long-term viability. Training will improve morale, retention and boost the company’s credibility.

The study showed that routine staff training is a common characteristic among the most successful SMEs. 47% of the 100 highest scorers on the SME Performance Index provided training for employees at least on a quarterly basis. However, nearly half of all small businesses (46%) only provide training once a year or less, inadvertently hindering their growth and success prospects.

Frequency of training also differed across sectors. 34% of legal businesses provide training for staff once a month compared to just 6% in the hospitality and leisure sector. Whilst there will always be sector-specific disparities, firms in all industries can benefit from boosting and improving their training programmes.

Chris Weller, Chief Commercial Officer, Allica Bank, said:

With so many concerns and barriers for small businesses to navigate in the immediate term, it can be difficult for managers to focus on the training and development of their teams. However, if COVID has taught us anything, it is that adaptability and resilience are invaluable.

“The provision of regular training not only builds these characteristics into teams but serves to maintain a sense of value and togetherness that will boost morale, aide retention and improve performance – all of which contribute to the ongoing success of a business.”

“There is no one-size-fits-all approach to training, but it’s vital for business longevity that staff are supported with a formalised programme of some description. Customers will respond well to a company whose employees demonstrate enthusiasm and competence. Employees also need to feel that their skills are constantly being improved and expanding. These skills will contribute to the success of a company and this will feed through to the bottom line.”

Allica Bank’s SME Guide to Success identified six ‘rules to success’ that were more likely to be displayed by top-performing SMEs compared to their counterparts. The full report contains a wealth of additional data and insight into each of these topics.

As part of its mission to empower small businesses, Allica Bank is making the findings freely available and running a series of free online workshops with relevant partner organisations for businesses to attend.

Aliya Vigor-Robertson, CEO, JourneyHR, the expert partner for Allica Bank’s training workshop, adds:

Staff need direction and the knowledge that they are advancing in their career to stay motivated and engaged at work. An unmotivated, disengaged team is no recipe for long-term success and will ultimately hamper a business. Team members that lack tangible support from above are less likely to identify with their role and its duties, which is a completely natural reaction.

“Regular staff training is a key component of tangible support and will make the team feel secure in their career development. A happy team with purpose and direction will contribute to a thriving business”

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What Is Globalization

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What Is Globalization 2

What is globalization? Globalization, or inter-connectedness, is the ever-growing process of integration and interaction among countries, individuals, businesses, and even governments all over the world. Globalization has rapidly accelerated in recent years because of advances in communication and transportation technology. This allows us to be able to get from one country to another quickly and easily. This also allows us to communicate freely use the Internet to connect with our friends and families around the world.

So what is globalization and why is it important? Globalization will benefit many people around the world who are looking to travel more freely, save money on their monthly expenditure, be able to meet new friends and relatives from different parts of the world, learn more about a new culture, and take part in trade and commerce.

Globalization will benefit all of us because there will be more opportunities for everyone to participate in global markets. People in different countries have access to resources, information, and products they wouldn’t have otherwise been able to afford. There are also many opportunities for people to work at home.

Globalization is not just an economic boon, but it can also benefit all of us in other ways. As globalization continues, the boundaries between individuals, states, and countries will become less porous. There will be fewer political conflicts in the world, less violence, and a greater sense of cooperation, tolerance, and peace. These are all positive impacts of globalization.

However, globalization has also created some negative effects as well. It has caused people from one country to move to another to take advantage of globalization. This is also leading to some negative consequences such as a reduction of jobs in some countries. The effects of globalization also include increased competition and unemployment in many countries. Due to this decrease in jobs, wages are dropping.

The only way we can stop globalization is to make sure that we know what it is and what its benefits are. We must understand globalization and its impact on our lives and make sure we are ready to accept the changes that it may bring. if it is inevitable in the future.

The key is to be educated about globalization. There are plenty of books, websites, and television shows that explain how globalization is impacting us and the rest of the world. Globalization is not always bad, but we must be careful not to lose sight of its positives.

In the end, globalization is here to stay, so we must learn to live with it and embrace its benefits. We cannot fight it and try to fight it off, but we must learn to deal with it. And we can do that by educating ourselves. Globalization is here to stay for the long term but we must learn to adapt to it and learn how to live with it.

Globalization can be beneficial for all of us, but it has also caused many problems in the past. There were many cases of unfair trade practices and there was the rise of unfair labor practices. Some people argue that globalization has also reduced the pay of most Americans. So while globalization is definitely not all bad, we should understand that the benefits of globalization are not unlimited. and that we must be willing to give it some limitations and accept some sacrifices.

The biggest benefit of globalization is the ability for all of us to communicate with each other easily. The ability to connect with other people across borders makes it possible to share ideas, information, and knowledge. Since we can communicate with each other, the chances of getting a good price for our goods or services goes up dramatically. and it also allows us to save money by buying in bulk. This also translates to more savings on our end.

As mentioned earlier, globalization has brought about a change in the way people work and live because people are no longer tied down by jobs. They now have the freedom to travel and do what they enjoy.

As globalization continues, there will always be some people who are unhappy with globalization and are afraid to open their eyes to new opportunities that are available to them. But that is okay; this is part of the process of globalization.

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What Is Microsoft Teams

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What Is Microsoft Teams 3

Microsoft Teams is an application and web-based collaboration tool that combines chat, videos, online collaboration, document storage, and collaboration with other applications. The service integrates well with the Microsoft Office 365 business solution and features numerous extensions that can integrate well with other non-Microsoft products, like SharePoint. There are many different versions of Microsoft Teams but here are some of the basic functions that all versions offer.

Teams also offers a variety of options for people to create and customize their own groups. This feature provides a way for people to organize their teams within Microsoft Teams. For example, there may be teams for business projects and then another group for personal tasks or social tasks. There are also different types of teams which include teams for social, personal and business.

Microsoft Teams allows users to make lists of files and documents and view them from different perspectives such as in the document viewer or from another Microsoft Teams project. This feature is called “project pane”, and it shows a summary of each of the files in the project. There are also sections for all files in the project that you can see in the “Files” pane.

Microsoft Teams gives users the ability to share information and collaborate on these shared items. A user can create a document that has other people add comments or attach files and then save the document to a list so that other people can view the document in a Microsoft Teams document viewer.

Another feature of Teams is the ability for you to invite other team members to work with you. A user can join a team and then invite other team members to collaborate with the team members who join the team. You can also invite team members to join a new team. When a team member joins a new team, they will be automatically added to your existing teams and the teams will merge together.

Microsoft Teams provides a number of different ways for you to collaborate with others and see the files and documents of others. These include groups and threads in the main document viewer. You can search your files using the search box in the document viewer and you can share your documents with others by email.

Microsoft Teams provides users with a variety of different tools to help you organize and manage your teams. You can assign members to specific teams, assign permissions to members, create custom groups, organize tasks and events, and organize files and documents into groups.

Microsoft Teams can help you build a team and create a collaboration culture that you want to create at your organization. You can use this tool to build effective teams and increase productivity and improve your relationships within the organization. Microsoft Teams offers a variety of options to help you get started and become more productive quickly and easily.

Teams are created easily. If you have several departments within your organization and need to create a team for each department you can do this easily. Teams are made easy and you can get your teams up and running quickly.

One of the best features of Microsoft Teams is the ability to invite people from around the world and let them work with the same documents and projects. You can have the documents and projects organized and shared in the same way throughout the entire organization, regardless of what country they were created in. You can create a similar project in the same language that they were created in and share it with other employees in the organization.

One of the most amazing features of Microsoft Teams is the ability to have multiple team members edit and view the documents and files in the same way. With Microsoft Teams you can have a document and have people edit the same document at the same time without any problems. The changes that you make can also be seen by other team members and can be modified by them without ever needing to send the document again.

Microsoft Teams is the perfect tool for building a powerful and effective collaboration culture. You can share documents and files in the same way that the rest of the organization can view the information.

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