Start-Ups & Emerging Growth Companies
BUSINESSES IN THE START-UP AND EMERGING GROWTH PHASE TOO-OFTEN SACRIFICE LEGAL PROTECTIONS, CREATING UNNECESSARY AND UNREASONABLE RISK.
We love the entrepreneurial spirit—and share it. At A.H., we understand that the most successful business owners start out with an excellent idea, product, concept, or service, and hit the ground running. But it can be difficult to balance legal infrastructure and protections while reinvesting funds to push growth. Sometimes, this lack of legal protections has less to do with finances and more to do with the issue of time. After all, it is difficult to allocate time to service agreements or I.P. asset protections when you're burning the midnight oil. Still yet, many start-up owners simply don't quite know what legal solutions they need in the beginning.
The bottom line: there are many reasons new start-ups fail to implement the necessary legal protections. While these reasons are understandable, they create additional risk in an inherently risky environment.
OUR ATTORNEYS UNDERSTAND THE CHALLENGE OF BALANCING LEGAL EXPENSES AND SCALING A COMPANY.
The partner-level attorneys at A.H. General Counsel Services have worked with numerous business owners in the emerging growth phase of their business, so we understand that balancing legal needs with every other thing on your plate is difficult.
In some cases, our clients have to decide whether to pay for legal services or forego a legal safety net and hope for the best. As attorneys who have practiced in both AM 100 and AM 200 firms, we understand this economic dilemma. We believe we can provide a good alternative. Given our law firm's boutique business model, we are often able to accommodate the budgets of our technology start-up and emerging growth clients with the same service we give our larger clients.
Now more than ever, emerging tech companies, or companies that rely on tech to facilitate their business, need to protect their I.P. assets. In developing these protections, we can help you:
- Register Trademarks
- File Patents
- Prepare NDAs
- Develop Pilot Agreements
- Review and Advise on Proposed Licensing Agreements
"An ounce of prevention is worth a pound of cure," they say. Legal protections act as a type of insurance against risk. At A.H., we welcome your inquiries to work with us at all phases of your business growth.
COMMON QUESTIONS WE GET FROM FOUNDERS:
What are the typical stages at which Start-Up and Emerging growth companies engage your services? AKA When do I need a lawyer?
It's important to note that your stage of development and industry plays a significant role in determining how much legal support you need. For example, a start-up in a heavily regulated industry like finance, healthcare, or one that deals with sensitive customer information may have stricter legal compliance requirements than a start-up in a less regulated industry like direct-to-consumer products. Similarly, a start-up seeking to raise private equity or venture capital should plan to have more support in the areas of security law and investor relations compared to those who are bootstrapping their operations.
The proper legal representation for a start-up depends on a myriad of factors. Our team is here to help you determine precisely what you need to achieve your goals and protect your legal and financial interests.
Early Stage Start-Ups
Early-stage start-ups are often so entrenched in getting their operations off the ground that they relegate legal matters such as entity formation, partner agreements, and privacy compliance to the back burner. However, these, amongst other issues, are vital to your start-up's long-term success. Failure to address these issues will lead to legal and financial problems down the road and give your counterparts a competitive edge. Legal representation is not just for well-funded teams in Silicon Valley. At AH General Counsel Services, we want you to know that you do not have to go at this alone. We are here to help. To begin that process, here are some of the questions we've gotten from our past start-up clients.
What legal entity should I choose for my start-up?
Entity Formation: Your start-up begins when you first identify a problem in the market and attempt to commercialize a solution, not just when you file entity formation paperwork. However, working with a law firm during the early stages to choose and form the appropriate entity can ensure that your future interests are protected. In addition to your tax advisor, we can assist you in forming a sole proprietorship, partnership, LLC, or corporation and file the appropriate paperwork when you are ready.
Does my start-up need a partnership agreement?
Partnership Agreements: Creating an agreement with your partner doesn't mean you don't trust them. Using our legal services to draft a partnership agreement defines roles and responsibilities, allocates profits and losses, and delegates the decision-making process. It also clarifies the process for exits and dissolution if need be.
What laws apply to my start-up?
Legal Compliance: We never want to meet a client six months into developing a game-changing Software as a Service (SaaS) enterprise and tell them they are not allowed to offer their service due to regulation, compliance issues, or infringement on another's IP. Failure to determine the applicable laws to your industry and niche is a devastating blow and one we want to discover as early as possible. If you've consulted with an attorney (or even Google) in the past, the regulatory and data privacy landscape for SaaS companies in regulated industries, especially in California, has likely already changed. Even non-tech businesses face regulatory hurdles that must be addressed to ensure you can scale your start-up. Our team is at the forefront of privacy and regulatory compliance developments, and we are here to assist you in becoming and staying compliant.
What insurance does my start-Up need?
Insurance: We are not insurance agents. However, our law firm can assist your start-up by determining potential liability and helping you acquire the necessary insurance to protect the founders, company, and its employees.
Emerging Growth Stage Start-Ups
So, you've got some traction. Maybe you found a great vendor, acquired a few customers and hired a team. Now it's time to legitimize your operations. First and foremost, this includes the above-mentioned suggestions of choosing a legal entity, protecting your IP (e.g. federal trademark, copyright registration, or patent protection), and ensuring that you're compliant. Rest assured. You are not expected to know all of the regulations that you need to comply with. However, you should reach out to an experienced start-up attorney to ensure that there aren't any looming legal hurdles that you aren't aware of. At this stage of your growth, your vendors, customers, and employees expect you to have a few of the following bases covered.
What labor laws does my start-up need to comply with?
Employment Law: Your team is your greatest asset. However, long hours, high expectations, and access to sensitive information makes start-ups a unique area of employment law. Heads up, you may or may not be allowed to pay your team as independent contractors. You may also need NDAs or non-compete agreements for your employees. However, depending on where you operate, these agreements will have different requirements and restrictions. To ensure that you are compliant with labor laws it is highly recommended that you speak to an attorney with experience in this field prior to hiring your team.
How can I protect my start-up's IP?
Intellectual Property: Your IP is your business. Attorneys with experience helping to protect the intellectual property of start-ups can register and enforce IP assets such as patents, trademarks, and copyrights. Early identification of valuable IP by a start-up attorney is essential to ensure that one of your most valuable assets is protected.
How can I protect my start-up when licensing my SaaS or other systems?
Licensing agreements: No more back-of-napkin contracts, starting now. Once your IP is protected, you can rest assured when you start licensing your software, business model, or other systems. Licensing agreements must clearly define the scope, duration, payment terms, rights and obligations, restrictions, termination, and renewal provisions. An experienced start-up and emerging growth attorney can help you negotiate and draft this agreement to ensure that business is done on your terms.
How can I protect my start-up when dealing with vendors?
Vendor Contracts: Remember what we said about back-of-napkin contacts? That applies to agreements with your vendors as well. Typical vendor agreements that start-ups and emerging companies face include but are not limited to non-disclosure agreements, reseller agreements, cooperation agreements, strategic alliance agreements, marketing agreements, commercial supply agreements, etc. Vendor contracts must clearly set forth product or service details, price and payment terms, delivery schedules, quality assurance, confidentiality, termination, indemnification, and insurance details. A well-seasoned start-up attorney can help you negotiate and draft these agreements. Taking care of this matter from the outset protects you from legal and operational nightmares that arise during fulfillment and beyond.
How do I protect my start-up when raising capital?
Fundraising and Shareholder Agreements: It's important to first asses whether raising capital is aligned with your goals. If it is, you must also consider how to best protect the sweat equity you've built over the process. We are experienced in advising emerging growth start-ups in the fundraising process. Whether you are turning to friends and family, private equity, venture capital, or are ready to IPO, you should consider investment terms, rights of shareholders, board representation, access to information, drag-along and tag-along rights, exit rights, restrictions on transfers, and stock options for you, your team, and your investors. Ensuring that you have the proper legal representation during this stage can help your start-up take full advantage of this catalyst.
How can my start-up merge with or acquire its competitors?
Mergers and Acquisitions: M&A can be an important part of taking your start-up to the next level, but the complex nature of these transactions can be overwhelming for start-ups going at it alone. Seeking the counsel of a mergers and acquisitions attorney can help you prepare due diligence, purchase agreements, regulatory approval, integration and post-merger agreements. Engaging our services will help you navigate this important aspect of growth without completely consuming your time.
Exiting a Start-Up
The idea of relinquishing control of a company you poured years of hard work into involves both psychological and practical challenges. Whether an investor has sent you a term sheet or you're looking to make a secondary stock sale, move onto a new project, or even IPO, it's important to start planning your exit long before shopping for a buyer. One of the most critical aspects of selling all or part of your company is assessing a fair valuation that reflects both the tangible and nontangible assets. Due diligence is non-negotiable, so it's essential to ensure your internal operations are ready to be put under a spotlight. Once you enter the negotiation stage, you should consult with legal, financial, and strategic professionals to ensure a smooth transition while maximizing your position.
How can a law firm help determine my company's valuation?
Valuations: Assessing a company's valuation is a term of art open for interpretation and negotiation. First and foremost, you'll need to determine your company's assets and liabilities. This includes but is not limited to the physical assets in addition to non-tangible assets your company may have, such as key employees, credibility, intellectual property, and position in the market.
Can a law firm help my start-up negotiate a deal?
Negotiations: The benefit of working with a team of transactional and litigation attorneys is their ability to zealously advocate to ensure you get the most out of any deal. You may still be working to keep your company going so hiring out what we know to be one of the most stressful and intense portions of a transaction allows you to continue to focus on what's most important.
What else do I need to consider before selling my start-up?
Further considerations: Know your goals. Once you have determined what you want to get out of an IPO, full, or partial sale, our team can ensure that your bases are covered before you begin approaching investors. AH General Counsel Services will help you draft purchase, stock, transfer of ownership, and other closing agreements.
Congratulations, seriously, what you have built is no small feat, nor is making the tough decision to exit. The reality is that your competitors, vendors, and clients are likely using legal representation to protect their business and give themselves a competitive advantage. Start-up and emerging company lawyers like the team at AH General Counsel Services located in San Diego, but borderless to the tech ecosystem, can help you maximize your time and equity in addition to saving you from dreaded legal headaches that detract from your mission. Hiring an experienced attorney can assist you in preparing your company to scale, execute, and exit. As attorneys with expertise advising companies across the country, we have a fiduciary responsibility to be a zealous advocate for you and your company. In other words, we are here to be your partner and advisor.