Our investment and technology teams regularly advise tech startups as they progress from the initial pre-seed stage to being venture-funded enterprises on the cusp of an exit. Whilst the journey of every tech startup is unique, we’ve noticed that certain legal issues commonly crop up, and so we’ve created a case study to shed light on those issues and share our expertise on how to deal with them.
Our case study takes you on the journey of a fictitious tech startup via a series of blogs, each dealing with a different legal issue arising in the growth cycle. The journey starts in episode 1. Have a read and follow the blog series as the business grows, as there’s plenty of food for thought for founders, investors and budding tech entrepreneurs.
Episode 1 – Case Study
Welcome to the first blog in the series on the lifecycle of a tech startup
Episode 2 – The Basics
Last time we met the founders of a wearable tech startup, who wanted to take the next steps towards establishing their business. Cutting straight to the chase, this blog will outline the basics of starting a new business
Episode 3 – Intellectual Property
As part of the incorporation process, our founders started to think about any intellectual property rights (IPRs) the business was using and ownership of the same. In this blog we shall be exploring the IP considerations founders should be considering in a bit more detail
Episode 4 – Preparing to Raise Investment
In the last instalment we talked about the ways in which the founders of KNow Wear Limited could protect the intellectual property in their business. Since then, the business has been progressing well and our founders have been working on developing a prototype. They are now thinking about finding external investment to fund the project.
Episode 5 – Essentials for e-Commerce businesses in the UK
Alex Torpey speaks about the legal notices and key points to note for online retailers and platform operators in the UK.
Episode 6 – Tax Reliefs
After a brief detour to consider the essentials for e-commerce businesses in the UK in episode 5, you and the other founders are now once again focusing your efforts on raising investment. This blog focuses on tax relief available through the Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS), which are likely to be important for the business and for investors.
Episode 7 – Seed raise
Having decided in episode 4 on targeting angel investors to raise £500,000 investment in the business, the founders of KNow Wear Limited researched various angel investor networks which aimed to connect startups like yours with angel investors. You applied to pitch at a couple of events and were invited by one network to interview with them in person. This blog therefore focuses on the seed raise process.
Episode 8 – Employees and Consultants
Having completed the raise, you, Sarah and Chris have decided that you need more help in developing and marketing the product. You are looking to create two new roles in the business – the first is a Software Developer to support Sarah’s work and the second is a Head of Marketing. This blog will therefore outline the basics of employment law for startups hiring new employees and consultants.
Episode 9 – R&D Tax Relief
Knowledge of the UK tax system is valuable for any UK business owner, start-ups can dramatically improve their chances of success by ensuring they claim the various tax reliefs and incentives available.
Episode 10 – Obtaining a Sponsor License
Following their seed raise and having secured some additional capital through an R&D repayment claim KNow Wear Limited have identified some overseas talent that they would like to hire to help to expand the business. This candidate does not currently have permission to work in the UK and therefore KNow Wear Limited is considering whether it can apply for a sponsor licence from UK Visas & Immigration (“UKVI”).
Episode 11 – Directors' Duties
As a director you owe duties to the company and in certain circumstances to the company’s shareholders, employees and creditors. Breaching these duties can lead to civil or criminal penalties and so you have asked the company’s lawyers to remind you of the duties that apply to you as a director.
Episode 12 – Incentivising Employees
KNow Wear Ltd is now starting to flourish. The sample products manufactured in Burnley have tested above expectations and the company is looking to take on new staff to build out the sales and development teams. It has a difficult task now however – how does it hire the best staff, when it can’t offer the best salaries?
Episode 13 – Data Protection
In advance of trialling the product with a test group of 100 consumers you, Sarah and Chris are now turning your attention to compliance with data protection legislation, given that the trial phase will mark the commencement of the company processing a significant volume of consumer personal data.
Episode 14 – VC Investor
The EMI share options which KNow Wear Ltd granted to Aggie and Edith in episode 12 have really worked to incentivise them; and thanks in large part of their efforts, the company is getting lots of advanced orders for the product. In order to ensure that the company has enough bandwidth to keep up with demand, you, Sarah and Chris have started to think about raising more funds through venture capital (VC).
Episode 15 – Founder Fall-Out
KNow Wear Limited has been going from strength to strength and is now looking to expand and market the product overseas. Chris has concerns about the business taking time away from his family and he is now looking for a less-demanding role. You, Chris and Sarah have an informal meeting to discuss Chris’ role in the business and the future of KNow Wear Limited.
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