7 Questions Your Startup Should Be Able to Answer

How to, Interview
The fundamental principle of startups is to grow fast. This often means postponing other seemingly less important tasks for later. In our March interview with Přemysl Líbal we talked about the fact this approach does not always pay off and that it is often better to build a company on solid foundations. This time we asked our co-pilot about all the legal aspects that every startup should take care of.

Even though every company is different and every product or service have their own specifics, all startups should spend time thinking about these seven questions:

  1. Is our idea unique? And if so, in what way?
  2. Can we protect our idea?
  3. What type of company will we found and where?
  4. Who will do what?
  5. What, to whom and how will we sell?
  6. From whom, what and how will we buy?
  7. What worst thing can happen to us?

    Let’s go through these questions one by one.

Přemysl Líbal, mentor, lawyer and Co-pilot UP21

1. Is our idea unique? And if so, in what way?

The answer to this question will determine answers to all the other questions. Copying a successful foreign model can bring you success – after all there are many such companies in the Czech Republic – but you will probably not be able to grow globally or persuade investors that will be interested in global scaling.

Even if you think your idea is unique, it usually consists of approaches that people have used elsewhere. If that is the case, it is wise to verify whether you do not breach anyone’s rights, such as patents or intellectual property rights.

2. Can we protect our idea?

If you are convinced that your solution, product or service are unique, it is necessary to protect them from potential copycats. You should definitely check out whether your solution can be patented or protected as registered design (see Geschmackmuster). You should also register a trademark and domain and think about how you can protect your idea as a trade secret or confidential information in the Non-Disclosure Agreement.

3. What type of company will we found and where?

Do you want to start locally, use your own resources, go to local angel investors or incubators? If so, then you can create a local legal entity and then scale from your own country. If, however, you want to negotiate with foreign investors, then consider founding your company abroad.

I have experience with a couple of companies that registered in the Czech Republic and became successful abroad as well as with companies that registered in the United States or in the Great Britain, spent a lot of money on managing their foreign entity and eventually crashed. Therefore it is important to think through where you should found your company and take into account both business as well as budget aspects.

4. Who will do what?

Everybody knows that, right? Distributing titles is startuppers’ favorite pastime. I will be the CEO, you will be the CTO and Adam will be the CFO. But that is not the answer to this question. What is more important than distributing titles is determining what each person will do and how much time and energy they will dedicate to it.

Clarify what you will do in case someone does not fulfill their duties or is not able to manage them and how you will dismiss such a person from your company. Think about how you will decide about essential things of the company and what these essential things from your point of view are. And definitely tell the other co-founder what your vision about the future development of the company and possible exit is.

Agreements and deals are made for times when problems appear and believe it or not, problems will appear. Therefore, write down everything in the Shareholders’ Agreement which is created beyond the Founders’ Agreement.

5. What, to whom and how will we sell?

Is your company’s model B2B (Business to Business), B2C (Business to Customer), B2B2C (Business to Business to Customer) or is it completely different because your way of doing things is unique? Each of these models has its own specifics. Terms of contract are different if you sell to corporations, small and medium companies or end customers.

Based on the model you will either have General Terms and Conditions and simple agreements, or orders or everything will run online. Each startup, however, will need to have General Terms and Conditions, sample agreements and personal data processing in accordance with General Data Protection Regulation.

6. From whom, what and how will we buy?

Suppliers, contractors and employees. These are the people that you will be daily in touch with and if you want to have everything as it should be, you should sign agreements with each of these parties. Make sure that everything that is developed internally and externally for you is your property and you own the copyright. Protect your business secrets and take precautions against everyone who might not deliver what they promised to you on time. In general, try to take care of all the possible risks.

7. What worst thing can happen to us?

What first comes to people’s mind are accusations, fines, and lawsuits. This is quite understandable because if you have thought the previous questions through, there are so many things to do that if you want to resolve them all at once, you will most likely want to stop running a business. But that would definitely not be a good decision.

Do not panic! Try to think about all the must-do activities and imagine what worst thing can happen to you and how it can threaten your project. Then start to prioritize individual tasks based on risks and resolve one task by one.

And last piece of advice.

Select people carefully and check their real motivation. Find experienced mentors and coaches who will help you avoid pointless mistakes and minimize their impact.

Přemysl Líbal is a lawyer, advisor, mentor and coach with more than 30 years of experience mainly in the field of information technology, contractual relations, business modeling, copyright, electronic publishing and digital advertising. He participated in various projects in Europe, Africa, Asia and both Americas. He has worked for major multinational technology companies, small and medium-sized businesses, and start-ups. He likes to help companies get things moving and find solutions.

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