Relationships between founders? They’re like prenuptial agreements. And don’t be afraid to go to other founders for legal advice, says Jakub Císař.

Interview
You’re founding a startup, but law is as alien to you as the corporate mindset. What now? We asked Jakub Císař from the legal consultancy Novalia what contracts to make sure to have taken care of at the beginning, which ones can wait, how much founding a startup actually costs, and what you can handle yourself.

Jakub, what should I do if I’m founding a startup and I don’t understand law?

You should try to think about what areas of the business carry big risks. If you’re starting a project with a partner or more people, you should at least clarify the basic parameters of your cooperation. Another thing which is necessary to consider, is the subject of the business – if it is regulated in some way, ask yourself, do I have the necessary permits?

This typically applies to everything that involves health, financial services, or personal information. Next it’s necessary to think about how much damage I could do to those I’m selling to if something goes wrong. The next steps unfold from there.

Jakub Císař, Founder & partner NOVALIA

Is there a difference if I’m founding the startup alone or with a partner? What is necessary to clarify?

Relationships between founders in close teams are one of the sensitive topics that startup founders often underestimate. It’s something like a prenuptial agreement: both believe that they won’t argue and that everything will work itself out. But from experience we know that it doesn’t always turn out that way.

My recommendation is to make a mutual agreement. First of all, it doesn’t even have to be a formal agreement, it just has to be clear who does what and with what share. It’s necessary to at least make clear in the basic outline whether you’re going into the project half and half, for example. This is already a question that many founders do not even consider. The later you address this topic, the more sensitive it becomes.

We recommend having an internal solution in case you don’t see eye to eye in the future. That’s already something that you’ll need a lawyer for. I also assume that the founder of a startup will need more people sooner or later, and it’s necessary to give these relationships legal attention, especially with regards to intellectual property.

So if I’m founding a startup, either by myself or with someone else, what specific contracts are necessary to have at the beginning?

I don’t want to say that the very first thing you have to do is go to a notary and start a company. However, if everything gets to the stage when the project is viable, it’s definitely necessary to have a contract about intellectual property. All the more if I’m a natural person as opposed to a legal entity – in this case it’s an even more sensitive subject.

To be honest, this is the most essential and only absolutely necessary thing, at least at the beginning. An intellectual property agreement will even be advantageous when you start talking about possible investment.

The importance of other agreements requires legal analysis. It’s necessary to know where the possible risks of doing business are, and if it’s a sensitive business, contracts are necessary. This is typically addressed in the terms and conditions of use. And the rest is very individual, if you for example need to develop business relationships with partners, non-disclosure agreements are necessary.

If I’m closing this type of contract and I’m not a lawyer, what should I invite an expert to and what can I do myself? Can I use any kind of contract templates from the Internet, for example?

It would be ideal to have an expert for everything, but we’re realistic and understand that at the beginning resources are limited and founders carefully consider what to invest where. My advice would be to do definitely have an expert for the aforementioned intellectual property agreements.

As far as contract templates, it’s possible to use the service Legito, for example. It’s one of the places where you can buy various templates created by lawyers. It’s definitely better than just downloading a contract from the Internet.

Whenever you download a template, it’s good to know where it came from. If it is from a specific lawyer, it’s more credible. There are also books published with document templates. The disadvantage of every template, however, is that it is general, and  certain changes might be required according to the particular situation.

Getting into operational matters, if I think that my service is standard or similar to something that already exists, it’s not out of the question to get inspired by others. As a lawyer I have to remind you, that even terms and conditions or personal information protection are copyrighted, so no copy and pasting. With standard documents however it’s possible to compare more with competitors and supplemental legislation. For example, if I’m opening an e-shop, it’s not necessary to make up anything new, as standardized terms and conditions exist for this type of business. However, if I’m coming out with a new service that doesn’t yet exist on the market, an expert will be needed in this case, so we can prepare some kind of framework and get a lawyer to check and correct it. This is not a place for inspiration.

There are certainly founders who would be happy to take care of everything themselves, without a lawyer. Is it possible? Is there any possibility of self-study?

Law is a special field in which experience determines success. Law school is just a regulatory requirement, but the longer you work in law, the more conditions and contracts between partners you write, and the more you develop as an expert, and you become more and more experienced. I don’t think that self-study will allow anyone to get to that level, legal assistance is irreplaceable. Otherwise, on the Internet there are lots of materials, but I wouldn’t dare to recommend any specifically.

For founders, however, it’s definitely not a bad idea to get educated in this direction, to look for inspiration abroad, for example. My advice is to compare maybe two or three different sources, and when they say the same thing, you can trust the information.

How much are we talking about in terms of paying for legal services?

If it’s a basic contract, its in the thousands of crowns. For starters around 10-15 thousand crowns is enough, depending on modifications, if the contract is in two languages, and generally depending on its level of complexity.

If we start talking about setting up complex terms and conditions for a unique and involved project, we’re talking in the tens of thousands of crowns.

If a startup is already functional and meeting with an investor, what kind of legal matters should it have taken care of?

I’ll be repeating myself, but definitely intellectual property. Any minor flaws in personal information protection can be relatively simply fixed, but intellectual property is complicated to correct, it’s a key factor. It also depends on what stage the startup is in.

What general advice would you give to startups?

Don’t be afraid to go to other founders for advice. The experience of colleagues is priceless and they’re often able to look at problems from a different angle than lawyers. We’re happy to share our experience with our clients, but experience from the perspective of a founder is always a little different – which is why it’s definitely good to not be afraid to ask.

Jakub Císař is a foundering partner of the law firm NOVALIA, where he advises startups and investors, as well as other innovative companies. He specializes in the purchase, sale, and transformation of companies, as well as in financing and investment. He also practices contract law, regulatory law (including personal data protection), labor law, and intellectual property law. Jakub helps both Czech and international clients, and is regularly mentioned in the publication Legal 500.

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