Aug 24 2011
During the dot-com era we saw startup companies emerge, expand rapidly, and deflate just as quickly. While startup companies continue to be major players in our economy, we have hopefully learned some important lessons from the mistakes of the past. Startup companies are still thought to be primarily rapid growth, technology focused enterprises that fill some sort of unique niche in the marketplace. These ventures are attractive to both investors and potential founders because one can establish and grow their business with limited amounts of capital, labor, and tangible assets. Reach too far, too quickly or neglect important business practices, however, and a startup can revert from a success to a failure practically overnight. It is through a marriage of innovative thinking, smart business sense, and an understanding of startup company law one can launch, nurture, and protect their entrepreneurial efforts.
We can all agree that every successful startup must begin with innovative thinking, but founders do not necessarily need to reinvent the wheel, either. Some of the most profitable startups are refinements and expansions of already existing goods or services. Facebook is a perfect example. It is built upon the very simple and traditional concept of a campus facebook or lookbook and has online predecessors such as Classmates, Friendster, and MySpace. Facebook is neither a carbon copy of these ideas nor completely independent of them, yet it is also its own distinct entity which has revolutionized the way we communicate with each other, do business, and learn about the world. The foundation of most successful startups is an original concept that drew inspiration from existing ideas and transformed them into something unique that people will respond to enthusiastically.
Once you have your excellent idea, you immediately need to begin thinking about the legal ramifications, most importantly claiming ownership rights and ensuring you are not inadvertently infringing upon the rights of others. As we all know, intellectual property law protects creative expressions of ideas, inventions, trademarks, and trade secrets. You need to complete a thorough search to make sure you can legally claim ownership rights and assuming you can, register every aspect of your idea that is protected by intellectual property law. You are not required to have legal representation during this initial process, but it is wise to engage the services of an attorney who is an expert in intellectual property and start up company law. Returning to the example of Facebook for a moment, we all know this incredibly successful startup has faced litigation about ownership. Regardless of the outcome, you do not want to contend with protracted legal battles. They are costly, contentious, and can ultimately hinder the growth of your new company. Having legal representation from the beginning ensures you will be protected to the full extent of the law and if a legal dispute arises, it will be settled as quickly as possible.
Next, you need to develop a business plan, which also involves a number of legal issues. It is difficult to formulate a strategy to launch and nurture your startup without a comprehensive understanding of the laws that govern contracts, financial structuring, and all aspects of e-commerce. Furthermore, existing laws continue to evolve, sometimes quite rapidly in order to keep pace with developing technology. You are not expected to be all things to your startup, however, and any accomplished business leader will tell you that delegation and the expertise of others are major components of their achievements. That is why the first person you should approach before you sign any legal agreements, accept any funds, or even begin to discuss your idea with others, is an expert in startup company law. Before you sign a retainer, however, do your homework. While you may not be able to afford premier legal representation just yet, you should be certain that you are engaging the services of someone who has a comprehensive understanding of startup company laws and practices.
Once you have an attorney, you can formally assemble the team who will help you launch and grow your startup. You should keep your initial group small and invest fully in this initial collaboration. The early days of a start-up frequently determine its trajectory. Gradual, smart growth is better than a spontaneous and accelerated rise to the top. The decisions you make and the people you work with in the beginning establish the foundation of your startup and when done well, set the stage for sustainable success. No one has ever said launching and managing a startup company is easy, but with the right idea, an excellent group of people, a comprehensive understanding, and a methodical approach, your hard work and innovative thinking is more likely to pay off and pave the way for bigger and better things.
David Van Patton is Los Angeles based freelance copywriter and business consultant working under contract with NeffLaw.com; specialists in international ecommerce law