Insights on the journey of a business start-up





Advice from Richard Cobb, Partner, Corporate at Michelmores who will be joining us at Venturefest to discuss how to attract investors and reward staff effectively.

As a corporate lawyer, I have had the privilege of helping numerous new businesses get going over the last 20 years, and watched a number of them move on to become the brands and businesses we recognise today. I thought I would share some of my experiences of working with successful entrepreneurs – and the importance of protecting yourself from too much naked ambition.

Ideas
Every new business starts with an idea. In many ways the pure idea is the easy part.

The most compelling business ideas are often from those who have gained experience in an industry, then move on to develop a significant improvement in a product or business method. Many successful innovations have come from combining technologies – such as radio controlled aircraft and digital cameras in drones or using new materials to improve old products. Ideally this innovation can be legally protected – although in many cases it is ‘first mover’ advantage and speed to market that is the key to commercial success.

The naked entrepreneur would be so obsessed with the brilliance of their big idea, that they fail to take basic steps to protect their intellectual property in time, or at all. Like Leo Sayer’s father, who I am told arrived at the Patent Office a few weeks too late to register the first thermostatic kettle, or Frank Whittle’s jet engine, where the then RAF officer’s patent expired for the sake of £5.

Apart from patents, an understanding of copyright, design rights, trademarks and domain names is really important if you do not want your brilliant idea or business innovation to go to waste. Go to IP protection events, like our talk at Venturefest.

Teamwork
Successful entrepreneurs are willing to share the risk and rewards with others who fill in the gaps in their own expertise. Finance, marketing, HR and particularly sales are often gaps that need to be filled this way.

Hiring people is one of the biggest step changes in a start-up and needs to be done carefully, particularly if a new team member is also bringing vital financial resources.

Employment contracts for new staff and Shareholder Agreements for investors are invaluable in terms of protecting the company (and its founder) from a variety of ills when it is at its most vulnerable. Increasingly, the use of share options and equity in the business is a key factor, and the tax and control aspects of this need care.

Money
There are too many sources of funding to list in detail in this article, but if money is not already available, some of the options available to the entrepreneur include friends and family, business angels, crowdfunding, VC, private equity and grant funding. None is easy to actually pin down.

The banks and public markets are aimed at and generally suit more mature businesses. Seed Enterprise Investment Schemes or Enterprise Investment Schemes are great tax incentives to fund a start-up for individual investors, of up to 30% of the shares. In addition, convertible loan notes and other mechanisms can add flexibility to the basic ‘borrow or sell equity’ options.

Be Lucky
You don’t pay a lawyer to tell you to be lucky, but good luck and good timing often go together. Being prepared to grab an opportunity can make the difference between winning or losing key people, contracts and ultimately business sales. Timing your move is also key to market penetration. Too soon, and you might have a great product for an immature market – like some businesses that launched before broadband and smartphone penetration reached tipping point. Too late speaks for itself.

The smart entrepreneur gives themselves as much choice as possible when it comes to timing a launch, or doing the step change deals. Our naked entrepreneur misses the big opportunities because the corners that were cut in the rush to get to market get in the way later on – no decent terms of business in place when the big client opportunity lands, no IP protection when others see the opportunity too, nothing in the background sorted to give an investor confidence that the business itself will be a success. The exciting journey of a successful start-up can be tough, but being proactive, listening to good advice and getting the right protections in place, can make all the difference….

Here’s wishing you more than a lucky streak in your new business!

Michelmores is a sponsor of Venturefest South West 2016. It has recently launched a ‘Business Starter Pack’ to provide budget-conscious new start-ups or small businesses with essential support and commercial advice, to help their businesses grow.

Please visit www.michelmores.com/business-starter-packs for more information.