Tag: EC Column

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A growth framework for reaching $1M ARR

Jonathan Martinez Contributor
Jonathan Martinez is a former YouTuber, UC Berkeley alum and growth marketing nerd who's helped scale Uber, Postmates, Chime and various startups.
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There are hundreds of guides on how to scale a startup, but many authors either haven’t done it themselves or are too forward-looking into the millions. So, how does a founder implement a growth framework to scale to the first million dollars in revenue?

After working at hyper-growth companies such as Postmates and Coinbase, I wanted to try my hand at the accelerated growth of my own startup. I’ve been fortunate enough to have co-founded Virtualis, where I have led all marketing efforts as our CMO, from zero to $1 million annual recurring revenue (ARR) in our first year.

I’m here to share the framework that I implemented, which I believe can apply to all startups just entering the market. I do not pretend to have a silver bullet, but I do have a tried-and-true framework you can use to help you achieve your first million.

The core components to my early-stage startup growth framework are finding product market fit (PMF), identifying your ideal customer profiles (ICP), nailing down messaging, pushing users to their “aha moment” and finally optimizing for down-funnel metrics.

Introducing my battle-tested startup framework: First Million Startup Growth Framework.

A growth framework for reaching $1M ARR.This plan applies to any startup that's just entering the market.

First Million Startup Growth Framework. Image Credits: Jonathan Martinez

If you’re either just starting out with your newly created startup or struggling to get to your first million in revenue, this is the early-stage framework for you. Let’s dive in!

Finding product-market fit

PMF is a term used to describe a product or service that has found enough organic demand from consumers. This demand is both sustainable and economically worthwhile for a startup to continue operating. So how can you find PMF in the most efficient and frictionless way possible? I believe that the answer to this question is through paid acquisition.

There are 100s of guides on how to scale a startup, but many authors either haven’t done it themselves or are too forward-looking into the millions.

With a paid acquisition channel like Meta or Google, you can launch a campaign to assess whether consumers are genuinely interested in your startup’s offering in an expeditious manner. It is important to understand that paid campaigns are not the most efficient on day one and take both experience and optimizing to drive costs down.

However, it should be obvious if there is an interest with your startup based on the initial cost per leads (CPL). If you’ve spent $1,000 and have no purchases, or even signups for a waitlist, then the campaign may not be configured correctly or there’s an issue with PMF. Below are some rough gauges to determine PMF, outside of purely looking at metrics:

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The startup landscape has shifted dramatically: Accelerators must adapt or fade away

Brett Calhoun Contributor
Brett Calhoun is the managing director and general partner at Redbud VC.

Unparalleled contrasts have marked the last decade and a half — from the devastating plunge of a major housing crash to the soaring heights of the longest bull market and the unforeseen havoc of a global pandemic. Amid these turbulent times, the VC accelerator industry has emerged as a stalwart player.

Fueled by a zero-interest landscape in 2020, it has surged, giving rise to an ever-growing array of funds. That said, a paradigm shift of the broader venture landscape could be on the horizon.

Starting a tech company today costs 99% less than it did 18 years ago when Y Combinator was started (today and 2005), largely due to the emergence of cloud technologies, no-code tools, and artificial intelligence. There is an unprecedented amount of information or knowledge that is now freely available to guide founders (e.g., the free YC Startup School courses).

Network effects have evolved, moving away from the traditional physical spaces to digital ones. Digital communities and social platforms such as Twitter, Signal NFX, YC’s co-founder matching, and Slack communities (e.g., Flyover Tech) have played a significant role in this shift.

At the start of 2022, there were $1 trillion in assets under management (AUM) and $230 billion in VC dry powder, figures that dwarf the prefinancial crisis AUM by a factor of five. Concurrently, the number of funds raised in the eight-year period up to 2022 was 2,700, up from 883 in 2010. Crowdfunding witnessed a 2.4x growth from 2020 to 2021.

Angel investments in 2022 equaled those from 2006 to 2011 combined. Family office investments increased by 5x, and corporate venture investments rose 6x, thus opening new capital avenues for founders who found it difficult to raise capital.

The competitive landscape also underwent significant changes. At the dawn of 2022, there were 2,900 active VC firms, marking a 225% increase since 2008. This influx of funds has propelled platform VCs to step up their game, nurturing their portfolios and winning deals more aggressively.

Finally, the talent pool for tech startups has broadened immensely. Factors such as remote work, offshore development, and the steadily growing labor pool of software engineers have enabled startups to hire additional engineering talent, adding yet another catalyst to this vibrant ecosystem.

Importantly, the traditional accelerator model has enjoyed the fruits of these potential paradigm shifts. The number of accelerators has more than doubled since 2014, while the number of accelerator-backed startups in the U.S. has nearly quadrupled in the same time period (investments from 2005 to 2015 and total investments through 2021). However, as we look into the future, founders must confront a key question: Are there too many accelerators now, and is joining an accelerator even needed anymore?

Accelerators are facing competition on all sides

The idea that accelerator funds have little value grew in popularity during the pandemic, as capital was so abundant that first-time founders began bypassing accelerators altogether. Moreover, rumors of deeply unethical behavior at accelerators are starting to surface frequently. The most notable example was allegations of fraud at Newchip, a popular virtual startup accelerator.

The liquidation of Newchip sent ripples through the startup ecosystem as perceptions of grifting at accelerators gained momentum online. Another instance of negative press involved the On Deck accelerator, which laid off 25% of its staff in 2022. The layoff came from a deal that went sour with Tiger Global, forcing On Deck to use its Series B funds to keep the lights on in the accelerator.

Founders must confront a key question: Are there too many accelerators now, and is joining an accelerator even needed anymore?

The fall of players like Newchip and On Deck are not isolated incidents. They testify to the growing realization that accelerators increasingly compete for capital and opportunity with other established, institutional VC firms. For example, when YC was founded in 2005, a “pre-seed” round did not exist, and it cost $500,000 to start a tech company. Now pre-seed rounds have surged in popularity to being the most popular round for getting your business from MVP to $1 million+ ARR. In 2022, there was 10x the amount of capital in the market than a decade ago, with hundreds of pre-seed VC funds in existence with hyper-targeted theses (e.g., psychedelics or construction).

The influx of pre-seed venture dollars in circulation has increased competition with accelerators and influenced more funds to pursue a “platform VC” model, with some even having a venture studio (e.g., building companies in-house) or incubator (e.g., long-term support at the earliest stages). In some cases, funds themselves launch “accelerators,” which in most cases are the platform support and capital extended to earlier startups, so the VC invests earlier.

Importantly, a VC firm pursuing pre-seed funding escapes the traditional stigmatized accelerator branding due to more favorable terms. Furthermore, many VCs have also built communities around their accelerator model in ways traditional accelerators fail to. Thematic platform VCs have world-class advisors for specific sectors and create cross-pollination within their portfolios. Some pre-seed VCs are focused on backing community-driven startups that have access to communities, hacking distribution and discovery.

That said, it’s not just micro VCs or emerging managers who are launching platforms; brand names are, too. For example, Sequoia Capital’s Arc or a16z’s Crypto Startup School attracts quality with favorable terms, capital, and a strong brand. The chart below shows how VCs have adapted through market cycles:

Image Credits: Brett Calhoun

Platform VCs vary in both definition and focus depending on the logistics of the firm. For example, at Redbud VC, our team manages a VC fund plus some aspects of a studio, including support from world-class operators who have founded billion-dollar companies. In general, VCs have continued to invest earlier, with many now backing idea-stage or pre-product founders. Some firms like K9 Ventures won’t even back founders who have taken prior institutional capital. Due to the increased competition from the platform role and the hunt for untapped early-stage founders, every VC will soon have a platform or studio component.

Are accelerators giving founders what they need and want?

All this said, what is different about an accelerator versus a platform VC, strategic angel, or an early-stage VC in general? If we drill into what an accelerator does for founders, generally speaking, it can be bucketed into:

  1. Knowledge sharing.
  2. Networks.
  3. Resources.
  4. Peer groups.
  5. Capital.
  6. Events.

The value of the above is directly correlated to the level of entrepreneurial experience the founder possesses. That said, the value accelerators provide comes at a cost: time and equity. The large equity stakes and extensive work can be a repellant to quality founders. If the value is delivered, the equity can be argued, but the time cannot. Some accelerators are adding 20+ hours of programming per week and networking events that may be lackluster.

In Redbud VC’s conversations with 2,000+ founders, our team found that what is truly relevant to founders is network effects and knowledge sharing. Founders are time-strapped, so filtered feedback from successful founders can expedite years of learning, and warm intros can save months.

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Enterprise spending on cybersecurity has changed, and vendors must adapt

Sara Behar Contributor
Sara Behar is a content manager at YL Ventures, where she promotes the firm’s cybersecurity expertise and provides value-add support to the firm’s portfolio companies with content creation and strategic initiatives.

Even in the usually exciting world of cybersecurity, discussions on enterprise security budgets tend to veer toward the mundane. However, today’s macroenvironment has thwarted almost every market prediction, and while we know for certain that the down market has driven most companies toward austerity, its true impact on cybersecurity spending has remained an enigma — until today.

A recent report by YL Ventures based on data pulled from surveying Fortune 1000 CISOs (chief information security officers) and cybersecurity decision-makers is shedding light on the impact of the down market on buying behavior, how security strategies are evolving in response and how customer interactions with vendors have changed as a result.

The biggest takeaway? Half of CISOs can still accommodate new solutions, and, contrary to low expectations, 45% of cybersecurity budgets remained unchanged or have even been increased. Specifically, a third of respondents (33.3%) report unchanged budgets and 12.2% saw their budgets raised.

Meanwhile, another third (33.3%) of cybersecurity budgets have been cut while 21.2% of cybersecurity leaders are currently managing frozen budgets, meaning that new spending is not possible.

Infographic CISO Circuit 2023

Image Credits: YL Ventures

Making first contact

Though the data may seem intimidating, vendors still have ample opportunity to get a foot in the door. A considerable majority (75.8%) of cybersecurity leaders are still willing to meet new vendors — there are simply more caveats involved. While almost half (45.5%) are willing to meet any vendor, 18.2% are only meeting with those who strictly address their most pressing security priorities and 12.1% are only interested in meeting younger and smaller startups.

Indeed, this is an excellent time for small startups to shine and perhaps for larger vendors to take note. In the eyes of most cybersecurity leaders, smaller and earlier-stage companies tend to offer more advantageous licensing costs as well as design partnerships, which enable bespoke solutions that better suit their unique pain points and operational needs.

Currently, 26.7% of respondents are relying on free trials as provisional measures. If we think back on the more difficult days of the pandemic, when many cybersecurity providers offered their services for free, we can see ample evidence of just how much goodwill such gestures built and how they propelled companies to the top. For vendors who find this too difficult to stomach, consider how effective land and expansion tactics have tended to work in the past, and remember that the rising tide of fiscal conservatism leaves little room for obstinacy.

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How we scaled our App Store performance by approximately 200% in 1 year

Olga Bakirova Contributor
Olga Bakirova is an ASO/ASA Specialist at Keiki, an edtech startup that creates enjoyable developmental apps for kids to keep them interested in learning.

App Store optimization (ASO) and Apple Search Ads (ASA) are potent tools for promoting apps that can significantly boost conversion rates. Every prospective user encounters an app’s page in the App Store, influencing their decision to download or purchase.

This article will particularly interest those working with mobile applications and seeking new traffic sources. I’ll share my experience with optimizing products in the App Store and provide some insights to help you quickly elevate your metrics.

ASO/ASA promotion is driving downloads and purchases

Over the past year, I’ve been working on the App Store optimization of our flagship product, an educational app for children named Keiki World. With ASO/ASA promotion, our metrics have grown substantially: The overall number of downloads increased by 210%, and purchases surged by 157%.

Dynamics of Keiki World purchases over the year (April 2022 – April 2023)Image Credits: Keiki

Dynamics of Keiki World installs over the year (April 2022 – April 2023). Image Credits: Keiki

Looking specifically at the traffic from Apple Search Ads, the changes become even more noticeable: Downloads skyrocketed by 352%, and purchases surged by an impressive 416%.

Image Credits: Keiki

Dynamics of downloads and purchases from Apple Search Ads over the year (April 2022 – April 2023). Image Credits: Keiki

These results are significant; the final step should be their evaluation. It’s crucial to consider the return on investment from ASA in addition to the growth metrics. However, correctly assessing the effectiveness of App Store tools requires setting clear goals.

It is essential to define specific expectations rather than simply aiming to “increase app purchases.” Our team focused on two main objectives:

  1. Optimizing the app’s page to increase organic downloads.
  2. Running advertising campaigns with Apple Search Ads while maintaining profitability and scaling this traffic source.

Step-by-step ASO implementation

Our marketing team had prior experience with ASO, so we continued conducting regular optimizations via iterative improvements. Enhancing the product page is crucial for increasing its visibility and attractiveness, making it easier for users to find the app and boost their desire to download it.

This process divides into two stages:

  1. Textual optimization of the page.
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5 growth lessons we learned while scaling from $2M to $3M ARR

Jonathan Martinez Contributor
Jonathan Martinez is a former YouTuber, UC Berkeley alum and growth marketing nerd who's helped scale Uber, Postmates, Chime and various startups.
More posts by this contributor

Every million dollars added to your annual recurring revenue (ARR) feels like another World Cup kick that lands on target. The reality is that it usually takes many on-target goals to scale through every additional million, and these do not get any easier.

I’ve worked diligently to not only keep track of all the lessons I learned while scaling my startup that I co-founded two years ago, but also to share them with you. In a previous article, I discussed what I learned during my $0 to $1 million ARR journey. This one will be no different.

While it may seem that not much changes between each successive million, you would be surprised at the mistakes one can make in this latest stage of startup growth. I’ll share why hiring earlier is frequently better, why consistently allocating 10% of revenue to marketing throughout your expansion is key, and the importance of strategic partnerships.

1. Don’t wait too long to hire experienced talent

Apart from select software startups, it is no secret that as you scale up, it becomes necessary to increase your staffing levels. I learned this lesson during my own startup experience and unfortunately made key hires too late, leading to stagnation in our growth as the team quickly became inundated with too much work.

You must keep track of everyone on your team and their bandwidth consistently during the high-growth stages, because workloads can vary dramatically month to month, and even week to week. At my startup, we weren’t doing this. Some individuals on the team were assigned tasks that should have realistically been shared by at least three employees, which inevitably led to errors and lost clients.

Hiring experienced talent that has already accomplished what you’re seeking to do is vital and should occur as soon as your cash flow allows.

In addition, hiring experienced talent that has already accomplished what you’re seeking to do is vital and should occur as soon as your cash flow allows. The moment we made hires for our C-suite was the moment we began to break through numerous plateaus of growth, as their experience pushed us forward. When possible, make these key strategic hires sooner than you might otherwise realistically think you need to.

As a gauge on hiring for your team, ask yourself the following two questions:

  1. How is the weekly bandwidth of everyone on our team?
  2. If we brought on X hire, how much faster would our growth be?

2. Set aside 10% of net revenue for your marketing budget

As our CMO, the budgeting for our marketing team falls directly under my domain. I am a firm believer that 10% of net revenue should be applied directly to marketing expenses. This includes paid acquisition spends, influencer deals, blog content writing and tools.

In B2B specifically, if you constantly spend the same amount while revenue is increasing and everything else stays equal, you won’t have enough volume to support the sales team. For example, we spent the same amount for six straight months, even though our revenues had increased 50%, leaving our sales team with the same lead volume.

We expected to continue driving more closed deals, but that was a huge misconception as marketing spend stayed the same.

Percentage of marketing spend should move at the same rate as revenue. Image courtesy of Jonathan Martinez.

Percentage of marketing spend should move at the same rate as revenue. Image Credits: Jonathan Martinez

Make sure that you have a clear directive within your startup on what percentage should be allocated to marketing each month to avoid stagnation.

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Unveiling the winning formula: How B2C fintechs conquer customer acquisition

Ian Sherman Contributor
Ian Sherman advises PE/VC-backed portfolio companies at Sagard on growth marketing. He has a prior executive track record of driving profitable, eight-figure revenue expansion for consumer brands.

In the fast-paced world of B2C (business-to-consumer) startups, mastering marketing spend is the key to achieving sustainable growth and securing a leading position in the market. While there’s often a formula to follow, it’s not uncommon to see CEOs and startup founders grappling with these crucial decisions for the first time.

To shed light on this critical matter, we surveyed select portfolio companies to understand their current marketing expenditure patterns. Additionally, we meticulously analyzed the journey of our longest-standing companies, observing their growth from the initial seed stage to IPO readiness.

In this article, I’ll dive deep into the best practices and successful strategies that have proven to elevate B2C fintech companies to the forefront of their game. Expect evidence-based recommendations that will pave the way for your company’s success in the highly competitive business-to-consumer landscape.

#1: Prioritize focus on one to two dominant channels

Image Credits: Ian Sherman

Amid the barrage of marketing channels available, the mantra for B2C fintechs is “less is more,” and our evidence-based research supports this approach. Our in-depth analysis of companies from seed to Series D stages revealed that allocating marketing spend to just one to two dominant channels can be a game-changer.

Amid the barrage of marketing channels available, the mantra for B2C fintechs is ‘less is more,’ and our evidence-based research supports this approach.

This was agnostic of company size as well. While our later-stage portfolio companies tended to diversify their marketing efforts and invested in a larger number of channels as opposed to their earlier stage counterparts, our companies consistently maintained a strategic focus on just two core marketing channels that made up greater than 25% of their annual spend.

Our findings clearly demonstrate that despite expanding their marketing channels as they grow, successful B2C fintechs consistently prioritize their investments in the most impactful and effective channels.

This approach allows them to build upon their proven strategies while exploring new avenues for growth. By honing in on these core channels, B2C fintechs can ensure they’re acquiring customers efficiently and with purpose.

#2 While there’s no right way to grow, consider Google Search, Partnerships and Meta as core channels

Image Credits: Ian Sherman

While there’s no one-size-fits-all approach to growth, our research has uncovered key insights that strongly suggest considering Google Search, Partnerships, and Meta platforms as core channels in your marketing strategy:

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Ask Sophie: As an immigrant to the US, how can I create and work for my own startup?

Sophie Alcorn Contributor
Sophie Alcorn is the founder of Alcorn Immigration Law in Silicon Valley and 2019 Global Law Experts Awards’ “Law Firm of the Year in California for Entrepreneur Immigration Services.” She connects people with the businesses and opportunities that expand their lives.
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Here’s another edition of “Ask Sophie,” the advice column that answers immigration-related questions about working at technology companies.

“Your questions are vital to the spread of knowledge that allows people all over the world to rise above borders and pursue their dreams,” says Sophie Alcorn, a Silicon Valley immigration attorney. “Whether you’re in people ops, a founder or seeking a job in Silicon Valley, I would love to answer your questions in my next column.”

TechCrunch+ members receive access to weekly “Ask Sophie” columns; use promo code ALCORN to purchase a one- or two-year subscription for 50% off.

Dear Sophie,

I was born in India and have been living and working in the U.S. on an H-1B with my current employer for four years. I tried to apply for one of the 10,000 H-1B visa holder work permits that Canada made available in July, but I didn’t get one.

I’ve decided to move forward and found my own startup in the U.S. What’s the best way for me to be able to stay in the U.S. and legally work for my startup?

— Fledgling Founder

Hiya Fledgling!

Kudos to you for your grit and determination to continue to build and innovate in the United States. You’ve got this — and I’ve got your back!

A note to U.S. lawmakers: We are falling behind

Canada’s H-1B initiative and its overall work visa and permanent residence processes are far more appealing and effective in attracting and retaining international talent than the restrictive, complicated and backlogged immigration system individuals face in the United States.

The U.S. must enact immigration legislation that helps startup founders and merit-based workers have a clear path. This has become a national security issue: Do we want the emerging technologies of the future to be created in the U.S.?

Even state-level actors see the urgency and importance of founder immigration: California governor Gavin Newsom recently budgeted $2 million for a Global Entrepreneur in Residence (GEIR) pilot program in the University of California system. The program aims to attract and retain international talent by enabling the UC system to sponsor visas for individuals to build startups.

Immigration vs. corporate law

Creating a strong foundation for your startup under corporate law and creating a strong startup to sponsor you for a work visa or green card under immigration law focus on different things. Because of that, I recommend you work with both an immigration lawyer and a corporate lawyer for guidance.

During a chat with Michael Avent, a partner at multinational law firm Perkins Coie who works with emerging growth startups and VCs, he emphasized it’s crucial for prospective founders to keep in mind the proprietary inventions and assignment agreement that they likely signed with their current employer.

Avent said one of the first things he does when meeting with prospective founders if they are currently working for a company is to go through the proprietary inventions and assignment agreement. “One of the things that we always think about at the earliest stage — even pre-company — is protecting the IP that’s going to form the foundation of the business and that can be complicated if you’re working someplace else.”

Things get complicated with immigration law, too, since you cannot do any work for your startup without a work visa or other work authorization. Your H-1B usually authorizes you to work only for the company that sponsored your visa — your current employer. Working to get your startup off the ground without the proper work authorization could have a detrimental impact on your ability to remain in the U.S. and any future visas or green cards you apply for.

However, there are things you can do that are not typically considered work, such as attending business meetings with prospective hires or investors or signing contracts. Ask your immigration lawyer about other activities you want to engage in to set up your startup to find out if they are allowed.

Avent also highlighted a few things that will have a huge impact on your future as a founder and on that of the company that you should stay on top of as a founder. For example, he talked about the importance of meeting the filing deadline for Section 83(b), which enables a founder to be taxed on the equity in their startup on the date it was granted rather than when it vests.

It can be “catastrophic to founders and their company if the 83(b) filing is missed,” he says, meaning potentially “hundreds of thousands [in] tax liability for the founder and withholding for the company.”

In addition, Avent emphasized that founders pay close attention to the dilutive impact of a convertible security or SAFE (simple agreement for future equity) or multiple SAFEs. “You can inadvertently give away more of your company than you want if you don’t understand the mechanics.”

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5 lessons robotics founders can learn from the AV industry

Sanjay Aggarwal Contributor
Sanjay Aggarwal is a venture partner at F-Prime Capital focused on frontier technology investment opportunities.

Throughout the late 2010s and early 2020s, the autonomous vehicle industry captured the imagination of the startup community and the public. However, the category’s meteoric rise preceded an even more meteoric fall over the last 18 to 24 months. From 2018 to 2021, investments in the AV sector across the U.S. and Europe increased by nearly 2.5x, eventually peaking at close to $10 billion in 2021. Then, in 2022, investments fell to $4 billion, with 2023 likely to see further precipitous declines.

Meanwhile, the broader robotics ecosystem has continued to flourish, with companies focused on mostly industrial “vertical” use cases now commanding the bulk of investment dollars. In 2022, these companies attracted $7 billion in investments, defying the broader slowdown in VC investment by growing 15% over the previous year.

We recently analyzed the trends shaping the industry in our State of Robotics report, and identified five lessons that the next generation of robotics founders can take from the successes and failures of the AV industry.

in 2022 ,vertical robotics attracted the most investment dollars.

F-Prime State of Robotics Report. Image Credits: F-Prime Capital

VC excitement for hardware businesses is higher than ever

In the U.S. and Europe, more than $60 billion have been invested in robotics and AV alone over five years, with the AV sector leading the way. AI is making hardware much smarter, which is enabling companies to generate the kind of high-margin recurring revenues typically associated with software businesses.

AI also creates opportunities to disrupt traditional industries with massive addressable markets. For example, across the logistics ecosystem, AV companies such as Aurora are disrupting the trucking industry, while companies like Locus and RightHand Robotics (an F-Prime portfolio company) are transforming how fulfillment operations are done.

For founders, this surge in interest means there are more robotics investors than ever, ranging from newcomers in the category to those with an extensive track record in the space. Even top-tier investors such as Sequoia and Andreessen Horowitz are starting to make investments in the category, an encouraging bellwether for overall VC interest in robotics.

Nevertheless, hardware-oriented investments are not the right fit for all investors, and it’s best to seek out those who have made a commitment to robotics and understand what it takes to be successful.

You must eventually build a real business

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Beat the clock: 6 smart ways startups can use lawyers effectively

Marjorie Radlo-Zandi Contributor
Marjorie Radlo-Zandi is an entrepreneur, board member and mentor to startups, and an angel investor who shows early-stage businesses how to build and successfully scale their businesses.
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Without informing their board, a certain startup had amassed $150,000 legal fees in just three months.

The investor team I was part of grilled the founder to explain why. He told us the fees were for documents involving business formation, funding, various agreements, and intellectual property registrations.

Because fees like this can sink an early-stage startup, it’s critical that founders of emerging companies know cost-effective ways to use lawyers.

As a founder, you can get the most out of legal help by deploying a few smart strategies that won’t break the bank or blow your budget. Not everything you do requires a lawyer: You simply need to know when to engage your attorney, how much to spend, and when to do it yourself.

When you absolutely need a lawyer

Your startup needs the right legal structure. Structure depends on various factors: the nature of the business, its growth potential, funding requirements, liability considerations, and tax implications. Most startups are formed either as an LLC (limited liability company) or a C-Corp. Your business lawyer will help determine which structure best fits your company.

All startups enter into agreements and contracts with employees, suppliers, strategic partners, distributors and partners. It’s wise to have a lawyer help draft contracts to ensure your startup’s interests are protected. These three key areas require legal coverage:

Not everything you do requires a lawyer: You simply need to know when to engage your attorney, how much to spend, and when to do it yourself.

IP (intellectual property) protection: Identify and protect your IP, including patents, trademarks, copyrights and trade secrets.

Fundraising and securities law compliance: Your capital raises from investors require securities laws compliance. These laws were established to ensure transparency in investing. As an entrepreneur, you provide accurate information to your investors about their potential investment. This includes all associated risks. A lawyer will advise and help your startup navigate the process to ensure your company is compliant.

Employment law: When a startup hires employees, the business must comply with state, federal and different country laws that include operating and promoting a fair and inclusive workplace. To lay out the company’s policies, you’ll need an employee manual that an attorney can review or help create. It’s equally important to have relevant agreements completed, such as employee “IP assignments.” This means an employee who creates intellectual property for the company, such as patents, trademarks, trade secrets or copyrights assigns all rights of ownership to the company.

My six smart ways for your startup to use lawyers effectively follow.

Ask your network for referrals and research before hiring

Before hiring a lawyer, ask other entrepreneurs, your board and advisers for referrals to prospective attorneys. Find out what they’re paying for legal services in your area. This will give you a good sense of how much you’ll pay and what to budget for. Ask about education, experiences and how satisfied they are with their lawyer.

You’re better off with an attorney who specializes in the entrepreneurial ecosystem and has many years of experience with entrepreneurs. Angel investor groups often have alliances with sponsoring law firms that specialize in the startup space. Because these law firms understand the inherent risks for emerging companies, they often have experience on all sides of the complex business and intellectual property issues that startups are likely to encounter.

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Will the Law Commission’s digital assets final report make the UK a DeFi jurisdiction of choice?

Dr. Adam Sanitt Contributor
Dr. Adam Sanitt is a knowledge director specializing in financial disputes, technology and innovation at global law firm Norton Rose Fulbright.

Laws and regulations for digital assets tend to arrive either too early or too late. Too early when they include details that turn out to be awkward or irrelevant when technology moves in a different direction. Too late when they wait for certainty and meanwhile leave important areas unregulated and vulnerable to fraud.

The English Law Commission, in its final report on digital assets, proposes to solve this riddle with a new approach that might make the U.K. a jurisdiction of choice for DeFi and other digital asset structures.

A lack of clarity in how they are treated by the courts prevents DeFi and the digital asset economy from developing more widely.

As a holder of NFTs or a participant in DeFi, you might think that legal uncertainty does not affect you — cryptoassets exist independently of any legal system and do not need to be controlled by regulations. But a lack of clarity in how they are treated by the courts prevents DeFi and the digital asset economy from developing more widely. Here are a few examples:

  • If you hold your cryptoassets via an exchange, you might not actually hold any cryptoassets at all. This is what cryptoasset exchanges themselves have argued in a series of recent English cases. Victims of fraud attempted to freeze cryptoassets held in exchanges or obtain remedies against exchanges through which their cryptoassets had passed. They were largely unsuccessful. In many circumstances, all that an exchange customer will have is a contractual right against the exchange, enforceable by the courts. Legal uncertainty means it might not be clear whether they actually own a cryptoasset.
  • If you post cryptocurrency collateral as part of a DeFi transaction and there is some problem with the structure — error or fraud — and some cryptocurrency is lost, perhaps from a different account that is part of the same structure, you might not be able to get your cryptocurrency back. This will depend on whether, in legal terms, you have transferred your cryptocurrency to somebody else or merely shared control over it. Again, legal uncertainty makes it impossible to gauge this risk and thereby inhibits growth in DeFi. And a myriad of custody and private key management possibilities make it hard to come up with clear legal rules that will apply in all situations.