Jason Baptiste in his book, “The Ultralight Startup” says that “people are the most important asset of a startup. They breed perseverance, come up with great ideas, and let you build for the long haul and ultimately succeed. Once you have great people on board with what you are doing, everything will fall into place over time”.
Clauses such as termination grounds, notice period, salary and other benefits, non-solicitation, confidentiality, limitations on the employee’s ability to compete with your business after the employee leaves employment, protection of intellectual property, etc should always be clearly set out in a letter of offer or employment agreement. You must also make employees provident fund (EPF) and social security fund (Socso) contributions to your employees as well as comply with the prescribed minimum wage and minimum retirement age requirements.
The prominent business management guru Peter Drucker once said, “the most valuable asset of a 21st-century institution, whether business or non-business, will be its knowledge workers and their productivity.” In today’s knowledge economy, it is the people who create intangible assets such as intellectual property, patents, brands, designs, etc. If you manage your employees well, they will become your valuable asset, but if you don’t, they can also become your biggest liability.
You should have a good understanding of intellectual property rights so that you will appreciate how to realise the full economic value of your intellectual property and incorporate them into your business strategies.
Trade secrets are basically confidential information that is not publicly available, such as ideas, designs, methodologies, processes, marketing plans, methods of business operation, pricing policies, etc. One of the ways to protect the value of a trade secret is to enter into a non-disclosure agreement prior to the disclosure of any confidential information. In addition, you will also need to put in place a proper information protection program.
You should also register your brand as a trademark. If you are in the business of product design, the three-dimensional features such as the shape and configuration of your product, or two-dimensional features, such as pattern and ornamentation of your product can be protected as an industrial design. Copyright is a form of protection that is granted to authors of literary, dramatic, musical and artistic works. Copyright does not protect the idea, but rather the expression of an idea.
A company, while it is recognised as a legal person in the eyes of the law, cannot act on its own. Ultimately, the day-to-day affairs of a company will still have to be run and managed by a group of natural person i.e. directors, officers and shareholders.
Breach of any of the above duties may result in the director being judged as unfit to remain in the management of a company and lead to his disqualification as a director. He may also face civil and criminal liabilities and in certain cases, personally liable for the loss or damage suffered by the company.
Before you start looking for funding, you should first be sure that your business is ready to raise funding. Investors will look at three key factors when considering a startup for potential investment: people, product and market. Issues such as whether you have a strong management team, whether you have developed a good product or service and whether your product or service has gone through market validation must first be dealt with before you reach out for funding.
There are also various sources of financing, ranging from the founders themselves, friends and family, angel investors, venture capitalists, government funding and/or grants, strategic investors to banks and financial institutions. Crowdfunding is also another platform which has recently gained much traction from technology startups and investors. Understanding the different considerations, strategies, implications and expectations in each of these funding mechanisms is important to planning a successful fundraising campaign.
A due diligence exercise is a process to assist the investors in evaluating the team, the technology, the market, the financial as well as the legal and regulatory compliance so that they can make a prudent and informed investment decision. After that, parties will engage in documenting and negotiating terms of the agreements. This whole process can be quite arduous, time-consuming and costly. It is therefore always good to get your legal documents in order from the beginning, as it will make it easier for the investors’ lawyers to verify that your company is in good legal standing which will help make the investment process proceed smoothly.