START UP LAW

Lums fall 2021

Maria Khan
 What do we mean by start up law?

WHAT THIS COURSE IS HOW WE WILL BE WHEN WILL

ABOUT TESTED ASSESSMENTS
HAPPEN
Brief introduction

• IDEA ASSET (IP protection)

• Partners (equity allocation, co-founder agreements, stock purchase agreements)

• Found a company (what kind) (form a board, appoint officers, draft by laws)

• Raising money (vesting, seed round, valuation cap, series A and B)

• Employees (rights and obligations)

• Commercialization
Start-ups:

 
◦Meaning of the term.

◦A startup is a young company founded by one or more entrepreneurs to develop

a unique product or service and bring it to market. By its nature, the typical startup
tends to be a shoestring operation, with initial funding from the founders or their friends
and families.
◦  a startup is a 
“temporary organization designed to search for a repeatable and scalable busi
ness model”
, while the small business runs according to the fixed business model.
◦ A start up founder follows three main functions:

• To provide a vision of a product with a set of characteristics;

• Create a series of sceneries of the business model regarding customers, distributions, and
finance of the company.
• Understand, whether the model is the right one, based on customers behavior, as your model
predicts.
◦ https://www.youtube.com/watch?v=CIA9ikESXYI
◦ 1. Lifestyle Startups: Self-employed folks
◦ Lifestyle entrepreneurs are living their preferred lives while working for no
one, but themselves. In Silicon Valley, such professionals are freelance coders
or web designers, who love their jobs, because of passion.
◦ 
◦ 2. Small Business Startups: Feeding the Family
◦ Small businesses are grocery stores, hairdressers, bakers, travel agents, carpenters,
electricians, etc. They are those, who runs his/her own business to feed the family. 
Small business entrepreneurship is not designed to scale.
◦  
◦ 3. Scalable Startups: Born to Be Big
◦ Google, Uber, Facebook, Twitter are just the latest examples of scalable startups. From the
very beginning, the founders believe that they are going to change the world.
◦ Such startups hire the best and the brightest. They always search for a repeatable and scalable
business model. When they find it, they start to look for more venture capital to boost their
businesses. Often scalable startups group together in innovation clusters (Silicon Valley,
Shanghai, New York, Boston, Israel, etc.).
◦ 4. Buyable Startups: Born to be bought
◦ During the last five years, startups that offer Web and mobile app solutions, are sold to larger
companies. This tendency becomes more and more popular. Their goal is not to build a billion-
dollar company, but to be sold to a larger company for pretty cash.
◦  

◦ 5. Large Company Startups: Innovate or die

◦ Large companies have a finite life duration. Changes in customer
preferences, new technologies, legislation issues, new competitors
create pressure, forcing large companies to create new innovative
products for new customers in new markets (for example - Google
and Android).
◦ 
◦ 6. Social Startups: Mission - Difference
◦ They are passionate and driven to make an impact. However, unlike scalable startups, their
mission is to make the world a better place, not for wealth's sake, but for an idea. 
◦  a company is a startup until it finds product/market
fit and begin to scale.
•  You’re buying other startups
◦ Once upon a time, Uber and Pinterest, both six years old, were
startups. Today, they are consuming other startups like a dragon.
They add these minor groups to their evolving giants.  If your
startup is so well-established, that you can buy other startups,
you’re not likely running a startup.
• When you become an investor
◦ When you reach the point in your business, where you're asked to invest in
other companies you can be sure that you're moving out of the startup stage.
• You’ve passed “taking high risk” stage
◦ Risk-taking is an essential part for developing entrepreneurship,
however, it’s a hard game the entrepreneurs play in the more mature
phase of their development. If you're not in a search of large
investments and you’re no longer sacrifice your personal capital to
survive, you’ve probably outgrown the startup status.
• The 50-100-500 rule
◦ There are a bunch of metrics, such as the number of employees, number of funding rounds,
revenue, and etc., but TechCrunch writer Alex Wilhelm sets his own 50-100-500 rule.
According to his rule, if a company fits or exceeds any of these criteria, it is not a startup
anymore.
1.$50 million revenue run rate
2.100 or more employees
3.Worth more than $500 million
Types of start-ups
 
 Start-up generally without technical innovation.
 
 Start-ups with technical innovation.