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TechEd LIVE: Startups must think smart, and write it down...

12 Sep 2014

Beers flow, ideas blossom but rarely, if ever, does logic invade the art of innovation.

The road to startup success is commonly perceived as a rocky one, an unmanageable pathway to unpredictability and complexity.

But while new projects are exciting, they need not be unprofessional.

Back of a Napkin, a web app which creates a simple agreement during the early stages of business, banishes the notion that legality extinguishes that famous fire in the belly moment, commonly associated with thriving startups.

“Great ideas are worthless unless they’re executed properly,” says Sacha Judd, a partner at national law firm Buddle Findlay, specialising in early-stage and high-growth tech companies.

Addressing TechEd NZ 2014 as the creator of backofanapkin.co.nz, an online tool for digital collaborators, Judd oversees over 100 early stage and high growth tech company clients across New Zealand, learning many lessons from their journeys as a result.

“One of the most common mistakes is to not write anything down at the start,” says Judd, who has acted on behalf of tech companies such as Vend, Wynyard Group and TranscribeMe.

Judd says the napkin acts as a “living document”, just like a will in many respects, which offers five questions that will help iron out some basics that are crucial to the future success in business, such as:

• Who is in your team?

• What are you building?

• If your project makes money, what percentage stake do you each take home?

• How will you make decisions?

• What happens to the project if you break up?

“Start up founders are becoming more educated,” adds Judd, who says in the beginning, start-up companies rightly focus on doing all they can to get the business up and running.

But as a result there is often a reluctance to spend money on anything that doesn’t 'make the boat go faster' - such as a lawyer.

“One of the first things start up companies should consider is getting a good lawyer but usually legal services are not considered a priority at the start,” Judd adds.

“In that early bubble of excitement it’s easier to talk about world domination than discuss legal issues but it could save you a lot of time, money and even heartache down the road.

“At the early stage everybody is convinced it’s going to be a success but problems happen when things go right as well as wrong.”

Judd says a common mistake is companies not documenting what they own on paper, which can lead to confusion further down the line, such as when shareholders pour over the books to assess the actual assets of the business.

“You might have your mates helping out doing bits here and there but unless you’re paying somebody to do it through a contract, it still belongs to them, not your business,” she adds.

“But nobody thinks about this until they try and raise capital or sell the company. Yet this can be resolved through a bit of good advice at the start.”

The beauty of a napkin approach to business, according to Judd, is that when you work on your project, your circumstances might change - for example, you might add a person to your team, or take on some funding.

“Just come back to your napkin each time this happens, and make sure it still reflects what everyone wants,” she explains.

“Moving forward quickly is great but you need to understand the corners you’re cutting because of this and a plan to address any upcoming issues as a result.”

Echoing the mantra of fail to prepare and prepare to fail, Judd encourages innovation across the country, but does so safe in the knowledge that the start-up narrative isn’t always a successful one, and when things do go wrong, or indeed right, measures are in place to help...

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