The Nigerian start-up
ecosystem has evolved in the past few years, many startups have emerged, some
have won while some have lost, regardless of the industry or the nature of the
product or services being offered by a start-up, there are some common success
factors shared by companies that have grown in the past few years. For
instance, issues like; traction, leadership, funding and legal structure are a
few of the differentiating factors of start-ups in Nigeria and even globally.
Often times, when we interact
with many founders, it is often discovered that product development does not
qualify as entrepreneurship, as many founders even find it hard to understand
the business aspect of the technology they have invented, thus, it is no
surprise that they usually overlook the importance of having a serious legal
backing while embarking on their entrepreneurial journey. While some do not
right this wrong until they encounter a serious legal problem like Privacy or
Intellectual property or employee or shareholders agreement, others do not even
get a second chance and this latent defect literally kills the business before
it even takes off.
Interestingly, in the new
global business ecosystem, a start-up surely does not need a lawyer for the
sake of hiring one, there is no point hiring a lawyer that hinders innovation,
start-ups should pay attention to lawyers that understand business and are
ready to add value to the company by providing business friendly legal
solutions, in essence, if your lawyer is not adding any real value to the
business objectives of your start-up, definitely, there is no point engaging
such lawyer any further.
At the recently concluded
Paystack event tagged “Y Combinator Lagos meet up”, held at the Paystack
Headquarters, we had the opportunity to talk to some Tech Founders and ask them
about the role a lawyer plays in ensuring the growth and success of start-ups.
They could not over-emphasize the importance of Lawyers and from our
interaction with them, we observed that the type of value a lawyer provides,
usually depends on the growth stage of the start-up, at the early stage, the
lawyer is involved in the following;
Incorporating the start-up –
this requires drafting and filing the incorporation documents at the Corporate
Affairs Commission. This is very paramount given how the lawyer would from the
information provided by the founder/promoter of the startup and the needs of
the startup advise on the best type of company to register and to also (where
necessary) obtain all relevant permits and licenses. More importantly, the
lawyer would advise on the best time to register the startup in line with the
provisions of the Companies and Allied Matters Act, 2004 which expressly
provides for the timeline for commencing business whether before or after incorporation
(depending on the nature of business)
Product development–
One would find this rather shocking, after all, the lawyer is not expected to
be a technical developer of the product. However, the unique nature of
start-ups always require interaction with users, thus, startups need documents
like Terms and Conditions, Privacy Policy, etc. to regulate the manner of using
the products by customers. These documents are like the undertakings of the
start-up to the customers and vice-versa, of course, it is drafted according to
the business model of the start-up. Therefore, the lawyer handles this in order
to ensure compliance with all relevant domestic and international laws
Creating the legal and
ownership framework- there are certain must haves for start-ups at the early
days, to begin with, a lawyer can help determine the structure and ownership of
the company, this will eventually influence the drafting of Co-founders
agreement (where they are more than one) and deciding stock options among
co-founders (this information must be included in the incorporation documents)
and Employees Stock Options (ESOP)
Determining and protecting
Intellectual Property created by start-ups– expectedly,
start-ups will create a number of Intellectual Property Rights (IPRs) like
Patents, Trademarks, Designs, Copyrights, Trade Secrets, Domain names, etc. it
is the responsibility of the lawyer to protect all these IPRs by registering
same at the Trademark, Patent and Design Registry and ensure the ownership of
these rights by the start-up by drafting documents like IP Assignment
Agreements, Employment Contracts, External Vendor (Consultant) Agreements,
Product Development Agreements etc.
Raising Funds–
this is by far the most important need of a start-up, and although, it is a non-legal
role, however, in the global start-up ecosystem, lawyers have been the nexus
between founders and investors and they have consistently helped founders raise
funds. Lawyers facilitate interactions that eventually lead to funding between
founders and investors/venture capitalists, mentors and accountants.
A seasoned start-up lawyer
can handle these responsibilities in order to promote the business objectives
of the start-up at the early stage. At the scaling stage, the lawyer plays a
host of different roles like sitting on the board to advise, company
secretarial functions, advisory services during mergers and acquisitions, these
and many more will be discussed in the subsequent series of this publication.
Management Consulting and ICT Law Enthusiast
Source: Linkedin
