Hello Start Ups : Contracts For An Organization Are Not Simply "Accessories" But "Necessaries"

This is an era of startups and entrepreneurs. Our prime minister Mr. Narendra Modi also has promoted the idea of starting your own business instead of running after jobs. This has not only opened up new avenues of income but has also reduced the anxiety of getting a job.

 

The new gen entrepreneurs are creative and capable enough to inculcate their ideas into business entities, but real challenge emerges when they deal with the external environment. Only having a creative idea and having capability of starting a business, are not sufficient ingredients for establishing the business for long run. In today’s cutthroat competitive environment, also knowing threats to the business should be a priority of startups, which most of them miss out somehow. It’ll not be wrong to say that a large number of startups are either suffering major financial losses or have reached at the verge of shut down in their premature stage for simply not being aware of the upcoming complications and not having a strong support system in place beforehand to protect themselves from those complications. 

Amongst many of the reasons “one” is completely ignoring the importance of signing of agreements, either the agreement has not been signed between the parties or the agreement has not been reviewed properly before signing. A small clause or sub clause or missing out a small clause or sub clause in the agreement can be a reason enough for a major setback. Needless to say that to avoid such possibilities the entrepreneurs need to have a legal team in place to support and protect the legal rights of their business, after all it takes numerous sleepless nights, tirelessly long working hours and lot of efforts to pull the business to a certain level.

Let’s accept the fact that regardless the size of your business, for nurturing it as an entrepreneur your focus must be on the core business activities and to deal with any unwelcome complication you must have your legal team in place beforehand. Practically also its not possible for an entrepreneur to know all laws or all legal remedies. Your legal team parallelly keeps an eye on and protects you from all possible external and internal business threats, and helps you minimize your losses.

To know what those areas and means are where your legal team extends its support and helps you, stay connected with us. 

 

upcoming articles:

Hello Startups : How your legal team protects legal rights of your business and helps you minimize the probable losses.

Hello Startups : What’s your best brand strategy of today !

 

Hello Startups : Deal smartly with unknown threats 

 

For personal enquiries/queries you may either DM us or may connect with us at connect@draftncraft.com

Author 

Surabhi Rastogi (Advocate)

Associate Partner- Draft n Craft Law Firm

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SEVEN TRICKS OF HASSLE FREE INVESTMENTS

Someone has rightly said “playing with money helps to grow”. This saying has actually encouraged people to invest in different ventures. The stumbling block in investment had been the risks associated with it. The volume of investments made globally in the last four years has been more than $2.27Bn till 31st March 2015 but it could have easily been twenty times of this amount. If one wants to avoid hassles in making such investments, they should follow the seven star formula of investing:

1. KNOW YOUR INVESTMENT SEEKER: The first cardinal rule of making an investment is to know the organization looking for investment and the people behind it. The structure and brain of an organization is the first guiding principal for making an investment. No one is likely to use the hit and trial method while investing, rather an investor would be prompted by the spirits behind the organization. An encouraging factor is to identify and understand the brain behind the seeker, their entrepreneurship and the ability to grow.
2. CONNECTING WITH YOUR INVESTMENT SEEKER: Once a general understanding about an investment has been achieved then the next goal should be to develop a connection with the seeker. After the exchange of general mails, meetings should be scheduled - telephonic or personal. A regular touch before making an investment is a must, as this would assist in getting first hand information whereby the seeker would share his project and other details. The connectivity between the investor and seeker has to be pre-established before entering into a relationship.
3. EVALUATING THE PROJECT/INVESTMENT SEEKER: Every startup or the innovator considers one’s project as enterprising & very profitable but that requires a strong evaluation from the perspective of an investor. An investor needs to know the worth of the project viz. popularity, technical feasibility, business growth, local or global.  Similarly, an overall review of the people behind the project needs to be made which means identifying their knowledge, background as well as financial background. In case of a seeker involved in a previous project which failed, extra caution needs to be taken. On the other hand, a successful seeker would attract more and sound investors. The risk gets minimized once a decision is taken after having concluded due diligence on the project as well as on the investment seeker.
4. DEFINING YOUR GOAL: Every investor needs to know the goal one aims by such investment. It may not always be necessary and important to see growth in revenue; rather it may be the fame & reputation of being part of a very successful project. Similarly, at other times one may not look out for immediate returns but returns over the passage of time. Once a goal has been determined then milestones need to be fixed. The goal should be understood as a period and gain of investment and not merely return of the investment. 
5. LEGALIZING THE RELATIONSHIP: No relation co-exists for long time unless supported by a well reasoned legalized document. Investors and seekers relation does not stand long where it is based upon oral understanding or weak documents. Gone are the days when documents were created just for the sake of remembrance, today the documents are created to strengthen the relationship between people/organization. A well defined and understood agreement not only encourages people to work together but equally discourages them to fall prey of unnecessary risks. Every investor must start their relationship with the seeker depending upon documents like Letter of Intent (LOI), Founders Agreement, Confidentiality Agreement, Mutual Non-disclosure agreement, Term sheets, Shareholders agreement etc. 
6. UNDERSTANDING THE FLOW OF RELATIONSHIP: As an investor one would need to know what information and at what level the same would be shared by the seeker to the investor. The expectation as well as the obligation between the investor and seeker needs to be defined with clear understanding for mutual benefits. The flow of relationship has to both ways and not merely one way. A standard of charter or report can be defined to encourage transparency which would strongly glue them together. The compatibility between two increases with defined flow of relationship and ideally reduces the fears of an investor and helps in the strong growth of relationship.
7. TAKING CALL TO QUIT FROM THE PROJECT: A nomadic journey never lands a person anywhere, rather a defined strategy to achieve a destination has more probability of being successful. Once a goal has been setup then one should be clear to take calls on the exit or review the goal. In certain cases investors prefer periodic exit from the project rather than the same being dependent on financial gains. One needs to take call on the exit from a project rather than repent at the end, especially when the project does not look to be going. The investor will have a clear understanding as to their achievement in case they are open for review and exit from the project instead of bound with time limitation.