You have a great business idea, have discussed it with friends, family and advisors and now you are ready to start. Well, I am not going to tell you about the kind of entity you should be setting up or how you should go about it. You will find enough write ups on pros and cons of different types of entities. A lot of them will also set up the entity for you for a few thousand rupees. But then what? Just having an entity in place is not enough. Most start-ups think their legal obligations are fulfilled once their entity is set up and that they can just concentrate on getting their business off the ground and probably raise some investments. Well, they are not completely wrong. While it is important to press the accelerator on business, one should simultaneously work on putting in place the right processes and systems, from day 1.
I know it is easier said than done. I am starting a company myself too, and from being a lawyer who has always propagated the importance of starting right, to now an entrepreneur, who is perpetually stretched for time, I find myself echoing the pain of millions of entrepreneurs – “WHERE IS THE TIME?” Between getting the product ready, opening a bank account, hiring people, keeping my head above the flood of ideas like traction, MVP, cost of customer acquisition (blah blah blah) that my co-founder throws at me, I find myself with little or no time to take care of internal “stuff”. However tempting it may be to shove the internal compliances under the carpet till the need arises, I have to after all, practice what I preach. After giving it considerable thought, I have prepared a list of absolute must haves that every start up (including mine) should strive to put in place. I plan to share the list, along with my experience of implementing them, over the next few weeks, through this blog series. But before I go into the absolute must haves, I would like to delve a bit on my emphasis on “starting right”. One would ask, why this urgency? It can probably be done a few months later, or maybe when the company is fundraising. Believe you me, it will save you a lot of heartache and pain when you are fundraising, if you have paid attention, to doing things right (the legal way) from the beginning. Ask any entrepreneur who has gone through the process of fundraising, and he will tell you how much time and effort he could have saved, had he paid attention to a few details. Remember, every non-compliance on your part will get added to the laundry list of things you need to do (aka Conditions Precedent) before the investor puts cash in your bank. You are therefore effectively delaying your fundraising by putting “legal stuff” off. As counsel to several VCs, I have often faced the dilemma of having to explain to entrepreneurs why the investor will not go ahead without them fixing a few things. Moreover there are some non-compliances, which if not fixed on time, could become “unfixable” and just remain a baggage with the company, to be dug out by investors’ lawyers at every round of funding. Simply put they could haunt you for the rest of your life. Which is why save yourself the trouble, and start right…right now!