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Preparing startups for the growth journey: A plan is essential when headwinds hit

@Redaktionen

This post is also available in: Danish

When the creative urge brings startup founders together on a shared mission, the goal is to make the world a better place. But the euphoria founders set out with can quickly be replaced by animosity when the adventure hits unforeseen challenges.

Challenges between founders are not uncommon, says Ricki Boye, attorney and partner at BACH Law, who has been advising startups on their journey for the past five years. That’s why his most important recommendation is that founders have a formal shareholder agreement in place from the start, covering everything from working hours and responsibilities to what to do if a partner wants to leave the company before the big, planned million-dollar exit in seven years. So, they have a plan for when the headwinds hit.

“When embarking on a project like this, it’s easy to agree that founders will work full-time. But what is full-time? For some, it’s 37 hours, while others think it’s 80 hours a week. If there’s a difference in perception, it’s hard to deliver on expectations. And these kinds of disputes between founders can cost the startup its life,” says Ricki Boye.

Help to solve it yourself

Ricki Boye recognises that very few first-time entrepreneurs call a lawyer to get their legal needs sorted out in the midst of the initial creative urge. But having the house in order is important – both internally between owners and externally to potential investors. That is why BACH Law also collaborates with the innovation environment Futurebox and the accelerator programmes GreenUP and Danish Tech Challenge at DTU Science Park to help entrepreneurs early on. Even if legal needs aren’t top of mind from the start, it’s much easier to grow the company, get more employees and raise investments if the house is in order from the start.

“Basically, you need to know about many things as a startup, including legal issues. For example, if you’re going to raise money, how do you secure favourable conditions in the long run? If you haven’t tried it before, it’s impossible to know what to look out for. We want to help with that,” says Ricki Boye.

<em>Ricki Boye Advokat og Partner BACH Advokater<em>

Because entrepreneurs often have limited resources and juggle a lot of tasks at once, he takes pride in approaching the legal task as pragmatically as possible. This way, the entrepreneurs can both use the counseling in their specific situation and when similar situations arise in the future.

“We spend a lot of time educating the founders. I want to know that when the founders enter into dialogue with an investor, they can explain what’s in the document and talk about concepts such as vesting, good/bad leaver and so on. Because if the founders don’t understand what they’re agreeing to, it’s difficult to negotiate,” says Ricki Boye.

Along for the entire journey

From two founders to a team of 25. Investment rounds in the double-digit millions. Well on the way to an exit. In the five years BACH Law has worked intensively with startups and venture financing, they have followed numerous startups closely. And it’s the personal relationship with the owners as much as the professional challenges that drive Ricki Boye.

“It’s a lot of fun. It’s often young people with a lot of drive, ability and desire to reinvent the wheel – and we want to be part of the journey,” says Ricki Boye.


Fact: 3 key pieces of advice for university startups

  • Secure the IP: University start-ups and spin-outs are particularly dependent on the IPR (Intellectual Property Rights) that forms the foundation of the business. Therefore, it’s also important to have secured ownership or a licence agreement – and understand the impact it will have on your growth journey.
  • Have a funding overview – also for soft money: It is expensive to develop new technology, which makes a funding plan crucial. This also applies to grants and soft money, which are often paid out on special terms that you need to be aware of.
  • A well-thought-out warrant programme: Knowledge-based spin-outs need to recruit specialists to the team, and warrants and other incentive programmes, that allow the holder to get part of the ownership in the long run, can be crucial in competing against high salaries in the established industry. However, if the terms of a warrant programme are not clear, it can become a headache later on in the growth journey.

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