As a startup ourselves, we know how important it is to build a strong founding team and incentivise them in the right way.
Because human capital is key, based on our experience, investors tend to have a keen eyeball on how your employment agreements have been drafted, and how your share option plans have been implemented.
Flexibility is also important for a startup, as not all of us can afford full-time employees at the get-go. How do we navigate around these?
Employment agreements differ with every startup – some startups prefer a light touch employment agreement; whilst other startups prefer a more robust employment agreement. This agreement reflects the culture of your company and sets the tone of the working relationship.
During the due diligence stage, investors tend to ask for a copy of your employment agreement to ensure that it checks the boxes of their investment committee/fund.
Have you also thought about your intern agreements?
In the initial stages, some startups seek expert advice by engaging consultants and/or advisors and reward them in cash or shares (or a mixture of both).
Some startups make the mistake of giving out shares too freely at the beginning which culminates in inactive shareholders and increased liability. At other times, founders get into disagreements with advisors due to the lack of contribution by the advisor – so it’s good to set clearly defined expectations.
It is also important to ensure that your startup is protected (i.e. there are sufficient confidentiality and IP assignment provisions) to ensure that no proprietary information is leaked.
On top of your employment agreement, many US-based institutional investors will ask for an IP assignment agreement. This ensures that all IP created by any employees, consultants and/or contracts, are assigned to the company.
The formalities for each country differ from startup to startup, so do get a lawyer to check that all the boxes are ticked!
Implementing a share incentivisation plan is one way to incentivise your employees to stay. Millennials love to job hop – so having a share option plan with appropriate vesting periods could appeal to them.
There are a plethora of share incentivisation plans accounting for different business structures. Just like any tool, they are accompanied by pros and cons.
Administering a share incentivisation plan is no easy task. It is up to one’s discretion to weigh your options and ensure that it is a sustainable plan even without a dedicated HR department.
Before gathering full-time employees, some startups hire independent contractors through platforms such as Fiverr or Upwork.
However, certain contractors may not be listed on these platforms. In such cases, it may be ideal to enter into an independent contractor agreement with them to ensure that your company is sufficiently protected.
This can also be a flexible way of seeing whether the contractor’s style aligns with your startup’s work dynamics before onboarding them as full-time employees.
We are built for fast-growing early stage companies and ambitious founders between their pre-seed and series C stages. We provide you with the support you need before you hire your own in-house legal counsel (or an expensive law firm for complex restructuring).
We also like to work with people that we like. That’s why it means a lot to us when our clients are decisive, enjoyable to work with, ambitious, and honest at the same time!