Recommendations for startups and founders
At the beginning of February 2023, our IT lawyer Sven Kohlmeier answered questions on the panel of the "Swiss Startup Conference" at Trust Square near Paradeplatz in Zurich, Switzerland. Together with Tonia Zimmermann, co-founder of UMushroom, and Michael Dudli, founder and CEO of Xelon, they gave very practical advice for Swiss startups. Nearly 500 participants were present to exchange ideas and network.
Sven Kohlmeier answered the questions of Adam Fulham, founder of Startups Network Europe, from his legal experience. We summarize the questions and answers here.
Many startup founders are creative and visionary, but for whatever reason, they pay little attention to accounting, cash flow and legal issues. Why is that from your point of view?
Nobody combines all talents, but we often think we can do everything ourselves. When I developed a really great software product with a friend, we had the best lawyer and the best programmer on the team - us. But it lacked a good marketing strategy. It's the same with a lot of startups. The founders are great and novel in idea, belief in the product and in performance, but they look little or not at all at financial or legal implications. At Wicki Partners AG, we advise various startups on their formation and find time and again that there is a truly visionary business idea, but entrepreneurs give too little thought to contracts, IP and copyright.
My recommendation: Lawyers routine. The regular visit to the lawyer should be a routine like sports or the after-work aperitif round. For example, once a month for one hour is enough to have a legal sparring partner, not to make any mistakes and to be able to concentrate on product development with legal certainty.
What are the most important legal issues startups should consider?
From my perspective, startups should take the following 5 important topics to heart:
1. written contract instead of non-binding appointment:
I love contracts and startup founders should too. It doesn't always have to be the most complicated or extensive contract, but a short written contract, for example about the partnership agreement, loans, service agreements, is better than a verbal agreement. Included should be the parties to the contract, the subject matter, and a summary of the key understandings and deadlines. Such a contract should be signed; either in person or with a digital signature.
2. IP and copyright check before launching product or service:
It should be checked in good time that there is no infringement of third-party intellectual property, trademarks or names. Also, each startup should protect its own trademark or patents in time before the product is distributed. The scope of protection can be locally only for Switzerland or also for the EU or other countries. It is time-consuming and expensive when the product and marketing is ready and then a re-branding has to take place because third party rights conflict.
3. managing directors have legal obligations:
Managing directors should know their legal obligations for proper management. These include, for example, tax obligations, but also criminal consequences such as bankruptcy or failure to keep accounts. The principles of "good governance" and "compliance" must also be taken into account.
4. observe regulations in the EU:
For offers within the EU or for EU citizens, various European and country-specific legal requirements apply. There are more extensive regulations in the EU than in Switzerland, for example regarding consumer protection or offers on the Internet. This starts with data protection and ends with information requirements for consumers on the website. However, those who offer their products and services only within Switzerland are also subject to requirements under Swiss law, such as the imprint requirement for websites or requirements of the Financial Market Supervisory Authority (FINMA).
5. take a risk-based approach:
After receiving legal advice, every founder should weigh up how legal risk can be avoided and where legal risk can be consciously accepted, for example. For startups, especially with limited financial resources, there is usually no need for multi-page general terms and conditions, for example; a clear contract is much more important (see point 1). Even when complying with legal requirements, a risk assessment must always be made. If some important preparations are made, this will largely reduce the situations in which a legal fine or a legal offense could occur.
My personal recommendation: Get expertise on board or on the board of directors. Tonia Zimmermann reasoned at the conference that board members are important for companies to obtain valuable and external expertise. I agree with this view. Every founder can and should bring expertise to its board of directors. This way, the founder has one or more experts at his side who are familiar with financial or legal topics. In this way, everyone can concentrate on their core competence. Many lawyers of Wicki Partners AG are active in the boards of directors of startups or companies and thus support the founders or long-established managing directors.
As a contact person for startups and IT law issues, Sven Kohlmeier (specialist attorney for IT law) is at your disposal. Sven Kohlmeier is registered on the list of attorneys (Art. 28 BGFA) of the Canton of Zurich and admitted to the bar in Berlin (Germany). He advises and represents startups in Swiss as well as in European and German law. Mirijam Gröbli is in charge of trademark and IP protection at Wicki Partners AG.
(Photo: Sebastian Schmider)