Explore the first things to consider before you launch a tech company with Adam Herstein, business and technology lawyer at Pitblado Law.
What comes to mind when you hear the word startup? Maybe it’s unicorn giants like Airbnb, Netflix and Uber, or maybe it’s your local food delivery service. No matter how big or small, any successful startup is driven by an entrepreneur with a unique idea and a team of professionals that helps to grow and protect it.
Adam Herstein, is a business and technology lawyer who’s worked with startups and business owners at every stage of the game. Adam is a partner at Pitblado Law who’s been recognized by Best Lawyers® in Canada for his work in information technology law and by Lexpert® as a leading practitioner in computer/information technology (IT) law.
In other words, he’s the guy you want to call if you’re launching a tech company. Adam shares with us the first things to consider before you get started.
Your legal team
The idea of working with a lawyer may seem daunting, especially for startups without a lot of financial backing. You might think, I’ll get a lawyer involved later when I can afford it, or I’ll take care of it myself. These are scenarios Adam strongly advises against.
“You can do a lot of things yourself,” he says, “but you wouldn’t pull out your own teeth.”
Getting a lawyer—and the right lawyer—on board early on can save you money and headaches down the road.
So, what makes someone the right lawyer?
Someone who understands your business and can take it from the starting line to the finish line.
Adam jokes that he’s often a startup’s second lawyer. He says some clients will use one lawyer to incorporate their business and then come to him once they realize their first lawyer doesn’t have the same experience covering the legal needs of a tech startup. From there, Adam works with other legal and technical professionals to handle more specific needs, like patents.
“To use a sports analogy, I often refer to myself as a quarterback and I will distribute the ball as I see fit,” he says.
He references a whitepaper: Business Law for Startups, explaining the areas of law that intersect with startups, saying there’s a lot to consider but very little his team can’t help with from a legal perspective.
“We’re very cognizant of the fact that most startups are working with a budget,” Adam says.
To accommodate this, he’ll provide clients with a prioritized list of tasks and the estimated fees associated with them.
It lets clients plan ahead, so they can budget for what needs to be done now and what can be done later. It also builds trust in the lawyer-client relationship.
“We don’t want people spending money they shouldn’t spend on us,” he says. “If things go properly they’ll need us for more down the road, so it’s a matter of setting off on the right foot.”
Adam tells of an entrepreneur client who divvied up duties with the other shareholders of their company, except for one shareholder who refused to pull their weight. The shareholders couldn’t agree on how to manage the situation and in the end, chose to sell the company.
“I always try to look at something like that and try to deconstruct it,” Adam says. “How could we have prevented this? What could we have done?”
Having a shareholder agreement in place would have set out each shareholder’s responsibility in clear terms. These agreements also deal with issues of divorce, death, and so on. Basically, anyone entering into a business with other shareholders should get a legal shareholder agreement in place ASAP.
Employment, contractor and/or confidentiality agreements can also be helpful, particularly if you’re sharing your product or service idea with another person. This is where it’s best to get a lawyer involved, to determine the agreements that will best protect you and your business.
For the full rundown on what to know when launching a startup, tune in to the full podcast. You can also check out Pitblado Law’s Resource Guide for Startups or reach out to Adam Herstein directly or on LinkedIn.