London remains in the top three of leading global startup ecosystems, behind only Silicon Valley and New York, according to figures from Tech Nation. The report says that global connections are key to startup success, with 25 percent of entrepreneurs around the world maintaining relationships with founders in London.
There's clearly a drive for entrepreneurs to launch startups in the UK market, however what is often overlooked are the legal aspects of growing a startup - especially IP law. We talked with Mark Blunden, head of tech & commerce at full service legal firm Boyes Turner, to hear his advice.
The three-step process
As a technology law specialist, Blunden explains that there are three main processes of launching a startup in any given market: an understanding of intellectual property (IP), the market itself, and how much funding is needed to get off the ground.
"IP in the tech startup world is really important, it's the kind of thing that everyone gets really creative and enthusiastic about without actually identifying that it's really the whole value, and how they can capture that and then what they possibly need to do to protect it,” Blunden says.
IP is the guaranteed ownership of ideas, and with IP rights in place during business planning the owner can take any action under civil law to stop others from using or replicating their service. When used well, the value tends to build up towards the startup's IP assets.
"Understanding how IP works is important because actually a lot of people don't," he adds. "It's useful to have some idea of what copyright is, and people may have some idea from music or whatever they're sort of exposed to in their everyday lives, and it's just a basic understanding that it's mainly copyright in the first instance because these things tend to have some sort of code behind them rather than just a vague idea."
More commonly in the tech space, startups tend to grow when employees get an idea from experience within a particular industry, although this comes with risks. For instance, if you form the bare bones of a product or service while working for another employer, then it's possible that employer could be granted at least partial ownership.
"If you do it whilst being employed then it belongs to the employer of your day job, so it's being careful about that particularly if it's a group of people. That's not uncommon these days – they're all doing different things to pay the bills before they can say they're going to head off and startup because it's gotten to a stage where it's suddenly got some traction.
And IP laws can vary by region, so it's worth understanding the market you are starting up in.
"That's really the IP and that's the value, in making sure that you own it and you properly transfer it into your startup business so that everybody owns it,” Blunden says.
If you can self-fund, get a loan from the bank or seek help from friends and family that might just be the best decision, as opposed to searching for an angel investor in the early stage.
"The further you are down the track and the more that you can demonstrate that it's buyable, the greater likelihood you have of being able to get funding," Blunden says.
"So it's knowing how much funding you need to take, also probably doing it on a few occasions as possible and you could get a loan from the bank as they're not giving any equity away, then obviously as it gets more traction, the likelihood is that you will then go and look for an angel investor who wants a share of the business.”
"It all depends on where in the timeline they are, and if you start on day one getting the basics right,” he added.
"I think what they [startups] need to try and do is get in the market and to revenue and then be strategic and very careful about who you take money from. There is nothing worse than having an investor that is very hard to manage,” he says.
"Try and have a disruptive technology that isn't just a 'me too.' Come up with something different and try and be innovative. If you can bring a disruptive technology or service to the market, you're going to get traction and you're going to get revenue, and a lot of this comes down to getting revenue not to necessarily profit but is what they need to keep driving forward.”
"I think the main advice will be to understand what your target market is. The target market might not be the UK and frankly, you've got an online service so that's fine, but that doesn't mean you need to put an individual on the ground and break into America or have people in other countries.