Ė As you may remember I, an electronics PhD student here in the north of
England, have formed the Slotzz iPad slip case business with Leonie Cunnington.
Now read onÖ
There are many fun parts of
starting a business, but there is an equal number of parts which arenít, many
of which seem to be generated by Her Majesty's Revenue and Customs, which is
the U.K. government's taxation office - but thatís another story!
In the fun category are: making the website, developing the product, choosing the packaging
and writing the company blog. In the less fun category are: taxation,
book keeping, terms and conditions, and partnership agreements; essentially all
the stuff that intertwines legal with finance. And of these one of the trickiest of these
legalities has been the one between me and my business partner, Leonie, so as a
benefit to all I thought I would share.
However much fun we are having at the beginning, the first thing we have
to acknowledge is that business
partnerships do not last forever. Every person's involvement will have some
sort of arc from beginning to middle to end. But how do you make that end
smooth, mutually beneficial and not a source of problems?
It is because of this that
Leonie and I have a founders' agreement in place which protects each of us and
the company. Iím not going to go through all the details but Iíll touch on a
couple of the main points - which you can take to mean the points we found
toughest to decide upon.
Dividing up shares in a
company sounds so simple. Surely dividing evenly is the best solution? Well,
most of the reading Iíve done on the subject points to that not being the case,
but then again there are only two of us so surely in this case that must be the
You can see how we went back
and forth between the issues of even division and keeping it simple but in the
end we decided that an uneven division fits the bill in our case. It basically
came down to our roles in the company and how we influence the business
direction in different ways. Leonie is the creative force within the company. Itís
her craft, skills and passion going into each and every product so itís only
right that she gets more of the business. We have agreed that she gets 60
percent and I am the minority partner.
One of the key things we had
to decide was how we would define our roles and responsibilities. Again, this
is more complicated than we first thought as our roles will change as the
Initially we share the roles
of marketing and the day-to-day running of the business. While I build the
website Leonie pursues suppliers and potential marketing leads. However, once
we start to get more orders more of Leonie's time will be taken up making the
products with me running the business and managing its growth. This is covered
in the agreement and although no tipping point has been defined for when the
roles change itís there in black and white stating that when the orders become
very frequent I will be the one running the business and finding employees as
the need arises.
Now THIS is the real reason
for this agreement; how do you leave a business? We both have the same vision
for now, but we are individuals with academic careers and it is clear that at
some point one or other of us may not want to carry on or may wish to take the
business in a different direction.
This is the part we knew the
least about how and has been most difficult to decide on. This is the most
complex part of the agreement and one which we have to thank many people for
helping us with.
In short, if one of us
wishes to leave then other gets the right of first refusal to buy the bulk of the
shares before they are offered to third parties. The exact value of said shares
is governed by a complicated formula which should work out as a fair deal for
both of us. It certainly has the advantage of being worked on in advance and
not in the heat of some company or personal crisis.
Up until writing the
founders' agreement most aspects of starting up Slotzz have felt manageable and
not too overwhelming. This agreement has been the first time Iíve really had to
scratch my head and work hard from learning the basics right up to drafting
something which we can get feedback on. Having had little interaction with the
legal profession before, this has been quite an eye opener - and I used to
think patent protection was complex!
You might argue that for our
small partnership this is all a bit over-the-top. But the principles are the
key and better to cover them now in the abstract than to argue about them in
the future when the business may be at stake. Getting things right now should
help when Slotzz is bigger and when I come to start another company that is a
more capital- and technology-intensive.
Now thatís out of the way it
is back to the mysterious art of marketing and organizing my upcoming
presentation at the IEEE Sensors Conference at the beginning of November in