When we think about technology, innovation, and disruptive services, we automatically think of startups! These are companies that are in the development phase and are constantly seeking professionals specializing in Startup Law to act as "business partners."
In this article, we will present you with the necessary tools to develop your legal practice with these disruptive companies, also known as startups, understanding the challenges and perspectives in the field.
Working with startups is undoubtedly one of the most coveted activities for professionals in the legal field. This is because these companies don't think about business in the "traditional" way, with innovation being an essential part of their business model.
There are thousands of companies like Uber, Airbnb, Buser, Descomplica, iFood, 99, and Hotmart, for example, that stand out as startups and have a lot to teach us about entrepreneurship.
But what exactly is a startup?
Defining a startup is not an easy task! This is because, since they are innovative companies, there are some elements that are present in some startups but not in others (the variation may depend on the sector in which the company operates).
Therefore, to enhance our studies, we will seek to understand at least five essential elements for a startup!
1 – As a rule, startups are companies in development.
This is one of the most important characteristics! Well, it's very simple, startups are companies in the initial stage of development.
Consequently, there are few times when an internal organizational process exists. Furthermore, despite the business being driven by "selling an innovative idea," in many cases, there isn't even an established business model.
Therefore, one of the main characteristics that can be found in a startup is precisely the fact that they are starting their activities.
2 – Breaking with tradition
Startups, in general, break with market logic! Before it was taxis, now it's Uber. Before it was lunch delivery, now it's iFood. Before it was hotels, now it's Airbnb.
This is one of the elements that essentially characterize this business model. Broadly speaking, there is a disruption of market practices, caused by the product or service that is routinely offered by the startup.
3 – The idea is scalable.
Another characteristic that sets this type of company apart is that the product or service offered by a startup is easily expanded to other markets, at different levels of reach and distribution.
Therefore, those who create a startup ultimately seek to achieve economies of scale by replicating the same product for numerous customers.
4 – Requires third-party capital for initial operation.
Authors who study startups point out that, since these companies aim for a scalable economy in the sale of products or services, the initial capital invested by the founders is generally not sufficient to support the investments necessary for the company's full operation.
Therefore, it is very common for startups to seek external investors to finance the start of their operations or their expansion plan.
Thus, in order to attract investment, these companies carry out the fundraising process, which is also known as raising financial resources.
5 – Use technology in your business
This is one of the most important elements of the startup concept!
Because they are companies with disruptive ideas, they use technology to their advantage. In this way, they are able to develop scalable and innovative businesses, and often they are fully digital companies (whether via app or even website).
How does the law work for startups?
In the daily operations of a startup, numerous challenges can be encountered, and if you are a lawyer and wish to work with these innovative companies, specialization is essential for your development.
Mauro Massucatti Netto, Master in Business Law, startup lawyer, and author of the book "Startups and Accelerators: from origins to a critique of anti-entrepreneurial socioeconomic and legal paradigms in Brazil," revealed some insights into the challenges faced by those wishing to work in this field.
According to Mauro Massucatti Netto, those who provide legal services to startups need to understand that legal knowledge alone is not enough. He explains that lawyers often focus too much on legislation and legal textbooks when, in reality, they need a multidisciplinary approach.
Therefore, one of the main topics to be studied by those who wish to work as a startup lawyer is business modeling.
When we talk about business modeling, broadly speaking, it's the tool used to understand a company's workflows (recruitment, production, sales, and added value).
Therefore, it is essential to understand some concepts such as Canvas, Break-Even Point, B2B, B2C, among others used for business modeling and structuring.
To make it easier for you to understand, I can give you an example:
Imagine a startup that handles business contracts. Therefore, we can consider that we are talking about B2B contracts (this is a business model where the end customer is another company and not an individual).
Therefore, in a B2B relationship, if any conflicts arise during the course of the contractual relationship, these problems tend to be subject to the rules of the Civil Code.
The same logic would not apply to B2C contracts. This is because B2C is a business model in which a company sells its product or service to the end consumer – that is, the customer is an individual. Consequently, the Consumer Protection Code applies.
Therefore, understanding startup business models and structures is essential for lawyers who want to achieve excellent performance in their work.
How to stand out in the field of Startup Law?
As Mauro Massucatti Netto rightly said, multidisciplinarity is the key to success in digital law for startups.
Beyond concepts outside the legal realm, knowledge of Corporate Law (a branch of Business Law) is also necessary.
Mauro told me that startups are born from good ideas, and behind those ideas are people with a great deal of technical skill to develop a particular software or application.
It turns out that a good developer doesn't always have the technical skills in the area of business development, and for this reason, partners/associates are sought in order to complement the team and integrate this other knowledge into the company.
If we take the case narrated by Mauro Massucatti Netto, for example, the startup's lawyer needs to understand the business model, draft the company's articles of association, explain the terminological differences to the partners (for example, the difference between a partner and an executive), know how to structure a shareholders' agreement, among countless other challenges that arose during the legal counsel process.
Therefore, a dialogue between legal, administrative, and accounting knowledge, as well as learning about market rules, becomes necessary for a startup lawyer to succeed in their professional career.
This knowledge can be acquired in many ways! Whether it's through reading a book, participating in an entrepreneurship event, or through a specialization focused on the field, with professors who assist students in developing their careers.
So, you already know, right? Our keywords: study, read, research, specialize! Stay informed about the latest news in the startup field, and count on me for good advice!
I'll see you in the next post! Stay tuned for updates on IDP Online's social media! Happy studying and best regards.
References
To learn more about startups and the legal world, I recommend the book "Startup Law" from Editora Saraiva (2018). ISBN 9788553600311. Available at: https://integrada.minhabiblioteca.com.br/#/books/9788553600311/.
To understand the world of startups, I also recommend the book "Startups and Accelerators: From Origins to a Critique of Anti-Entrepreneurial Socioeconomic and Legal Paradigms in Brazil" by Mauro Massucatti Netto (2020). Link: https://amzn.to/3CHJpJH
To learn more about Mauro Massucatti Netto, connect with him on LinkedIn: https://www.linkedin.com/in/mauromassucatti/
IDP Study Group, on “Market Challenges for Technology Startups, Before and After the Pandemic”, available on YouTube: https://youtu.be/C5aEYgwTaqo
