Our high-growth and investment team has extensive experience helping young, innovative companies secure the necessary investment to fuel their growth. As legal partners of Entrepreneurial Spark, we're also well used to helping them be investor-ready in terms of facing a grilling when pitching for backing.
Each week, we outline how we would the help the businesses coming under fire from the Dragons deal with their potential pain points from a legal perspective.
Another tense night in the Dragon's Den, as Episode 5 gave us four very different businesses all looking for some Dragons' cash. A few of the main highlights from the night came from Deborah Meaden; always make sure that you have fully identified your customer and it is always worth negotiating any offer which you receive - that includes an offer for investment.
Daughters of the Soil - contracts and trade marks
The Den started with Daughters of the Soil, a bodycare cosmetics brand. There was a lot of discussion around their distribution route and some smaller retailers were not identified as having the growth potential the business was looking to achieve. I wondered whether the business would have had any contracts in place with their retailers, and how the business could ensure that what they had verbally agreed had been put in place e.g. where are products located in shop, what promotion is carried out.
One of the biggest shocks for the Dragons in this pitch was that the business had spent £4000 in obtaining a registered trade mark. A simple trade mark application certainly shouldn’t cost that much unless something had gone very wrong with it and the business was looking to contend it.
Kwizz Bit - who owns the clever stuff?
Next up was Kwizz Bit, an online pub quiz application which can be played on any mobile device. Although the Dragons felt that technology was possibly not what was required to boost the pub quiz sector, the question that arose from a legal perspective is whether or not Mark had designed all of the technology himself.
If he did in fact use a software developer, had he considered whether or not the business actually owned the Intellectual Property (IP)? If not, he should probably get that software developer to formally assign the IP to the business to save him some significant issues should he attract investment in the future.
Not having your IP protected properly is a common mistake for young businesses who use third parties or freelancers to help develop their product. Always ask – do you own the intellectual property rights.
BKD - baking's all about the detail
Finally, we had our first business of the episode to receive an offer from the Dragons. BKD produces kids' baking kits, with an additional subscription element to it. The subscription side of the business was recognised as having potential, however was slow in taking off.
I started to consider what terms the business would want to have in place with its customers in relation to the subscription model in order to protect itself. Does this just roll on a monthly basis? What is the cancellation period? What are the timescales for delivery? What if items are never received? What if items are damaged or faulty? What about the initial 'cooling off' period? All of these should be reflected in the terms and conditions with the customers, and should be available to the customers when they sign up online.
Sent into Space - shaping a business to rocket
This business was pretty much what it sounds like – they send things into space, anything really but in particular they see a market for sending up the ashes of departed loved ones.
There were a number of legal points which were sparked from this particular pitch, again particularly around IP ownership and also in relation to the structure of the business. Chris and Alex mentioned that there were a number of different strands to the business e.g. research, services, products and I wondered if in time all of these different business should sit within the same company or be restructured in due course to separate them out.
Sometimes when businesses are so different in terms of what they do, they are split into different companies. This reduces risk in the one business and also allows them to be more easily separated if one was to be sold off or invested in.
Another point with this one was that Chris and Alex had both come up with the concept of their business whilst studying Phds at university. From time to time, depending on involvement, universities can have a claim on IP if it was something which the research side of the university helped create. I hoped that they had any assignments which they needed from the university, if required.
Get in touch
If you are a growth business seeking investment, or recognise any of the issues we've highlighted as potential concerns for you, please don’t hesitate to contact a member of our team.