On Tuesday we held the first of of our Entrepreneur Academe expert sessions at the Tech City offices of our partners Thomson Reuters. It was attended by our entrepreneur cohort as well as about 20 of our mentors. In this session we looked at all the basics that need to be in place in order to scale a business: legal/regulatory/compliance, finance/governance, HR/culture/leadership and boards/reporting/KPIs.

The afternoon kicked off with a panel discussion with Roberta Draper from City law firm Kingsley Napley, Mark Pattenden and Mel Pittas from accountancy firm haysmacintyre, and recruitment expert Lauren Hine, founder of Zealify and an alumnus of the first Entrepreneur Academe.

Questions came thick and fast from our entrepreneurs, the first was on using options to incentivise staff. The Enterprise Management Scheme (EMI) is by far the most efficient and flexible way to do this for a small company and there’s a detailed explanation of how it works on the Gov.uk website. A couple of notes of caution. As with any share issue, when a staff member converts an option to a share, this will dilute existing shareholders. And remember that this applies only to staff members – not to freelancers or consultants. Finally, expect it to cost around £6,000 to set up an EMI scheme.

On a related note, we briefly touched on HMRC’s valuation of companies. There’s a general consensus that, as with company valuation from the point of view of investors, this is “more art than science”.  Some of the same factors will be taken into account – assets, IP, current and future revenues, potential growth, your sector – but HMRC assessments of price per share are in general lower (sometimes considerably) than a funding-based valuation. It’s probably best to get help from an accountant with this and expect the process to take around six weeks.

Governance is an area many startup businesses gloss over. Areas to nail as early as possible include Companies House filings, roles and responsibilities, lines of reporting, cash flow and terms and conditions. The Companies House Life of a Company document is hugely useful and you can also find good governance and legal advice as well as templates of legal documents at Lexoo, iHorizon and Taylor Wessing.

entrepreneurs and mentors
Having Terms and Conditions from the get-go is also essential but this need not be onerous or expensive. Look at similar companies’ T&Cs and adapt them when bootstrapping, although you may want to get a lawyer to draft your own as you grow. In general, T&Cs should cover payment, termination, liability, data protection and contain indemnities. And use clear language; if you can’t decipher them, it’s unlikely your customers will be able to either, which could make the T&Cs invalid.

On the topic of data collection, always ask: “Why am I collecting this data?” If nothing else, this will inform decisions about the what kinds of data you collect and in what format. Certainly, never collect data just because you can.

We also discussed insurance. The main takeout here was to shop around. Go to several brokers, as their prices will vary (sometimes widely), and be prepared to haggle. It will certainly help if you can show the efforts to limit liability, for instance through background checks on staff and customers (again, this needn’t be expensive – check out Veridoo, Onfido and Yoti for cheap or even free background checks).

On the subject of ownership of IP, the best practice where possible is to own it entirely. However, the default legal status of anything created by a contractor is that it is owned by them. So if you want to retain the IP – or some of it – you’ll need to agree that contractually upfront. Clear documentation is essential here. Weigh up the risks and rewards of shared ownership and ask yourself why you need to go down this route.

Unsurprisingly, the subject of hiring and on-boarding took us deep into the weeds. Some headlines included:

  • Wherever possible, take your time hiring – avoid rushing in and rushing the process
  • Don’t delegate hiring to a junior employee. The process needs to be “owned” by a senior member of the team, so you think about using someone for whom “people are a passion”.
  • Think carefully about the balance of freelancers and staffers. In particular avoid running foul of IR35 rules by being clear that contractors are not working for you alone, in your office and on your equipment for long stretches of time.
  • Be wary of hiring friends – if things go wrong then, well, you can imagine how that pans out. And in any case it’s best to avoid building a monoculture.
  • Ask: “What is our company culture?”
  • Consider recruiting from your user/customer base where possible as these people will be passionate about your product. Citymapper did this very effectively.
  • We’ve said this already, but again: be clear about roles and responsibilities from the get-go – and get them in writing!
  • Don’t create “shopping list” job descriptions when hiring – rather, think about what you specifically need this recruit to do.
  • Remember that all employees need to be paid at least the national minimum wage – the only exemptions are company directors. And as well as fining, HMRC will name and shame anyone breaking this rule!
  • If anyone is moonlighting in your business, they may be in breach of contract with their employer.
  • Famously it’s difficult to recruit tech talent, but finding good salespeople is also notoriously difficult for startups. When doing so you might want to consider whether you’re looking for a hunter or a farmer.
  • LinkedIn is of course an excellent resource all round. Think about using their showcase pages alongside your company profiles.
  • If you’re looking for creative talent, use The Dots for profiling your business and recruitment.
  • Workable and Zenefits are other excellent online resources.

During the second part of the afternoon we ran breakout groups to discuss the main themes in more detail:  Legal/Regulatory/Compliance, Finance/Governance, HR/Culture/Leadership and Boards/Reporting/KPIs. These were co-chaired by our panellists and mentors, including lawyers, accountants, advisors startup investors and angel investors.

Thank you to everyone who gave their up their valuable time to join us.

Our mentors include experienced entrepreneurs, angel investors and business leaders from the Angel Academe community and partner organisations. As well as extensive experience of starting, running and growing businesses, they bring specific expertise in finance and fund-raising; sales, marketing and PR; technology; law, accountancy and people management.

We provide them with an opportunity to get to know some exciting women-led businesses over a period of time. If you would like to join our amazing pool of mentors, we would love to hear from you. Please tell us a little more about yourself.