Planning and preparation is essential when thinking about selling or obtaining investment for any business. When it comes to a tech start-up, there are some specific matters to keep in mind, particularly with regard to intellectual property rights. These will help to increase the price you can command, save time and cost when the process commences and avoid the risk of an aborted sale or investment.
If your business is incorporated as a company, it will be registered at Companies House. This means that no-one else can register a company with that name, but it does not give you any "trademark-type" rights. A buyer or investor will typically insist that the business name is registered as a trademark so that others are prevented from using it, or similar, to refer to the same kinds of goods or services. It is therefore recommended to register your business name as a trademark and to also consider the registration of any other names that may be commonly used in the business.
If your business uses independent developers, they will own copyright in code and content they have created for you - unless you have a written agreement to the contrary. Whether or not there is a written agreement, you will have (in almost all cases) an implied licence to use the code or content for the purposes for which it was created. A potential investor however will prefer the business to own the copyright or have a clear written licence, as this has certain important advantages over merely having an implied licence. You may therefore wish to obtain a written assignment or licence of copyright signed by the developer.
If you process personal data, it is important that you are in compliance with the Data Protection Act and registered with the Information Commissioner's Office, as breaches may lead to fines and reputational damage. Personal data is essentially any information that may allow an individual to be identified and most businesses will process users' personal data in some way.
Alongside the specific tech considerations outlined above, the following general points should also be borne in mind when it comes to selling your business or sealing investment:
- Preparation of the business: If your files are in order and, in particular, your commercial contracts and accounting records are clearly documented and easily understood, you will save considerable time and cost during the transaction.
- Tax planning: It is worth taking tax advice at an early stage, as there may be steps you can take to minimise your tax bill on any sale.
- Your advisors – As a start-up you will naturally be cost-conscious and wish to find advisors that are cost competitive. It is, however, equally important to seek advisors with the right skills and experience for the job, as well as sector know-how. This can save you time and money in the long-run.
Take the first step
There are a number of things you can do to prepare yourself and your business for a sale or investment and it's never too early to start. Don't be daunted, take it one step at a time, get good advice and try not to let the process take over. Remember that your main priority should be to manage your business effectively because, ultimately, you need to have a successful business before you can achieve a successful sale.
- Thomas West is an associate solicitor in the corporate department at Stevens & Bolton LLP
- Olivia Perrott is an associate solicitor in the intellectual property department at Stevens & Bolton LLP