Economic and Legal Support for an IT Startup

The IT startup and its stages

• venture funds
• "documents" for funds
• economic parameters
• intellectual property
• forms of doing business and taxation

Terms

IT startup: A company implementing a new business idea, most often operating at a loss at first

Main stages:

• PowerPoint startups

• "seed" stage

• launch stage

• growth stage (Break-Even Point)

• expansion stage (profit)

• (investor) "exit" stage

Extended stages: 1. PRE-STARTUP

– Pre-seed stage

– Seed stage

– Mock-up

– Working prototype

– Alpha version of the product

– Closed beta version of the product

– Public beta version of the product

Extended stages: 2. LAUNCH –

Putting the product into operation

– Analysis of the market response

– Work with the first customers

Extended stages: 3. POST-STARTUP

– Growth stage

– Expansion stage

– Exit stage

J-Curve

Venture funds

Special organizations for financing startups. Up to 80% of investments are loss-making. The profit from the rest pays for everything.

In Russia ~10 years, in the USA ~70 years

Venture funds

• "business angels" (money, connections, management)

• classic funds (money)

• smart funds (money, connections, recommendations)

About "documents"

• Business plan - the main one

• "Elevator pitch"

• "Teaser"

• Presentation

• Investment plan (financing scheme)

• Financial statements

Business plan (structure)

1. Executive summary

• Product

• Team

• Market size and opportunities

• Business model Business model

• Investment

• Investor exit

• Market and industry

2. Market and industry

• Market development prospects

• Market size, segment and potential consumers

• Direct and alternative competition

• Competitive advantages

3. Product and technology

• Distinctive features of the product

• Possibility of indirect application of the product

• Technologies used

4. Intellectual property and protection

• Existing patents

• Patenting prospects

5. Team

• Founders

• Management

• Development

6 Business model

• Production

• Service

• Marketing

• Sales development strategy through primary and alternative channels

• Expected time to market entry

• Key performance indicators

7. Finance

• Sales forecast

• Operating and capital expenditures

• Consolidated financial forecast

8. Project risks

9. Investment and exit strategy

• Amount of investment requested

• Structure and schedule of investment use

• Expected exit strategy

Business plan

Intel started with a business plan consisting of three! paragraphs. "It is assumed that many of the customers will be located outside California" $2.5 million in 1968 the reason - the team - from Fairchild Semiconductors

Project parameters

TCO - Total cost of ownership

SAM - Serviceable available market

SOM – Serviceable obtainable market

TAM = SAM + SOM

NPV ~ investor's net profit

IRR - Internal rate of return - the % at which NPV=0

PBP – payback period, the date when NPV>0

ROI – profitability indicator

Intellectual property

• copyright

– Exclusive right

– Right of authorship

– Right to a name

– Right of integrity

– Right of publication (disclosure)

• patents and industrial designs

• trademarks

• trade secrets

Intellectual property

• Patentable

– Algorithms

– Methods, processes

– Interfaces

• Not patentable

– Mathematical methods

– Program texts

Forms of doing business for startups

• Legal entities

– Limited Liability Companies

– Closed Joint-Stock Companies

– Open Joint-Stock Companies

• Individual Entrepreneurs

Taxes of the chosen legal form of doing business

• "Corporate" – 18%

VAT – 20%

profit – 2.2%

property (fixed assets)

• Simplified tax system – 6% of turnover – 15% of income

• on employees' salaries

– 13% personal income tax - direct

– 30% funds – hidden