Swire accelerator supports Hong Kong start-ups with free legal framework
A website designed to give Hong Kong start-ups a free legal framework in their early stages and as they seek investment has been launched by Swire Properties’ accelerator blueprint, law firm Bird & Bird and early stage investor Seedcamp.
Seedsummit Hong Kong provides four simple documents aimed at start-up founders to guide them through the early stages of their company from the founders agreement and intellectual property assignment through to an adviser agreement and a framework for a term sheet to use when approaching potential investors.
“The whole idea behind this was not to say this is the perfect and the only absolute way to do things, it was more to position a framework that people could use as that starting point, negotiate and find their own investment terms,” said Padraig Walsh, partner at Bird & Bird.
Hong Kong’s start-up scene has been growing rapidly with new accelerators run by private companies to support entrepreneurship popping up across the city as well as government plans to provide HK$2 billion in funding on a matching basis as announced earlier this year.
The Seedsummit documents were drawn up in line with Hong Kong law after consultation with entrepreneurs and investors in the city found some were referring to legal advice they had found online that was often based on California law – a major hub for start-ups.
Walsh said certain local conditions and the gradually maturing start-up scene made it necessary to provide guidelines for entrepreneurs in Hong Kong.
These conditions include entrepreneurs in Hong Kong paying legal costs related to investment deals, unlike overseas where a lead investors cover the fees.
Seedsummit Hong Kong is based on a similar initiative launched in Europe by London-based early stage investors Seedcamp, which was started after start-ups reported differing conditions across Europe, said Carlos Espinal, a partner at Seedcamp.
The framework that was developed enabled investors and start-up founders to both see what the most common terms were in the market and it was soon adopted by the community.
“What we started seeing was everybody in Europe started coalescing around one common framework and you could of course vary [it],” Espinal said.
“But it got rid of a lot of outlier things that were very punitive to founders early on.”
Espinal said greater transparency protects founders and also prevents investors unwittingly jeopardising their own interests.
Richard Hanson, co-founder of recruitment start-up Jobable, said the company plans to use the Seedsummit documents when approaching investors for its next round of funding.
He said fundraising can be challenging for first time entrepreneurs as they must learn a raft of new terminology and be prepared to answer questions in yet further jargon from potential investors.
“Apart from the actual terms for fundraising, there are other documents in Seedsummit that are going to be equally important in saving a lot of time and heartache for founders,” Hanson said.
Business to business start-up accelerator blueprint recently welcomed its latest batch of 10 start-ups for its sixth-month programme based in Quarry Bay.
Start-ups admitted to the scheme offering mentorship and pilot programmes with Swire companies include proximity marketing firm Neoma, online courses company GoSkills and vertical farming company MoVerticalFarm.