November 19, 2017

3 tips from a lawyer for your startup’s collaborations

3 tips from a lawyer for your startup’s collaborations

Updated: 8 December 2019

So you have found the perfect business partner for your startup, what should you do now ?

Below are 3 tips for your startup's collaborations.

What is a collaboration?

The term collaborate means to work with someone to produce something.  

First step

First,  you can prepare a summary of the key terms on the 'something' you will create. If you are not comfortable with this, your respective lawyers can also do this for you. The summary terms are sometimes called a term sheet or a memorandum of understanding (MOU).

Keep in mind an MOU is not usually meant to be legally binding but it can be - read the fine print. 

Tip 1: Collaboration Agreement

The collaboration agreement comes after the term sheet or MOU and includes the key terms you have negotiated.

Unlike the term sheet or MOU, a collaboration agreement is binding. Also, this agreement will help you come back to what's important if there is a dispute.

What's included?  Key terms like:

  • Collaboration scope - what the collaboration will involve;
  • Resource sharing - client lists, resources and industry contacts?;
  • Confidentiality - how you will treat & protect each other’s confidential information;  
  • Intellectual property - treatment of intellectual property created before and after the collaboration;
  • Dispute resolution - a clause on how to resolve disputes; and
  • Termination - a clause that deals with ending the agreement.

Tip 2: Do your agreements need to be changed ?

You should consider if you will share resources with your collaborator. Do your agreements change as a result ?:

  • Lease - do you need permission from your landlord to sublease?
  • Insurance - do you need to notify your insurer or include additional workers on your workers insurance policy?
  • Shareholders - do you need shareholder permission for the collaboration?; and 
  • Privacy policy and terms and conditions - do you  need explain new processes customers ?  for example about data collection and use to deliver products ?

Tip 3: Exit strategy 

It's a good idea to think about your exit strategy from the start.

To allow flexibility for an exit,  it is a good idea to cover:
  • Termination - when the agreement will come to an end;
  • Notice - the amount of notice needed to end the agreement;
  • Termination consequences - including handover and return of property;
  • Confidential information; and
  • Intellectual property.

Got questions or comments about collaborations? Leave them below.

I wish you success in your ventures!

About the author 

Vivian Michael

As founder and lawyer at Michael Law Group, Vivian advises Australia's top entrepreneurs on business and employment matters. Clients benefit from Vivian's commercially focussed and pragmatic legal advice, business experience, and commitment to deliver the best quality business legal services to her clients.

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