Updated: Jul 21, 2021
This article was originally published in Blockchain Industry Review - a Crypto Curry Club Magazine published monthly and available in soft copy and the printed version.
Featuring International Law Firm, CMS equIP
CMS equIP was founded to provide high-growth start-ups with access to discounted legal advice and support. CMS equIP has worked with more than 150 start-ups within the technology sector and has now expanded to 27 jurisdictions worldwide. They give us some advice about how startups can best prepare to be accepted by the accelerator of their choice. From CMS: Accelerator programmes are an excellent way for early stage early-stage, growth-driven companies to establish a strong support network and gain education, mentorship and in some cases, financing. The aim of an accelerator program is to aid an entrepreneur to grow as fast as possible within a short period of time, however a brilliant idea on its own is not a shortcut to this club. There are 100s of accelerator programmes to choose from. It is up to the founder to research success stories to ensure that they are posturing themselves to be in the best position possible to be accepted onto the programme. The accelerator you choose is likely to be influenced by the duration and rigour of the application process.
Questions you should be asking are whether the programme offers help in the short term which you need to refine your idea in the long term (e.g. do you need access to a seasoned code developer or someone with ashrewd marketing acumen?).
This covers a few points which may help you secure a coveted place at a desired accelerator programme.
Nothing is more attractive to an accelerator than groundedness and vision, but neither is exclusive nor a substitute for a precisely thought through presentation plan.
Your business plan will be reviewed by individuals from a variety of backgrounds so it must be simple and unambiguous (close all loops on questions that may arise by pre-empting them).
Be realistic about your metrics and growth plans so that it is easy to see how you your start-up will get from no revenue to seed, to Series A and so on.
If your business plan can quantify metrics, this allows readers to fully understand how they can best support you through the accelerator and the introductions which would be most useful.
Accelerators want to make sure that they are attracting the best fit for their cohorts so be prepared to be transparent yet balanced about your current expertise and shortcomings.
Be a self-starter and curate a team of advisors and board members.
In the early stages of growing a start-up, it can be difficult to establish the likelihood of success when there is limited information available on customer acquisition, revenues and profitability.
Having a team of established entrepreneurs and experienced board members supporting your start-ups provides validation and shows that they consider the business worthy of their support.
Aim to demonstrate a plethora of support for your start-up.
A company that has secured grant funding or backing from other accelerator programmes, is an excellent indicator to getting noticed by the accelerator
you wish to join.
Have a game plan to show investment readiness.
One of the easiest ways to demonstrate your commitment to the start-up is by demonstrating how deeply you have invested in the relationship with your co- founder, be it legal, personal or professional.
Quite frequently, co-founders are people who do not know each other in great depth and it is likely that co-founders get introduced at an accelerator. It is important at that juncture to consider not just the creative genius or business flair of a potential co- founders but also assess their character on persistence and resilience for tough times. Although this is rarely practiced, a founder would certainly help themselves if they considered early on the specific contribution of a co-founder (with clearly defined roles/ time commitment expectations), and what it might cost the company if they decided to part ways.
Establishing written service agreements with vesting provisions at the outset shows that the founders have thought about all eventualities and are prepared to prevent potential disputes from becoming a huge drain on the company’s time, resources and momentum. A start-up that has a plan to deal with commercial and organisational challenges, and whose founders can cope with bruised egos and disagreements with swift calmness is a good look for a business starting to gain momentum.
Prepare your cap table early on
In the early stages of your start-up, a capitalisation table is a simple spreadsheet, but it will become more complex as the company grows with investment and hires people. Particularly where an accelerator is taking equity in a company, it is essential that you have conceptualised how much equity you envisage parting with (not just at this stage but also in the future) or better still have a dummy cap table to explain future plans. Keeping good cap table hygiene from the start reduces legal costs as the company grows and shows future investors how you got to where you are when receiving investment.
Be clear on the terms of engagement
Each accelerator programme has a slightly different focus and they often present varying terms that start-ups will need to accept upon joining. Some early stage accelerators will look to take equity in a start-up whilst others help founders to fine tune their propositions and prepare them to meet investors. With the varying degrees of control that founders may need to sacrifice when joining an accelerator, it is incredibly important that you do your research and know what is required prior to joining.
Protect your intellectual property (IP)
When developing your product and value proposition through an accelerator programme, it is crucial for a tech start-up to have some background information about what constitutes their IP and how one will protect it.
As accelerators provide an excellent platform for introductions and potential collaboration opportunities, founders should make sure they have thought about answers to these questions beforehand as no doubt accelerator interviews and application processes may well be keen to better understand this. There is various publicly available literature online that a founder can use to self-teach oneself the basics of IP protection, and while this is not a norm, being aware about your most valuable asset is definitely a bonus. These are some practical guiding points to consider when applying for an accelerator. While each programme varies in their objectives, criteria and industry focus, you would, generally speaking, be accelerator ready if you follow these steps.
How can equIP help blockchain and crypto startups?
Whilst working with some of the biggest names in financial services, blockchain, and digital assets, CMS has also developed a strong portfolio of start-up clients who are set to pave the way in this environment. Applicants to the accelerator are invited to pitch to a group of legal experts from a range of practice areas and sector experience. This gives start-ups the opportunity to not only meet lawyers from different disciplines but to receive questions about their business covering a range of perspectives. When assessing the suitability of a start-up for the programme, the CMS team looks at factors such as the funding which has been raised to-date, the composition of its leadership team, and areas in the growth plan where legal experts can contribute valuable insights.
The CMS equIP programme helps blockchain start-ups and scale-up throughout their life cycle. Typically, the team will have an introductory meeting with the client and discuss how to structure their business or new product idea – this often involves drawing diagrams on a whiteboard (or discussing over video-conference post-COVID) to set out potential corporate structures which could allow for a blockchain company (typically cryptoasset- related companies) to function within the UK corporate and regulatory environment. Start-ups are provided with corporate and regulatory advice, often supplemented with additional tax and employment advice, in the form of a structuring paper which can be used by the client as a plan to become operational.
Later, as the company becomes operational, assistance is often provided in relation to drafting commercial agreements (e.g. terms of business with customers), outsourcing agreements (for intra-group and third party outsourcing), and helping to negotiate or consider terms in service agreements.
Often, in parallel, founders will be introduced to IP specialists who can advise on intellectual property issues which can typically be experienced early in the life cycle of a blockchain company. If a company begins to operate and does not have these protections, it can sometimes find itself stuck when it has created an image and user base, but is forced to change these and lose the capital it has built in its brand due to a lack of intellectual property protection.
As the blockchain company comes up with new product ideas, it is important to receive commercial and regulatory opinions on how the new products can function, how they can be developed, and what they need to consider with the current legal and commercial environment in order to make their product a success. It is this commercial element that tends to be most valuable to clients as it helps to direct their products going forward.
Often, blockchain companies will set up employee incentive schemes. These schemes offer shares to employees as part of their benefit package and help firms to create a more loyal employee base and ensure that the employees are more invested in the success of the business. It is easier to set up such schemes during earlier fundraising rounds, which is when the team will typically begin conversations about their creation.
Throughout the start-up and scale-up life cycle, blockchain firms are usually looking for funding. The CMS equIP team have strong relationships with blockchain-related venture capital funds and can often help clients by sending over pitch documents and providing practical advice about how to structure funding rounds, how funding should be sought, the usefulness of obtaining EIS / SEIS status, and various other funding questions
With regular virtual networking dinners (including takeouts via Deliveroo!), introductions to other founders and business mentors, the CMS equIP team is proud of the support provided from start-up to scale-up, and eventual exit.