Startup Story – Do not consider the investment in the Accounting and Law firm as an Expense

During the early stages of the entrepreneurial journey, we usually invest a significant percentage of time and resources nurturing our ideas, building prototypes of our product or service, doing initial market fitment with the limited resources, and getting the initial set of customers who believe in our product or service. However, we often overlook an essential element: the Financial and Legal discipline. In the absence of that, the start-up could suffer a significant penalty due to non-compliance, cause a rift among the designated partners, and, worse of all, could dilute the value and equity associated with your product or brand. 

For an early-stage start-up, it’s imperative to invest in a “Learned” and “Reliable” accounting and law firm, which brings with them years of experience in local and international tax laws, and creates a learning ecosystem for the designated partners on:

  • IP Protection Laws
  • Risk Management & Compliance
  • Contract Management
  • Labour Laws
  • Business Licenses
  • Various Business Structures
  • Smarter Cash Flow Management to mitigate better the risks associated with predictable and unpredictable events
  • Last but not least, the multiple compliances enforced by the Ministry of Corporate Affairs

If we look at today’s ecosystem where a significant % of new-age start-ups are coming with digital products available on SAAS based model, your accounting firm needs to be aware of various critical metrics associated with the SAAS based businesses apart from the usual financial measures such as EBIDTA, Gross Margin, Revenue, COGS, and Profit, i.e.,

  • Unit Economics
  • Average Annual Contract Value
  • Total Contract Value
  • Monthly/Quarterly Revenue Run Rate
  • Annual Recurring Revenue (New, Churned, and Expansion)
  • Customer Churn
  • Lifetime Value
  • Customer Acquisition Cost
  • Marketing ROI
  • LTV to CAC Ratio
  • Adoption Rate
  • Sales Funnel Metrics (MQLs, SQLs, SALs and Opportunity Win/Closures)

Apart from a good understanding of the accounting and SAAS based measures, your accounting and law firm should also have experience in filing patents to protect your novel idea. Both in India and the United States, following are the 4 fundamental requirements to qualify for a patent i.e.

  1. The subject matter must be patentable.
  2. The invention must be novel.
  3. The invention must have some utility or usefulness.
  4. The invention must not be obvious.

The 3 fundamental questions that every entrepreneur has with respect to the patent filing are:

When should an application for a patent be filed?

As per the office of CGPDTM, India, An application for a patent can be filed at the earliest possible date and should not be delayed. An application filed with provisional specification, disclosing the essence of the nature of the invention helps to register the priority of the invention. Delay in filing an application may entail some risks such as (i) some other inventor might file a patent application on the said invention and (ii) there may be either an inadvertent publication of the invention by the inventor himself/herself or by others independently of him/her.

What can be patented?

As per the office of CGPDTM, India, an invention relating either to a product or process that is new, involving an inventive step and capable of industrial application can be patented. However, it must not fall into the categories of inventions that are non- patentable under sections 3 and 4 of the Act. To better understand these acts, please visit this URL.

What is the term for a patent in India and does Indian patent give protection worldwide?

As per the office of CGPDTM, India, the term of every patent granted is 20 years from the date of filing of the application. However, for an application filed under the national phase under the Patent Cooperation Treaty (PCT), the term of the patent will be 20 years from the international filing date accorded under PCT.

No. Patent protection is a territorial right and therefore it is effective only within the territory of India. There is no concept of a global patent.

To learn more about the Indian and USA Patent Laws, do visit the following URLs and further evangelize yourself:

https://www.legalzoom.com/knowledge/patent/topic/what-is-patentable

In the end, I would urge all the new-age entrepreneurs to engage a good accounting and law firm at the initial stages of your entrepreneurial journey and don’t consider this as an expense. It’s one of the most critical investments from the founders and it should not be discounted. During my entrepreneurial journey, I learned this the hard way, and I want to thank Mr. Vinod Rawal from V.Rawal & Co. in India, and Mr. Hemant Patel from Chugh Attorney’s and CPAs in the United States to help me lay a solid accounting and legal discipline quite earlier in my journey. Also, I would like to express my gratitude towards my lovely sister Pooja Jain who played an instrumental role in financial book-keeping and maintaining a healthier cash-flow.

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