Why startups need lawyers, not legal templates

By Mark Goh Aik Leng, Founder and Managing Director of VanillaLaw LLC

Article first published by Tech In Asia

Ask any entrepreneur who is in the early stages of funding their business about their priorities. There’s no doubt that funding, growth, and product development will be among them (plus caffeine, of course!). Somewhere at the bottom of their priority list will be all their legal matters. This is understandable for growth-orientated startups.

Additionally, some entrepreneurs think that lawyers are prohibitively expensive and that legal templates can be downloaded from the internet. This is common—but wrong. Such a mindset can lead many successful startups to wind up their business or something worse.

This fellow could save 

There are over 2,000 startups in Singapore and the city-state has been justifiably named as one of the top 10 startup ecosystems in the world, with 220 funding deals made in 2015. It is evident that Singapore has become quite the wellspring for entrepreneurs and startups, and while this is great for our economy, it does bring with it its own brand of problems and challenges.

These fellows from grief as they grow their business

Many first-time entrepreneurs are sometimes so overwhelmed by the bustling activities and the ins and outs of running a new business that they tend to overlook legal fundamentals which ensure protection if things go wrong.

Unfortunately, the cost of legal services is often daunting for startups that may have limited funds. This makes sense, with the market rate for a website’s terms of service (prepared by a lawyer) at approximately US$2,100. Bills could add up if you include additional vital documentation such as employment contracts and partnership contracts.

The surprising reality

One in 10 startups fail due to legal reasons, many of which could have been avoided if basic legal matters were taken care of properly. This happens because these business owners either tried to use a contract template off the internet or never sought legal counsel from a lawyer.

It is understandable if they were concerned about legal fees. But dealing with issues with legal documents and having to appear in court to settle disputes will cost them so much more. This is a classic case of being penny wise but pound foolish.

A client’s case from before comes to mind here:

There were two young Singaporean entrepreneurs (Company A) who discovered a way to make special industrial ovens that were fundamental in baking microchips. They were based in the US and went to Taiwan to find an industrial oven manufacturer (Company B).

By this time, Company A had secured millions of dollars in the form of pre-orders. They knew they had to produce the ovens fast, but they also knew the importance of legal protection. So, they downloaded a legal agreement document template off the internet and made modifications without consulting a lawyer. Through this, they secured their position as the sole distributor of the ovens in the US—or so they thought.

Everything was well until 5 years after the initial launch. Company B found a loophole in the agreement signed by both companies and used that to terminate the agreement and sue Company A for damages. This apparently came off the back of late payments and other breaches in the original agreement committed by Company A.

Company A, embroiled in lawsuits, eventually had to wind up. Meanwhile, Company B repositioned themselves as both the manufacturer and the distributor of the specialized ovens in the US, essentially taking over the entire market.

The changing reality of the law

In the past few years, we observed that there has been a rise of companies that make use of technology to create legal documents for multiple types of situations. This is an improvement from using templates without the counsel of a licensed lawyer. Innovative individuals have made this their core business, leveraging on the savings their clients could enjoy with their service/product. For businesses with limited budgets, like startups, such a service is an ideal way to make sure they have some form of legal protection for their business.

The legal landscape is set to change and face-to-face consultations—the traditional way lawyers conduct their business and one of the main reasons why legal services are expensive—may soon fall out of favor.

A balanced approach

Looking at the legal challenges startups face and the changes that are already shaking up the legal communities in Southeast Asia, there is an aspect of this entire issue that can sometimes be forgotten—considering the mindsets of startup owners and their legal needs. Legal protection is important for businesses, but it is not always as simple as using a program that generates a draft of a legal document and hoping or assuming that it is the right type of document for your business.

It might be more accurate to say that currently we are in a middle ground, where technology helps to alleviate some of the basic and labor-intensive ground work done by lawyers (which is normally charged directly to the client). But we will still need to see qualified lawyers giving legal advice to make the content of legal documents more suitable for their clients.

A cost-efficient, technology-oriented service coupled with face-to-face consultations with lawyers might be the best way to give business owners true peace of mind.

Yellow Fever

On 12 June 2018, Singapore hosted a historic summit between Donald Trump, the American President and Kim Jung Un, North Korea’s leader. This was the first time ever that the President of the United States of America, who is often called “Leader of the Free World,” stat down and talked to the leader of the world’s only communist dynasty.

Whatever one might feel about Donald Trump, the world can only hope that his gamble pays off and the North Koreans decide to make peace and get rid of their nuclear weapons. The world can only hope that the younger Kim will become an enlightened leader who leads North Korea into peaceful prosperity.

While we may wish for good things to come, the odds are they won’t. The Kim Family, which has run North Korea since it was founded in 1948 have proved to be very good at holding onto power despite one brutal war and virtual isolation from the rest of the world. The Kim family are very aware of the fact that nobody invades countries that actually have the bomb and have shown a willingness to use it. The Americans were happy to get rid of Saddam Hussein in Iraq because they suspected he had the bomb but when it comes to North Korea, which has the bomb – everybody sits down to talk. Every North Korean watcher has said that the Kims know that their survival depends on having nukes and even dares to dream of the Kim dynasty surrendering their nukes.

If you look at the document that was signed, the young Mr. Kim only said he would “work towards the denuclearization of the Korean Peninsula.” He avoided committing to a time frame or letting international observers enter the country.  In addition to that, the American President who had been insulting towards him a few months ago (“Little Rocket Man,”) transformed into the cuddly father-figure that the North Korean never had. The Trump who is old enough to be Mr. Kim’s father could not stop gushing about Mr. Kim. He called him “talented,” and said that he “trusted” him and most importantly talked about the “special bond” that was forged. One the main press briefings where Mr. Trump waxed lyrical about his new favourite son can be found at - https://www.youtube.com/watch?v=00G-mUn12os

In fairness to Donald Trump, he seems to have caught a disease that many Caucasians get when they enter Asia – Yellow Fever or the disease that robs otherwise sane and capable people of their sanity and reduces them to blabbering idiots. I remember being in court during the Ku De Ta trademark dispute. This monumentally successful night club in Bali was built by a visionary Australian called Arthur Chandros, who had brought in a few of his fellow Australians and Brits into the venture and somehow, when the relationship collapsed, everybody was left arguing over nothing. The reason was simple – no proper agreements were drawn up. When put on the stand, everybody just said, “He’s my mate – we trusted him,” and “that’s how it works out here.” I remember one the men who had testify was a very successful pub owner in England. In the words of PN Balji, the founding editor of the Today Newspaper (and the main contractor on the job), “This man is a big timer – would he do this in England?” The answer was obviously no – he wouldn’t have reached his status in England had he behaved the way he behaved in  Bali.

The most common cases of Yellow Fever occur in older White Men, whenever they get a much younger Asian girlfriend. The ingredients of the relationship are usually obvious – he rediscovers his youth and the joys of being loved by a young sweet thing. She finds the meal ticket for herself and her family. 

I shouldn’t be critical of this phenomenon in as much as it has alleviated many people from poverty. If a man can bring up not just the girl but her mother, father, brothers and sisters, he’s managed to alleviate at least four people from the reality of abject poverty (which remains the case in rural Asia.)

So, on one level you could say that this is a fair exchange. Guy gets youth and girl gets to be a faithful daughter by bringing up her family in life.

However, the question remains – does every party in this type of relationship understand the exchange. The Asian continent is filled with Western men who were in senior corporate positions giving away money to their “girlfriends,” and then discovering new depths of disappointment when the girlfriend does not live up expectations.

In many cases, you’re looking at the guy and find yourself screaming, “Dude – you’re an executive corporate vice president (usually of a world respected company).” Somehow, the brains and guts that got the guy to this top job paying barely legal amounts of money desert him when it comes to a bit of yellow or brown pussy.

Perhaps it’s a culture thing. While love does happen between social classes in Asian societies, Asian, particularly the Chinese are better at compartmentalizing things. I think of the novel “Nobel House” by James Clavell where there a brothel owner explains to her girls, “If the customer is Chinese – no need to pretend to like but if he’s Gwei Lo, you must pretend to like it.”

In a way, sex is pretty much like life. It’s more fun when the other party has fun too. To put it bluntly, most men would kill themselves if their partners didn’t pretend to orgasm. However, when it comes to the “paid” variety, many Asian men understand there’s an exchange involved and she’ll do enough to make you feel happy but that’s about it. Asia’s brothels are filled with Western men who forget that there is a correlation between the intensity of the female orgasm and the amount paid.

The Asian continent is filled with many great opportunities for things like business and love. For Western men, the allure of Asia is particularly strong, especially when it comes to women who may seem prettier and demurer than what they have at home. It’s especially tempting when women throw themselves at you merely for being who you are.

Yet, the rules of the game of life remain. While Asia may have things that appear different, Asian people are not less different in what they want from anyone else and I’d ask many White men – “would you behave that way at home?”

So, while the President might think that he’s found his new favourite son, let’s not forget that the Kim Dynasty of North Korea hasn’t changed – they’re still a bunch of power hungry murders who have lied and cheated the rest of the world when it has suited their needs.