Half the value of a business empire is hidden in the rules.
Founder Zhao Xiaobin said that ULegal should be the Internet legal expert who knows the industry best and study the rules together with all partners.
Zhao Xiaobin
Former founder of Tencent WeChat legal team
People in the world called "Marcus"
Before joining Tencent, he worked in Beijing De Heng (Shenzhen) Law Firm is a cross-disciplinary expert in the legal industry and the Internet industry.
While at Tencent, he was responsible for the legal affairs of Tencent's R line, MIG, CDG, and WXG business lines after structural adjustment. He led the compliance of dozens of products such as PC QQ, mobile QQ, and WeChat public platform. We have extremely rich experience in product compliance.
After leaving his job, he joined the Internet financial industry and conducted newer and more challenging compliance explorations in P2P, crowdfunding and other products. Now he is starting his own ULegal (with legal affairs) legal service project, and is committed to providing integrated compliance solutions for the Internet and Internet financial industry by leveraging the advantages of legal services that understand the business best.
Countless star companies ignored the role of rules at the beginning of their establishment and during the critical period of transformation, resulting in out-of-control risks, loss of huge wealth, and even collapse!
In November 2014, the founders of Xishaoye were at loggerheads over the issue of equity repurchase, and the future of a star startup company was uncertain...
2016 In July 2016, Feng Dahui resigned from Dingxiangyuan where he had worked for 6 years. However, it was difficult to cash out his long-term option commitments, and he only received a lawsuit and a fight...
In July 2016, media reports The 18-year-old girl Wang Kaixin fell off the altar, the Magic Department Store is no longer "magical", and the e-commerce platform that raised tens of millions of dollars disappeared overnight...
April 21, 2016, Shenzhen Due to serious noise and dust pollution, the Peacock Organization, a local maker space, caused the occupancy rate to drop from 95 to 50, the capital chain broke, and it began to default on rent, and was eventually demolished by the property company...
2016 On the evening of February 3, 2019, Let’s Sing CEO Yin Sang issued an internal letter stating that due to the failure of the C round of financing and the previous purchase of a large number of hardware equipment, the only cash on the account has been exhausted, and the company cannot maintain employee wages, so internal Employees are quarreling on Zhihu...
The pain of equity distribution, the sorrow of option incentives, unreliable business models, tense labor relations...these are the pitfalls that may arise in the process of starting a business , have you encountered it?
If these entrepreneurs are allowed to start again, will everyone pay more attention to the role of equity structure?
If you were asked to build a team again, would you spend several weeks eating and drinking, and finally divide the equity equally based on the loyalty of your buddies? If you were asked to re-examine your business model, would you pay more attention to cash flow?
Countless tossing and turning on the eve of the release of new product versions, countless nervousness and apprehension when meeting with investment institutions, countless public relations crises when a large number of users criticized them, all of which were caused by failure to understand the rules of play. All in vain. Yesterday, he was the darling of the capital, but today he is deserted and on the run. The rule-based empire that creates new wealth on the Internet, the origin of value is the most basic respect for rules.
ULegal founder Zhao Xiaobin summarized a set of pitfall avoidance guides for entrepreneurship from sample analysis of tens of thousands of corporate customers.
A Guide to Avoiding Pitfalls in Entrepreneurship
1 Pitfalls in Equity Structure
The problems encountered in entrepreneurship are ultimately human problems.
During the Three Kingdoms period, Cao Cao was a state-owned enterprise, Sun Quan was a family business, and Liu Bei was a private enterprise. Nowadays, most business owners are Liu Bei, who lacks resources and funds, so the equity design of the early partners must be reasonable to ensure long-term success.
In the early stages of a startup company, there are only partners, so the distribution of interests among partners is very important. A reasonable profit distribution mechanism is very important and is an important prerequisite for the project to continue to operate and be successful.
The first step in starting a business is how to ensure stability among partners after forming a team. The first is the issue of finding partners, not just acquaintances, but experienced people who match the project itself. After finding the right partner, how to form a partnership is very important. Finding partners in the early stage is based on sentiment, but long-term partnership must be based on benefits. In the early stages of starting a business, one thing that must be settled is how to distribute the benefits. Some entrepreneurial teams may say that it is difficult to discuss interests. If they are put on the table and distributed, it will cause the entrepreneurial team to fall apart. Then it can be basically judged that there is a problem with the team itself.
Typical Case 1: On November 2, 2016, the founders of the entertainment industry vertical media platform "Chief Entertainment Officer" WeChat public account parted ways due to equity distribution issues, and serious differences occurred during the financing process.
Typical Case 2: In July 2014, the star start-up company "Instant Noodle Bar" was separated from a company overnight due to equity issues from a valuation of hundreds of millions.
Typical case three: In November 2012, the famous domestic catering brand "True Kung Fu" staged an equity war, and the two founders who were once husband and wife turned against each other.
2 The pitfalls of intellectual property rights
Early-stage entrepreneurs generally need to think about whether they can aggregate the elements needed for the project: including experience accumulation, team, start-up capital, qualification licenses, business channels, etc., but they often ignore the protection of intellectual property rights. , neglecting the accumulation and protection of intangible assets.
Many people will say that the Chinese have never paid attention to the protection of intellectual property rights, but this is not the case. Ancient Chinese calligraphers and painters would leave their own seals on each work, and would more or less leave some passwords in the paintings to prevent forgers from making fakes. It is said that Dai Song, a painter of the Tang Dynasty, was particularly good at painting buffaloes. Later, someone came to him with a piece of work and said it was his work. As soon as he saw it, he told the visitor that it was a fake. The visitor was surprised because the details of the seal and the painting were almost exactly the same as Dai Song's original. Dai Song told the visitor that if you look into the cow's eyes, you will see the shadow of the little shepherd boy in them.
On November 27, 2014, WeChat third-party service provider Pocket Tong officially announced that it had changed its name to "Youzan", and the brand name was changed from "Pocket Tong" to "Youzan". A trademark search revealed that on April 4, 2014, At least Technology applied to register 8 different trademarks around "Youzan" in 35 categories of advertising promotion and 42 categories of website operation. On May 19, 2014, At least Technology applied to register the Chinese and Pinyin trademarks of "Pocket Tong" in categories 35 and 42, four in one. At present, the domain name of Pocket Tong's official website has also been switched to youzan.com. It is reported that in addition to changing its name to Youzan, PocketTong also launched three platforms today: Youzan Service Provider, Youzan Distribution, and Youzan Alliance.
On November 8, 2014, Momo submitted an IPO application to the SEC, intending to raise up to US$300 million and be listed on the Nasdaq exchange with the stock trading code MOMO. From being a "god hookup tool" to becoming a listed company, Momo was not happy for a long time when the media revealed that its Class 45 trademark "11312563" was registered by a company in Hangzhou. The registered trademark content is social companionship and making friends. Services, marriage agencies, etc. may be prosecuted for this.
Public information shows that the trademark No. "11312563" was applied for by Hangzhou Sharp Software Co., Ltd., with the application date being August 6, 2012, and the exclusive right period being from January 7, 2014 to January 2024. On the 6th, the list of applicable goods/services includes 4502 social companionship, 4505 dating services/marriage introduction/planning and arranging wedding services, 4503 clothing rental, etc.
Momo did not respond to the “squatting” of the trademark.
Typical Case 1: On December 24, 2014, the lawsuit between Jiaduobao and Wanglaoji regarding the red can packaging was temporarily suspended. The court ruled that Jiaduobao should compensate Wanglaoji RMB 150 million and stop using, producing and selling all products packaged in red cans of herbal tea. Jiaduobao immediately appealed and launched a series of public relations campaigns.
Typical Case 2: On December 27, 2012, Beijing Chunyu Tianxia Software Co., Ltd. applied to register "Chunyu" in the categories of 35 types of advertising, 38 types of information transmission, and 42 types of software programming. For the trademark "Doctor", the trademark rights for categories 38 and 35 have been obtained, while the trademark for category 42 is invalid. On July 22, 2014, Hangzhou Qire E-Commerce Co., Ltd. applied to register the trademark "Chunyu Doctor" in 9 categories of APP software. In the same year, on September 12, Hangzhou Lingkuai Trading Co., Ltd. applied to register the trademark "Chunyu Doctor" in the 44 categories of telemedicine services. These two trademarks are still in the review stage. As for the 9 categories of APPs, before "Chunyu Doctor", there were also trademark applications similar to "Chunyu" and "Chunyu Jiujiu". Although "Doctor" is less distinctive, it is still possible to register it.
Typical case three: In April 2016, two "Daoxiang Villages" in the south and one in the north - Suzhou Daoxiangcun Food Co., Ltd. and Beijing Daoxiangcun Food Co., Ltd. were fighting over who was the real time-honored brand.
3 Pitfalls in Investment Agreements
2015 and 2016 were two years when investment institutions were particularly cautious. There was a blizzard in the venture capital world, and entrepreneurs shouted that winter was coming. Projects that lack cash flow are struggling, and many investors are on vacation instead of looking at the project. Investment institutions and entrepreneurial institutions are also fighting over investment agreements.
In November 2015, Entrepreneurship Magazine wrote: In 2011, Lashou.com and Wowotuan received huge investments respectively, and their valuations were quite high. At that time, Meituan's market share could not reach the top three. Wang Xing looked for investment everywhere, but encountered repeated setbacks. Therefore, when discussing financing with Alibaba, Meituan had no negotiating power and had no choice but to sign an investment agreement that allowed Alibaba to consider both strategic and financial considerations. In 2012, Meituan, which received Alibaba’s $50 million in Series B, went on to become the leader in group buying. This has also laid hidden dangers for Meituan’s future development: Alibaba’s withdrawal or stay will cause great harm to Meituan.
Hidden dangers left by Ali: Ali’s investment has always had strong strategic considerations. When Meituan is developing better and better, Ali has always hoped to expand capital increase to control Meituan. The fact is that in Meituan’s C and D rounds of financing, Alibaba has always participated in the investment, exercised priority, and had a say in the selection of subsequent investors. Meituan executives have publicly expressed dissatisfaction with Alibaba’s various restrictions and interference.
The damage caused by Alibaba’s withdrawal: When Alibaba invested in Meituan in 2011, Meituan was valued at about US$300 million. Now Meituan has entered the tens of billions of dollars club, with dozens of times the return on paper. If Alibaba withdraws completely, it can take away US$1 billion in funds at once, which Meituan cannot afford. Other potential investors in the new round are equally unhappy!
Typical Case 1: In March 2015, Chen Ge, CEO of Xingju Technology, an intelligent hardware company, complained in WeChat Moments that its investor, Hongtai Fund, did not make a payment within 20 days as stipulated in the formal investment agreement, and accused it It is "an unreliable fund with no credibility."
Typical Case 2: On the anonymous investor review website Uppers, an entrepreneur told the story between himself and the founder of Jade Compound Investment Fund: The amount of financing was cut off by RMB 20 on the first day of the meeting. On the second day, the amount of financing raised during the meeting was cut off by another 20, and on the third day, the amount raised during the meeting was cut off again by 20...
Typical case three: In 2008, Zhang Lan, the founder of South Beauty, introduced CDH Investment, a well-known domestic investor. CDH paid 200 million in exchange for 10 shares of South Beauty, and signed a gambling agreement with Zhang Lan. If South Beauty cannot be listed in 2012, Zhang Lan will need to pay a high price to repurchase the shares from CDH Investment. After the failure of South Beauty's listing, CDH Investment required Zhang Lan to repurchase shares at a high price according to the gambling agreement, resulting in fierce conflicts between the two parties. In the end, Zhang Lan was eliminated.
It is difficult to start a business. Whether it is from 0 to 1 or from 1 to 100, entrepreneurs need to devote a lot of effort and wisdom for many years. I hope ULegal's "Entrepreneurship Pitfall Avoidance Guide" can help enterprises Lord, Ulegal will continue to develop healthily on the road to entrepreneurship. Whether it is professional legal services or industry rules, Ulegal is willing to grow with its partners.