This is a series of posts where the marmots will be outlining how the Monax Platform can be used by a variety of diverse business sectors.
- Why does the Agreements Network need to be a blockchain?
- Startups: Future-proof Your Contracting
Our experience shows that startup companies seeking to optimise investor capital are keen to move beyond simple paper documents that are signed then left to languish in a drawer. They want their businesses to move in the direction of scalable systems which can be automated, and thus have a need for their legal function to support and complement this growth pattern. This blog post outlines some of the issues facing a typical startup and how the Monax platform can resolve them.
The Service Gap For Startups
Chances are, if you’re involved with a startup business you’re getting a raw deal on how you form and manage your contracts. In terms of quality legal services at a reasonable price that reflect the value delivered to startups, there is a definite gap in the current market.
On one hand, there is a raft of companies offering ‘off the shelf’ contracts which have little or no guidance or dynamism. Crucially, from a business perspective they offer the bare minimum of legal protection. Should things go wrong down the line, litigation lawyers often find rich pickings due to the poorly considered use of such forms.
On the other hand, there is the very real issue of notoriously expensive and time-sucking contractual deals. These are particularly characteristic for tech startups, where each funding round can involve a legal outlay of extreme disproportion (costs typically ranging from 30-100k). To add insult to injury, the fees often need to be repeated for subsequent funding rounds even when the previous set of documents would have provided a reasonable baseline upon which to build up a deal.
The Need For A Middle Ground
It’s clear there is no viable middle ground currently serving the startup model - nothing with the requisite quality and agility which the very nature of startup land demands. To amplify this problem, the middle sphere of modern commerce is experiencing exponential growth. In other words, there is a huge unmet need.
Making Startup Life Easier
With the Monax Platform there is a new middle way for startups to implement and manage their legal affairs, solving the issues described above and many more. So, how does it work? The consumer (for example a startup CEO) is about to hire a bunch of staff and wants to create several contracts of employment. They log on to the Monax platform, search the marketplace for these contracts and select the one most appropriate for their needs. They then fill out the blank sections set up by the lawyer who produced the template, and click go. The documents themselves are held in storage, while hashes of the documents and evidence of their provenance are stored in a blockchain for easy access and control tomorrow.
Next: a suite of business processes are set in motion and subsequently tracked. This allows any parties within the system (in our case, the CEO and his prospective employee) to be prompted to fulfil a particular event at a particular time. The requirement for an employment contract might be uploading ID, evidence of a degree certificate and of course signing.
The Monax Difference
The process above offers far more functionality than an off-the-shelf legal form library. The value lies in the ability to manage and track legal obligations in a more dynamic way, streamline processes and store for future purposes connected records of how and when important documents have been used. This represents a step change from the standard functionality (fill out a form, download a PDF, sign by hand, scan and email to the counterparty). Not only can you automate legal contracting, you can now track every event related to the contract lifecycle and, better still, these events are indelibly recorded on a blockchain for future proof-ed legal operations.
How This Works In Practise
Ed is the CEO of 123AI (*not its real name), a robotics startup developing a new product for libraries. He has just started at the company, and is bewildered by the amount of disorganisation in the legal affairs of 123AI. There are a considerable amount of varying contracts applicable - anything from NDAs, service/product delivery contracts, licensing contracts, investor agreements and employee contracts. And they are stored in several places, from the back of a filing cabinet to a forgotten hard drive.
Over the next few weeks, Ed finds that the majority of the contracts are not being adhered to correctly, given that they are not visible easily and there is confusion as to who signed some of them and indeed where they are stored. The company is about to start another seed round, and one of Ed’s first big projects involves leading this round (which involves several potential investors and is due in a few days’ time). He has to prepare the financial pack, and it takes him hours of searching to retrieve all the contracts applicable to the company which then need to be double checked for validity and any inconsistencies resolved. The due diligence process is delayed as a result, causing the investors to take a dim view of 123AI on account of their disorganisation.
Had Ed’s team used the Monax Platform to form, organise and keep track of the many varied contractual agreements held by 123AI, none of this delay would have happened - he could have simply logged on to the dashboard, selected a customised segment of agreements relevant to the funding round, and if necessary, prove to the seed investors the validity of the signing parties through the blockchain ledger for added peace of mind. The process would have taken minutes, not days, and could be easily repeated during further funding rounds.
Being a startup ourselves and knowing the challenges described above first hand, we’ve been busy creating the tools to take your company to the next level. If you want to learn more about how Monax can help you focus on your business instead of drowning in legal hassle - sign up to a demo below!
Photo by ANDREAS KLASSEN on Unsplash.