MIT Enterprise Forum CEE Learning Partnership: Babson Student Take-Aways
Babson MBA and undergraduate students recently partnered with top foreign start-ups in the MIT Enterprise Forum (EF) Central and Eastern Europe (CEE) to explore issues in US market entry strategy.
These issues related to law, and included questions discussed with entrepreneurs throughout the course: business formation and strategy, intellectual property (IP), contracts, liability, human resources (HR), and more.
Here are highlights of their lessons learned on law in the context of rapidly growing start-ups:
Law as a lens and tool of strategy:
- Legal astuteness can help an entrepreneur do more than limit risk. It can also help identify opportunities and create value.
- In at least one case, new laws are creating or expanding markets for a product.
- In evaluating barriers to entry and external threats, some students noted that law and compliance with standards can be among several significant factors. For example, regulations present issues in the context of food safety and medical technology (such as solutions based on bacteriophages and use of lasers to identify microorganisms).
Business formation:
- A foundational question is how to create an entity (a person for legal purposes) that protects the entrepreneur from personal liability, and also serves the founders’ purposes in terms of raising or sharing equity and controlling the business. Students noted the similarities in options for business formation across countries.
- In some cases, entry into the U.S. market justifies creating a subsidiary or, instead, the pursuit of a franchising model or licensing their technology (see next item).
Intellectual property (IP):
- In one case, the founder of an employer brand management platform prefers to create and license a technology package to other available options, such as subsidiary formation.
- Equally important to careful draftsmanship of license or franchise agreements is due diligence in choosing one’s partners (a recurring theme highlighted by guest entrepreneurs in our MBA course in class meetings on business forms, IP, contracts, liability, HR, and more.
- In at least one case, a company making a physiotherapy diagnostics device prefers to protect its IP as a trade secret, but its licensing agreements allow for sharing some of its algorithms with clients in the case of its bankruptcy. This example illustrates how contracts can be better tailored if one thinks-through contingencies and identifies motivating interests of parties, as advised in the books Breaking Through Gridlock and Getting to Yes.
Contracts:
- At the foundation of tools to limit risk and create value in all the other contexts listed here are enforceable agreements. Just as “war is too important to delegate completely to the generals,” contracts are “too important to delegate completely to the lawyers.”
- Even with the best ideas and talent, the choice of business model can make-or-break a start-up or its expansion into new markets. This is an example of law (contracts) being the essential tool for executing strategy. For example, in the case of a talent acquisition company, they must decide on a platform subscription model or a pay-per-hire service; either way, the strategy is made real through the use of law. This insight (that legal and strategic questions are inseparable in practice) was one of the realizations that the experiential learning experience was intended to provoke.
Liability:
- Data privacy laws (for example, the GDPR of the European Union or the CCPA of California) mean that, even as a young company, it is essential to develop procedures on the processing and storage of information and to train employees on them.
- On a related note, founders in the European Union may have developed competitive advantage thanks to operating in a highly regulated jurisdiction by virtue of having to develop strict processes and a conscientious work culture in, for example, the context of private medical records.
- Regardless of the product or service, any entrepreneur is well-advised to think-through various contingencies and consider warnings and disclaimers and liability insurance.
Human resources (HR):
- It is never too early to develop an employee handbook and training on operating procedures. This helps to limit uncertainty and liability risks related to employee conduct.
- However, again, students framed this take-away in the context of generalizable lessons learned from conversations with guest entrepreneurs during our previous class meetings – specifically, that there is no substitute for getting to know your partners well, and for due diligence when hiring people. Here again are links to student take-aways from previous classes on business forms, IP, contracts, liability, HR, and more.
Thank you to the Babson students who embraced this opportunity and helped make it a success, including Arber Cufe, Cecilia Hermawan, Dani Wang, Daniel Gasperowicz, Eduardo Rivas, Jeffrey Levine, and Lauren Park. Thank you to the MIT EF CEE start-up founders who likewise engaged as learning partners, including Adam Wozniak, Adrian Augustyniak, Barbara Zych, Klaudia Szklarczyk, Lukasz Skryplonek, Michal Wendeker, Pawel Kwiatkowski, Piotr Smolen, Michal Wronecki, and Tomasz Florczak.
The companies participating in MIT EF CEE this year were: