Tag: tech startups

Business legal services in Silicon Valley

Common Reasons Tech Business Startup Firms Fail in California

On behalf of The Law Office of Lynnette Ariathurai, A Professional Corporation posted in Business Formation & Planning on Wednesday, October 1, 2014.

Business is all about planning ahead. This is definitely true in the technology industry. Not only does planning ahead include an effective marketing plan and efficient operations plan, it also makes sure that business-planning strategies avoid some of the most common mistakes made by entrepreneurs in the technology startup industry in California. Doing so can ultimately make the difference between success and failure for a technology business startup.

One of the main reasons that technology startup ideas end up failing is that there is no need for the service in the marketplace. A recent survey revealed that 42 percent of firms failed due to failure to identify a target market. The more detailed a profile that a firm has for its target market, the more clearly the firm will be able to direct its resources and marketing efforts.

Another common mistake made by technology startups is having inefficient working capital. Almost 30 percent of technology firms failed due to not having enough cash to continue operations. Therefore, it is best to spend time in the beginning fundraising phases to ensure that a new company will start operations with a healthy amount of liquidity. This can allow business owners to have the flexibility needed during the startup phase, while also enabling firms to spend funds more effectively and strategically.

However, the best marketing strategy and operations plan may be useless if a business startup is not properly formed. This means that the company will have to comply with applicable rules and regulations specific to the new firm’s industry. Also, the correct legal paperwork will have to be submitted to the proper California regulating agencies.

Source: Baltimore Business Journal, “5 reasons your tech startup is likely to fail“, Sarah Gantz, Sept. 29, 2014

business failures, Business Formation & Planning, planning to fail, tech startups

Innovative Services Need Adequate Business Planning in California

On behalf of The Law Office of Lynnette Ariathurai, A Professional Corporation posted in Business Formation & Planning on Friday, February 15, 2013.

When starting a business, it is important to consider all of the legal implications of doing business within the specified industry. Rules and regulations tend to differ for each industry and each type of business. Three new ride-sharing businesses found out how important this part of business planning is when the California Public Utilities Commission (CPUC) sent them cease-and-desist orders. The CPUC was concerned that these companies were not adhering to the same standards as similar services such as taxis.

Two of the companies which received cease-and-desist letters were Lyft and Uber. The CPUC claimed that companies such as Lyft and Uber were not adhering to regulations on taxis and similar services, which the CPUC calls ‘charter-party carriers.’ However, the ride-sharing companies argued that their services do not utilize the same business model as taxi companies and other similar businesses. They claim that the rules regulating charter-party carriers do not apply to ride-sharing services.

The dispute caused CPUC to fine several ride-sharing companies a total of $20,000 in citations. However, the CPUC had agreed to suspend the citations until rules and regulations for these types of services could be finalized. While new rules and regulations are being developed, the ride-sharing services have been allowed to operate under an interim agreement with the CPUC.

Ride-sharing services are not the only types of businesses which may be subject to regulations from authorities in California. Many of the more innovative businesses, such as these, may find themselves in a gray area of the law which has yet to be developed. This means that these types of businesses will require even more careful business planning in order to minimize fines and citations.

Source: The Verge, “Ride-sharing startup Lyft reaches agreement with California regulators, readies Los Angeles launch,” Bryan Bishop, Jan. 30, 2013

Business Formation & Planning, Cease and Desist, software companies, startups, tech startups