With the rise of the internet came the rise of start-up companies, which allow young entrepreneurs to capitalize on their innovative ideas. One issue that often arises is how the young company should handle legal issues that may arise during the course of launching their business. This is an exciting area of the law that many lawyers find enticing. However, given the limited funds of many start-ups, they do not always have in-house legal counsel or the financial ability to hire a large legal team.
Q: Could you tell me a little bit about Stunable and how you and Co-Founder Samantha Radocchia, came to creating your company?
A: Samantha and I attended Colgate University and upon graduating, each of us decided to take a stab at our own post college endeavors. Sam began a Master’s program in Digital Media at NYU and I took a job at Ralph Lauren in the men’s merchandising department. Amidst our seemingly hectic lives, we would grab coffee and discuss the latest happenings on the media and fashion fronts. We both recognized the ebb in the popularity of flash sale sites and the over saturation in the women’s retail market. We wanted to afford women a more personalized means of shopping online and eventually, we began to develop the algorithm behind Stunable’s recommendation engine. As time passed, we became more engrossed, enough to make me quit my job!
Q: When trying to execute your creative ideas, what are your biggest frustrations with legal practicalities that get in the way?
A: Generally speaking, they’re time exhausting, but the territory comes with the business. You constantly have to make creative sacrifices for the sake of legal protection. For example, our company’s original name was Shop with Stella but for legal reasons associated with the name “Stella,” we had to change our company name to Stunable. As a young entrepreneur, I was naïve to the nuances of the legal world and my advice to all young start-ups would be to self-educate on the legal vernacular.
Also, another challenge is the legal confines as they pertain to design. The design element of the tech world has become a more prominent issue in the media. The Samsung v. Apple case in 2012 shed light on the seriousness of design patents and for a smaller startup, it forces you to take a more unique and legally sound approach to user interface design. However, this also requires that you tailor your creative layout so that it is legally sound.
Q: What are the biggest challenges that start-ups face when trying to launch their business in terms of unexpected legal issues that arise?
A: To be honest, I think the costs associated with legal counsel are one of the biggest, if not the biggest challenge. It’s an eminent necessity, but an expensive one at that. Also, it is difficult to ascertain which costs are of essence.
Choosing a lawyer is a major issue and probably the first challenge you face. It is one that should not be taken lightly. Best way is to meet with a slew of lawyers and make sure to ask them highly specific questions pertaining to how they plan to elevate your business.
Q: How have the challenges you faced at the beginning of the process changed from the early stages of your collaborative process to now?
A: With experience comes more of an understanding of the function of the legal system and even your own legal counsel. You begin to adapt a lawyer’s sensibility and I’ve learned to respect the written word more.
With time comes more responsibility. As the company continues to grow, we take on new legal issues, ie. Mobile applications, ecommerce payments and fulfillments. With each new service we utilize or with every new app we install, there are legal ramifications. You need to establish a concise legal backbone in order to ensure that your dependence on these services and apps don’t impede your business’ success.
Q: What are some of the specific legal issues that have come up as you prepared to launch the company?
A: We have stumbled upon quite a few legal issues. The first major issue being our company’s name change. This had been an issue we were aware of from the beginning and understood that the name “Stella,” was a liability because of an instated patent associated with that name. We weren’t willing to take the risk and thus, changed the name to Stunable.
One of the most common issues is the use of an Non-Disclosure Agreement (NDA). We also had to draft a few copies based on the individual and ensure that those we spoke to, in the initial stages especially, signed one.
We also had a little stint in reality tv and had to negotiate a contract with the Bravo Network. That was the most strenuous legal process and lasted almost 6 months. It was quite the contract, let me tell you…-but I can’t.
Q: At what point in the process did you decide to hire Legal Council, Morris Banks? Before this, how did you navigate legal issues that would arise?
A: We utilized a lawyer at the conception of the site. I think it was an important choice and it saved us a lot of headaches in the future. That being said, I can understand the frustrations of choosing a legal council in the early stages. It’s important to source the startup community, which is surprisingly small, for help.
Q: How do you use social media to advertise and promote Stunable? How do you think things like Instagram and Facebook will affect the success of start-ups in the future?
A: As of this year, you can see the shift in concentration from media to sponsored ads on both these platforms. We have yet to sponsor on Instagram. The Facebook ads can be a money suck if you’re not careful. They make it easy to promote your page and/or ad but the statistics aren’t consistent. It makes it difficult to fully understand the ROI. However, as an early stage startup, these are your primary platforms and the means by which you communicate with the outside community. It’s important to utilize them in organic and clever ways.
Nevertheless, these platforms have gained an exorbitant amount of leverage over startups. A majority of startups-including us!-are utilizing Facebook as a means of access to their site. It will be interesting to see how Facebook plans to capitalize on this advertising clout.
Megan Briskman is a J.D. candidate, ’15, at the NYU School of Law.