Rainer Ratnik At the stage of Latitude59

June 1, 2024 News

At Latitude59 2024, Rainer Ratnik attorney and Baltic COO of WIDEN gave a keynote speech on the Founder Stage. The focus of the talk was about when early-stage startups should focus on legal perfection and when to go for legal MVPs (minimum viable products).

– “Legal” is one of the most underestimated cost line in the budget Excels of many startups who have raised their first rounds.
– Most founders have never before that been buying legal services in a significant amount.
– Lawyers’ ethics demand a “no risk left behind” approach. Also, making a case for all problems being relevant is good business for a problem solver. It is easier and seems more right to push the client for perfection in all aspects of their business.

This often leads to situations where you have over-complicated legal solutions for very early-stage startups. Furthermore, when looking at the costs, founders go “all or nothing” and instead of addressing the risk with less than perfect solutions by implementing an MVP (minimum viable product), they default to doing nothing about it. This “all or nothing” stance and choosing to go for nothing is often the worst possible solution.

Sometimes it creates value to look at the classics and ask, what would have Socrates asked if he was on your team? His teaching was that one should ask questions and create more perspective. To do that in this perspective, one perhaps could do as follows:
1)      Ask, what is the origin of the thinking?
2)      Challenge the assumption.
3)      Ask for a counter-argument from the author of the argument themselves.

So… What would Socrates ask as a founder about perfect vs MVP legal solutions?

1)      Can the imperfect solution be later redone from the minimum viable product to the perfect solution and at what cost? – E.g. if you don’t know what your product is, perhaps you need an MVP + perfect terms for changing the terms step by step?

2)      What are the real-life examples of similar negative implications of implementing a legal MVP? – If nobody ever has heard of this risk materializing, perhaps you take a conscious risk about it and address it after the next round?

3)      What is the counter-argument, i.e. – what is the upside of initially implementing a legal MVP? E.g. on testing a new business line, perhaps you need a one-pager instead of beginning with legal design before even testing your business bet?

When is legal perfection necessary?

There are 4 whales where going for the minimum viable product is likely short-sighted:

1)      Equity. Usually nobody is willing to give up their position there after it has been written down. Thus, has to be written down as good as humanly possible.

2)      Intellectual Property. Once the IP becomes to have a value, nobody usually is willing to assign it (or assign more of it) to you.

3)      Licenses to operate. If you need a license to operate and start without it, in many jurisdictions, you may face criminal charges – quite nasty to deal with. Might be a “game over” situation.

4)      Ethics. If your gut says it is unethical – go for perfection. You cannot roll it back: undiscriminate someone or undo a data leak because you tested on real data.

Ask these 3 questions. If you can, as a early-stage startup, opt for MVPs – go for the MVPs. Don’t go all or nothing if there is too much – an MVP is 100% better than nothing. And, finally, do not mess with the 4 whales – they demand perfection.

What should one ask themselves when making the decision between legal perfection and legal minimum viable products?

1. Can the imperfect solution be later redone from the minimum viable product to the perfect solution and at what cost?

2. What are the real-life examples of similar negative implications of implementing a legal MVP? – Are these real or theoretical?

3. What is the counter-argument, i.e. – what is the upside of initially implementing a legal MVP?

Video recording of the keynote speech: