Izwan & Partners: Get The Right Legal Start Ahead
Welcome back to an all-new Head’s Up. In this issue, we bring you tips, quips and insights from Izwan Zakaria, the Founder and Managing Partner of Izwan & Partners on why new founders and entrepreneurs should seek legal help early on and it may just help them beyond just the need of drafting legal documents.
He is also the author of The Startup Law Blog, a website covering legal topics and trends affecting technology entrepreneurs and startups in Malaysia.
But just before you go on to read our piece with him, here are some news and announcements. And till our next issue, stay safe and stay healthy!
Singularity Aerotech Asia’s SM4RT TANI Inks MoUs With Key Agriculture Players To Launch UrusTani
Homegrown agritech provider, SAT.Asia through its agritech brand SM4RT TANI, has partnered with SMaju Agro Ventures, Top Fruits, Koperasi Sahabat, YTL Communications, the Malaysian Pineapple Planters Association, and Universiti Malaysia Pahang(UMP).
To commemorate these partnerships, the brand signed Memorandums of Understanding (MoU) with each organization in an effort to optimize its newly launched Digital Farm Management System (DFMS), UrusTani.
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Pickupp completes Series A+ funding co-led by Taiwan E-commerce giant PChome and Cornerstone Ventures, Accumulated Funds Reached USD$15M
Pickupp, the on-demand delivery and tech startup redefining logistics, today announced that it has successfully raised approximately US$15 million in Series A and Series A+ financing from regional strategic investors, after its first-round investment in November 2020.
The series A+ round funding was led by Taiwan e-commerce giant PChome and Cornerstone Ventures, with participation from an existing investor, Swire Properties, and new investors including Cathay Venture Inc. and DRIVE Catalyst (the corporate venture arm of Far Eastern Group) from Taiwan and the Jardine Matheson Group and Zipx from Hong Kong. The company will accelerate new expansion in Taiwan and deepen its presences in key markets including Hong Kong, Singapore and Malaysia.
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Mastercard and Boost Partner to Expand Digital Services and Advance Cashless Economies Across Southeast & South Asia
Mastercard and Boost, the fintech arm of Axiata Digital have embarked on a strategic partnership to provide a range of innovative payment solutions and offerings to deliver more choice, convenience, and security to Malaysian and Indonesian consumers.
One of the first products in the pipeline will be a Mastercard prepaid card that will complement the current offerings by Boost Life, Boost’s e-wallet business. One of the principle aims of the Boost Mastercard prepaid card will be to allow Boost consumers to make seamless, safe and convenient payments in Malaysia, Indonesia, and globally where Mastercard is accepted. The partnership also envisages the launch of SME financial products to expand the services currently offered to small micro merchants though the Boost Biz and Boost Credit platforms in Malaysia and Indonesia.
Boost will also tap onto Mastercard’s technology to expand and strengthen its fintech and payment offerings in the South Asian region, and will support its processing capabilities, payment gateways, and automation efforts.
Interview with Izwan Zakaria
His passion for anything technology related stemmed from a young age and even as he became a lawyer over a decade, the passion never wavered. However, unlike Silicon Valley law firms, Izwan Zakaria couldn’t find many law firms focusing in this particular area.
On top of wanting to become his own entrepreneur, Izwan decided to venture out on his own. And 2 years ago, Izwan & Partners was born with the sole goal of serving the underserved clients namely the technology companies and startups in Malaysia.
Today, Izwan & Partners is a dedicated niche law firm that also acts for many Venture Capitalists (VCs) in the ecosystem when it comes to structuring venture funds and preparing the necessary documents. The firm also works with first time fund managers to set up a micro fund as well as with seasoned VCs to set up an offshore private fund in Labuan.
“Our legal work also includes dealing with regulators when it comes to registering venture funds and lodgment of the necessary information memorandums. When it comes to technology and digital platforms, we are fortunate that we’ve developed a good working relationship with regulators over the years,” says Izwan Zakaria, Founder and Managing Partner of Izwan & Partners.
To date, the firm’s services with regulated platforms have extended to cover equity crowdfunding, peer-to-peer, robo advisor, e-service, and merchant acquirer platforms in their licensing applications with the regulators.
Izwan also shares that as more high-net worth professional want a slice of pie in the next upcoming ‘unicorn’, the firm has serviced several angels in their recent funding rounds.
Why Should Startups Have Legal Advisors?
“In our experience, the biggest distinction between a seasoned entrepreneur and a first-time entrepreneur is that a seasoned entrepreneur has a good set of advisers backing him or her in the venture. The advisers include a good startup lawyer, accountant, tax adviser to company secretary.
“Sometimes it’s just about being able to pick up the phone and ask for help. So, if you’re just starting out your business journey, you need to start building “dream team” now too,” says Izwan.
He shares several usual scenarios when a lawyer’s involvement is crucial. For instance, once a founder decides to hire his or hers first employee, they now become an employer. As an employer, you need to fulfil certain obligations like making the usual monthly statutory deductions and payments on behalf of your employee. Additionally, you need to ensure that the employment contact is water tight to cover confidentiality and IP assignment to your company.
Also, what if a few months down the road your employee is not performing according to your expectations? What are your safeguards in place to manage this situation? Of course, you can find a lot of template employment agreements out there – but many of the templates may not be suited to early stage startups.
For instance, a good employment contract for startups can and will help manage downside risks by incorporating the necessary clauses to ensure that the usual termination notice is not too long or extending probation period to allow you to terminate early so that you can replace the underperforming talent with new talent.
Another usual issue that props up often is when it comes to giving out equity to your cofounder or even early management team. For some reasons, unlike Silicon Valley founders, Malaysian founders like to give out their precious equity too early (and sometimes too much even to 40% at times!) to management team.
He highlights that it is crucial to document the equity issuance in an offer letter or even better implement an employee shares option scheme (ESOS) pool early on so that entrepreneurs can keep track of the shares capitalisation table for future equity rounds.
Additionally, he warns that unexpected events take place throughout one’s startup journey as well.
“For instance, if you ended up being the remaining founder, you may want to have the right to ‘clawback’ for the unvested shares so that you can find a replacement to the departing cofounder. To summarise, it is crucial to consider all these issues before you start bringing outside shareholders like an angel or venture fund in the company,” he highlights.
Izwan & Partners focuses on advising startups and founders on all matters in the early life cycle of a company. This includes advice on setting up a company to sorting out your internal and founder affairs, which ranges from founders and vesting schedule provisions, first angel and seed funding round to hiring your first employee.
The firm also works with other service providers such as intellectual property agents and corporate finance firms when it comes to more complex funding rounds to help manage legal requirements.
Getting The Right Legal Help
Izwan urges entrepreneurs to get the right and sound legal services as those who are not seasoned may not be familiar with terms sheets and it will be a good idea to get a legal counsel to review the terms to ensure that they are “industry standards” terms.
With the rise of new startups and expansion of the landscape alike, more law firms are offering ‘startup packages’ as their way into the space. Izwan tells Head’s Up that there is a good reason why both small and large law firms are focusing on the startup space.
In the case of larger firms, they want to get the most venture backed startups so that they can capture the large deal down the line and in the case of smaller outfits, or even among solo practices, to capitalise on their primary clientele, most of these practitioners themselves are self-employed with huge skin in the game in starting their own startup business.
“Like technology companies, we leverage on digital tools a lot. For instance, we like to call ourselves a fully cloud and digital law firm. So, startups can forget the hassle of physical meetings and they can meet us anywhere in Malaysia or overseas by booking a call with us online. So we hope this can allow us to call ourselves a ‘technology business’ as well.
“Unfortunately, a lot of founders got excited when they get a term sheet and may just agree to all the terms inside the term sheet. Consequently, it will be harder to re-negotiate the terms when the investment stage reaches the definitive agreements stage,” Izwan stresses.
Izwan Zakaria is the managing partner of Izwan & Partners, a corporate and technology law firm. He is also the author of The Startup Law Blog, a website covering legal topics and trends affecting technology entrepreneurs and startups in Malaysia. Izwan was also recently listed as one of the ‘top 50 thought leaders of the tech startup ecosystem’ by e27. He can be contacted on Twitter at @izwanzakaria1 or email at izwan@izwanpartners.com.
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