Legal Aspects in Startup Establishment

Startups in Indonesia are experiencing a phase of rapid growth and development in the digital technology ecosystem. It is undeniable that Silicon Valley's products and culture have finally spread to various parts of the world, including Indonesia.

Who is not familiar with Google, the giant search engine. Also if you want to connect a network of friends, Facebook is the place. Like commenting or responding to other people's comments, the timeline on Twitter is always busy with it. Want to take selfies and show off cool photos, Instagram is always full of color with various photos from all over the world.

Want to establish professional relationships and gain new insights to enrich professional work knowledge, Linkedin is filled with various professionals from various job categories. For the backpacker, or traveler who have limited funds or want to find a place to stay that is different from the hotel atmosphere, airbnb provides a variety of places in various locations around the world.

In Indonesia, Gojek become a mainstay for penetrating urban streets and ordering food. Love tech startup news, DailySocial have a lot of news. Brothers those who like to hang out online can share “cendol” on Kaskus. Want to shop but skinny (lazy to move) just click Tokopedia. Agate Studio is the place gamecreator to complete their imagination and skills. When you want to buy tickets, book hotels, and get info on vacation spots, Traveloka makes things easier.

Digital technology is made to make life easier, but on the other hand it is not easy for startup actors to live it. They must growth and scaling, then innovate in order to survive, because some others fail. Others continue to grow hopes of achieving unicorn or decacorn status.

As a business, of course, startups must complete their operational instruments in stages. Legal aspects and compliance must be prepared properly, because later it will become mature startup to move in scale corporate startups.

The founding process carried out by the founder and co-founder can be done in the simplest form. They can start with a form of trading business, then gradually increase after reaching growth and scaling can form a legal entity Limited Liability Company. This form of trading business was started because the founder and co-founder did not need to be complicated with tax matters for their business.

Of course at first the founders and co-founders were para "technators". They can hustler and hacker like Steve Jobs and Steve Wozniak or in the form of a couple hacker such as Bill Gates and Paul Allen, where they are also typical of Sergey Brin and Larry Page. However, there are also startups that require attendance hipster to complete it.

The issue of establishing a company at the beginning is not a top priority in a startup, because the main thing is the product and how the product can deliver value to user in the ecosystem. After the product is favored, it will appear habitus for intention to consume or intention to buy.

When the startup will become popular, that's when they will start looking for seed funds from investors like venture capital. Previously they could have obtained funding from angel investors or run the startup automatically bootstrapped.

Legality matters later when dealing with investors venture capital. If the startup already has a Limited Liability Company legal entity, when investment term sheet presented to the startup, they will negotiate the number of shares according to the investment value in the startup.

In Indonesia, there is no division of shares of Series A, Series B, Series C and so on in company law. So do not equate the form of the stock with investment round what startups do when they get investment round Series A, Series B, Series C and so on.

Startups in the form of Limited Liability Companies are classified as closed companies, until the startups reach a certain valuation and then they decide to obtain funding with an Initial Public Offering (IPO) scheme on the Indonesia Stock Exchange. After the IPO, the startup will obtain the status of a Public Limited Liability Company and be given an additional "tbk" after the name of the business entity.

In daily startup operations, of course, must meet legal and compliance applicable in Indonesia, starting from aspects of licensing, employment, and taxation. Then what is important to pay attention to is the aspect of intellectual property rights, such as brands, copyrights, and patents, because the products made must obtain intellectual property rights protection.

Like an ecosystem, nothing is perfect right away. People must understand nature of business and culture from startups. Its movement and growth requires the collaboration of many parties. In Indonesia, it still needs a lot of improvement to make it equivalent to the ecosystem in Silicon Valley in particular or in the United States in general.

Therefore, the issue of regulation must be considered and understood properly, as is the case with the issuance of regulations ride hailing, then about e-commerce taxation, or should someone start discussing about the form through crowdfunding with a broad definition to fund startups. So it's not just crowdfunding by project.

Everyone's Passion, Purpose and Journey are different. Likewise, startups that enliven the business ecosystem in Indonesia. Of course startups have value each and it can then give impact to the ecosystem.

The ecosystem is getting busier and more developed, more people are involved, knowledge and skills are more evenly distributed, income is increasing, which will then foster better economic competitiveness. I prefer to refer to it casually as "startup: it means start to the up".

- Disclosure: This guest entry was written by Doni Wijayanto. He is currently pursuing a career in law, business, and technology. Can be contacted via email to dnwija@gmail.com

This article is a series of book introductions "Legal in Startup Business".