Startups, emerging enterprises, and aspiring entrepreneurs are increasing at the crosshairs of a messy challenge, namely, how to create an orderly, secure, single source of truth for their documents and agreements.
We recently asked Equa Start Vice-President Sten Wie, to share a few brief thoughts on the herculean efforts taking place at Equa START to deliver a fresh set of solutions around this prevailing issue.
What’s the fundamental problem Equa Start is trying to solve?
The problem we are solving ties back to a knowledge gap among entrepreneurs and business owners around running a company efficiently and compliantly from a document system, corporate governance standpoint.
When you say corporate governance, what are you referring to?
It’s true, most people don’t know what that is. They may have a vague understanding or an operating agreement that references it and states that they have to do certain things. But they don’t understand the recipe in terms of their document system.
Can you elaborate a bit more here?
Business owners are often solely focused on building a product, idea or brand, that they are seeking to communicate to customers. While that’s great, they later find that not managing these document systems in an efficient way becomes problematic.
Problematic in what way?
Let’s say you want to add capital to your company because you’ve taken on a new partner. Or you want to issue shares or do a capital raise. It’s no mystery here that your documentation trail needs to be solid. There’s a proscribed process for doing this and doing it right. And if you don’t, you’ll be subjected to a lot of risks.
What are some other instances where due diligence around documentation is important?
If you are a company that’s vastly successful, and you want to get acquired or have now issued shares, documentation is of vital importance. In other words, you have issued stock or vested shares and handshakes have taken place. But if that paper trail is not outlined, defined and stored somewhere, then you expose yourself to a tremendous amount of liability. Even worse, you could even get sued if people become angry.
So a failure to address these shortcomings creates exposure?
Correct. It’s a simple truth that when you are leading a company that has reached a certain level of success, you will have a target on your back in one way, shape, or form. And without a process of establishing and maintaining your corporate governance, all this can now become a threat to the wealth you’ve built, to your livelihood, to your family, to everything.
So how does Equa START fit in here?
Doing this well and doing it right is our motto with clients. We are essentially providing an old school software installation wizard for document management, agreements, and corporate governance.
What’s the primary value proposition?
Whether it’s an employee agreement, vendor agreement, new bylaws, whatever a group of people can create consensus around the terms of a document, that’s where we are here to help.
But why replace the architecture or systems a company currently has in place?
Great question.So here’s the deal,many of these systems made sense and worked when a company was in its early stages and had, say, two partners. Problem is they never went back to their corporate bylaws once their number of partners grew and said, OK, we need to make sure that we have one version of a document instead of each partner making revisions and not knowing what the reality is, what the true document is.
So, in other words, it’s very difficult to reconcile what the truth is when everybody can individually without oversight, without notification, edit that reality?
Correct. If you have nineteen partners and they are all editing things, how do you reconcile all of that? Often things are in paper format, in Dropbox, maybe even in Excel. But there is no path, there is no process to force everyone to do it in only one master document, in one place. This is what we mean by the term “single source of truth.”
What is the ramification of not addressing this?
Without this reconciliation and due diligence, people simply do whatever they feel they need to do with regard to a single source of truth. It’s not malfeasance or people trying to screw one another. It simply becomes a scenario where a bunch of people all acting independently in terms of what they think needs to be done.
What sorts of issues ensue from this?
As more and more people become layered into this process, it becomes extremely problematic. Because if everyone is not looking at the same single source of truth then it becomes almost as if impossible to figure things out and to bring everything together.
So ultimately, what’s the solution?
Reconciling their documents into a digital environment where everyone is looking at one truth.
Can you describe the Equa START onboarding process?
It starts with setting the expectation in terms of the documents that we are going to need from your company, things like an operating agreement, bylaws, board meeting minutes, and corporate shares documents. Our philosophy is to get all of this gathered first and so we can migrate it into our system and structure it properly.
At that point, what’s the next step?
Once captured on our ecosystem all future document changes can occur in a single document instead of ten people having ten different versions of the same document. Everyone who has access to that single document can’t change it unless there’s a consensus.
And then are there principal overseers of this process?
Yes, your company leadership will determine who is going to be the administrator. You’ll also be prompted to invite your chief financial officer and legal counsel so that everyone can begin working within your one document environment.
So how will the system work once these documents have been migrated into the Equa START environment?
Once everyone is working off of the Equa framework, changes can be redlined and passed back and forth through a notification system that essentially says, alright, somebody made an edit or change here. But you can’t delete text because it’s always just redlining. In other words, you make a suggestion and then that suggestion is then sent out into the notification. The beauty here is that all of the documentation is captured in one environment instead of being pulled out to email or retrieved from Dropbox.
So ultimately this represents a much more efficient process?
Yes. When you can make something that may normally take five people, two hours and boil it down to something that takes five people 30-minutes, this can represent enormous time savings. And if you multiply this every time you need to go through this process, you are also fundamentally saving so much money for your company. In the end, you are preserving wealth instead of just letting it go out the back door with all these expenses.
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