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Startup disputes can vary in complexity from basic contract disputes to billion-dollar tech transactions, among other conflicts. As technology and innovation develop, the businesses become more global, and startups are likely entering into cross-borders agreements not only with customers and employees, but with contractors, business partners, and stakeholders.
Often conflict arises in the venture capital sector when there is a fundamental mismatch in expectations among investors, management, and/or the founder of the company. This could be driven by such factors as an investor’s lack of deep knowledge about the startup company, or a lack of trust in the broadest sense—not just relating to competence or business acumen, but in the sector and jurisdictional expertise of a founder or investor. Founders can also sometimes feel there is excessive management oversight, and may actively try to curtail investor control due to the investors’ lack of understanding of the business and its aims.
Typically disputes might occur when investors would like to remove the founder and replace management. There might be an investigation into misconduct if the founder has too much control. Fraudulent accounts are often a reason for conflict. Convertible loan defaults and a breach of contract or fiduciary duty are other common reasons for disputes. We consider some risk mitigation tools: