I already asked permission for hijacking this phrase from José Alberto Sanchis, a US-based serial entrepreneur I met at an alumni event early this year. Back then, global crisis seemed falling rock-bottom with little hope for a quick end.
“No jobs, all the opportunities” is so true in times of crisis. Not only for moguls with enough cash flow for shopping bargains, but for the increasing interest on start-ups from investors and entrepreneurs.
Tech startups are on the spotlight as a key business niche for economic recovery that even governments aggressively support them.
In Mexico, Federal Government has included IT industry into the lines of SMEs projects. E-Government Commission from Mexico City Government organizes Ciudad Movil DF, an IT event where coders access public data and write mobile apps for improving the City. Even, Telmex, Latam telephone mogul, has joined on the quest for finding profitable tech startups through its Innovation and Technology Center.
Business means risk. Startups are riskier by definition. Tech startups are riskiest by nature. Nobody knows if a project only has fantastic coding, magnetic GUI or real money behind it. Hopefully all of them.
Crisis forced us to slow down and rethink business models that were profitable before, and of course, made us think on new legal models for getting the deal through.
A lawyer is a risk filter for an investor to close a deal with a reasonable risk. Then, it is crucial for a pitch to learn about the lawyer´s vision. Here are some hints:
1. Show trustworthy if you are. Lawyers hate mixed signs and contradictory documents. It is important to prepare a small brief of the business for the lawyer or write a specific legal risk section into the business plan, including of course, assets and guarantees to cover contigencies. Most probably, investors/buyers will require full disclosure of your sensitive information for assessing any funding or investment. Be prepared with a good non-disclosure agreement with specific provisions on how to identify confidential information, persons authorized to read and process such information, as well as an enforceable penalty.
2. Corporations are less risky. Corporations could be vessels to make a sell, a joint venture or secure a loan (with stock options, handover deals or the like). In my opinion corporations are more transparent in relation to liabilities than people. Laws have more controls on corporations, so it is cheaper, faster and more secure to perform a due diligence on a company than a person.
3. IP property is a must do. Tech business is all about IP and its legal protection. Tech startups might not have big budget already, but IP must be on the top of priority expenses. Having IP in good standing might not cheap, but not having it could be a deal breaker.
4. Put all agreements in writing. There will be a time when people want look back at negotiations for reference. Verbal agreements and handshakes are hard evidence to discover. Remember, any deal could end up in court, so be careful on reviewing terms in writing.
5. BYOL (Bring on Your Own Lawyer). Remember that all deals are unpredictable storms, and you will require an experienced team to maneuver to safe harbor. A lawyer from acquiring/investing party will not protect your interests. In fact, most probably will not advice you in order to prevent a complaint due to conflict of interest.
Before skipping 9 to 5, it is important to understand that a successful startup requires time, planning and talent to execute. Who knows? Maybe your project is the Internet’s next big thing? And honestly, I hope it is.
Photo credit: Mexican Symbol by bradleyolin
Mexico, as other many countries is organised as a Republic, with three levels of government (Federation, State and Municipalities), and different branches each (Executive, Legislature and Judiciary).
That system of checks and balances, credited mainly to Montesquieu, is reflected in all terms of organization of the State, including the digital Government.
A small part of that digital Government, is to open, update and manage websites to provide services and information to citizens. In terms of transparency, those websites play a major role of that “check and balances” principle.
However, before implementation of digital Federalism to all 2443 municipalities of 31 States and 1 Federal District, with their respective congresses and courts, Mexico finds a big opportunity to take the Federal Pact to the information age.
Among the Government domains, you can find www.finanzas.gob.mx (Ministry of Finance to State of Zacatecas), www.mexicocity.gob.mx (Ministry of Tourism for Mexico City), www.benitojuarez.gob.mx (Municipality in State of Veracruz), www.delegacionbenitojuarez.gob.mx (Division of Mexico City), www.encuentra.gob.mx (Google-customized search engine) and www.gob.mx (redirected to the latter), and the list goes on.
On the other hand, there are many cities with similar names. For example, only in Oaxaca we have 16 municipalities called “San Francisco”, 3 municipalities called “Tuxpan” in different States and 48 with the name “San Pedro” throughout Mexico.
Under rules of Registry MX, to register .gob.mx is only necessary to evidence appointment of an officer and make a formal request of such registration. Only registrants are able to make changes to registration. Registry MX is not a Mexican authority nor has ability to challenge or distinguish rules of Mexican Federation. This explains why www.finanzas.gob.mx belongs to the state of Zacatecas, while any other entity could rightfully claim it.
Under Federalism rules, it makes sense that Federation, States and Municipalities, or their congress or courts, make and manage their own registrations. There should not be a centralized registrant. This would break the dynamics of government actions and take over Registry MX purpose.
I agree. We are facing bigger problems like digital TV, broadband access or bidding of new TV channels. Ambitious and titanic projects. However, if as a Federation, we target to reach 55% of homes nationwide with 5 Mbps broadband by 2015, it is expected that part of those citizens receive internet-based services and information.
For all Governments, this is an opportunity to think ahead of what the digital government needs to deliver to citizens in the near future. For the IT businessmen, this is an opportunity to evangelise public sector and get ready before all “San Pedros” come of age, the digital age.
Photo credit: Mexico City Metrobus by DearEdward
Fifteen years ago, I was helping an IT client to close a sale for Supply chain management software. He was very optimistic about the Mexican market and told me a phrase I still recall: “Lawyers, Bankers and Government are the last strongholds to conquer.”
Yes, he was referring to the difficulty of those ones to embrace technology. At that time, the phrase seemed proper to me. Now, lawyers use iPads for depositions, Bankers have implemented mobile systems for payments and Government moves forward at a different pace.
Federal Government has achieved to get rid of red tape through Government 2 Citizen Services (G2C). Mexico City has implemented some important changes and left behind some other, apparently there are not enough funds for speeding up. Here are my two cents on services that I believe would help the City People in their every day life.
1. Public Registry of Commerce (PRC).
PRC is an office in charge of receiving, recording and managing the changes on real estate property, incorporations of companies and professional corporations, as well as mergers, split-off, powers of attorney and other corporate records.
City Government has made a tremendous effort to digitalize old records as from 1869 to date. Three stages has set for this digitalization.
The first was to digitalize real estate files and books with a current 65% of progress. The second stage is to digitalize new records which has been implemented. The third stage is to receive electronic files of records authenticated with digital signature with has been implemented, too.
In the near future may be possible to search and receive electronic records from the PRC. But what if, Government goes beyond usual services and provide value added services such as email alerts notifying changes in real estate and corporations records.
Bond, insurance and financial companies could be interested in paid subscription to changes in records of debtors, as well as third party creditors and future plaintiffs.
2. Citizen Profile.
City Government charges for a variety of services and taxes. Some of them are periodical like real estate taxes, car taxes (where applicable), water and car pollution verification. Some other are triggered by event, like car transfer records, house transfer taxes, antenna installation and advertising duties.
All those filings and payments have to be carried out severally. Some of them can be solved through the internet. Others still follow the old ways.
But what if, you may access a website, create a profile and keep tracking of all those filings, including set calendar alerts, make internet payments, store electronic receipts of payments, access history of filings, receive suggestions of next steps for your filing and make transfer of cars with other users by clicking a few times.
The same could be done for companies and users with repetitive filings, such as advertiser permits, bars owners and installers of telecom antennas to save them literally thousands of hours and money.
All that has to be implemented, obviously, with a system with government-level privacy and security, but will expedite the red tape.
3. Telecom Infrastructure.
On March 28, 2012, Federal Government established general guidelines for leasing its facilities for installing telecom infrastructure of private operators. The objective of the Project “Federal Facilities for Telecom Infrastructure” or “IFIIT” was to increase, throughout the Country, telecom hotels for operators to set antennas, servers and telecom equipment in general.
The IFIIT is running for two months now and the results are not shown yet. Mexican telecom law imposes interconnection obligation to operators, but do not force to share passive infrastructure (colocation). Needless to say that this will gear up telecom industry.
According to 2010 INEGI data (Statistics Institute), Mexico City has almost 4 million internet users. There is no official calculation of mobile users in the City, but may be over 20 million, plus all telecom subscribers.
As such, Mexico City Government owns and leases several facilities that can share with operators.
Leasing part of public facilities to telecom operators may be a smart income for the City. These operations are simple leases and do not require but City permits for some of the equipment (antennas mostly). So, operators would appreciate a package of leasing and antenna license in the same contract with one single office. As an effect, maybe prices for some services will drop.
HERE IS THE PUNCHLINE. These services may be small, but they are great companion to the efforts of the City to be on the edge of G2C services.
Photo credit: very. fast. internet. Connection by ChrisDag
This is a guest post prepared by John Pavolotsky and Alberto Esenaro.
Gartner and IDC predict a creation of 14 million jobs related to the cloud by 2015 with $1.1 trillion of USD per year in revenue. While these firms have a different vision for the location of those jobs, the overall number is a good omen for these difficult times.
Mexico is the most equipped country for cloud services in Latin America, and 14th of the world, according to the BSA. Together with a growing automotive/aerospace industry, the cloud market will have a boom in the near future.
Beyond the general key points of any type of services through the internet, cloud services have some topics that require specific legal attention:
1. Trademarks, Copyrights and Patents. Mexico, as many countries, has a very broad legal framework and has executed international treaties for protecting trademarks, copyrights and patents. However, in terms of enforcement of that property, some problems may appear in reference to those properties, especially when the internet is in the middle. For example, Mexico does not accept software patents and has no remedies fast enough for the internet era. Whether providing storage in Mexico or abroad, a possible problem would be conflict of distribution rights for digital assets, since characterization as “sale” or “rent” may lead to severe legal problems. In addition the approval of the Madrid Protocol accepting the international trademarks, as well as the ongoing debates at the congress on SOPA-like laws, may put some limits on all online interactions.
2.Telecom Regulation. Some cloud services may require registration as value added service (VAS). As a consequence, a registration filing has to be presented. In the near future, regulation may change. The Mexican Government is trying to catch up with the IT future with its Digital Agenda (issued on April 2011) setting actions for increasing the use of cloud-based apps and infrastructure in automotive, aerospace, electronics and medical devices. Federal Telecommunications Commission (COFETEL) reserved $1M USD of its 2012 budget for a report on public policy for the cloud services.
3.Data Protection and Security. Personal Data Protection Law, and other specific rules for information in possession of qualified third parties, like banks, Notary Publics, trade secrets and other similar cases, determines privacy in Mexico. There are no rules for security requirements, except in banking services and those do not refer to cloud services yet. A lack of data protection law (except personal data) or general privacy law, as known in other countries, puts at risk providers and clients of cloud services. Therefore, data protection and privacy rules for services have to be specifically and clearly set forth in the cloud services agreement, transferring such obligations to employees working for cloud service providers.
4.Damages.As a general rule, damages in Mexican Law only cover actual damages and loss of profit. No other type of damages can be collected. Another problem associated to damages is to fix value on digital assets in case of theft or loss. Conventional penalties may play a better role in covering damages, but they need to be agreed by contract with a statutory limit up of the amount of consideration paid in the agreement.
5.Export Incentives.Mexican companies providing services to companies located abroad, are eligible for export incentive program IMMEX. This program allow such companies to import equipment without paying 16% VAT and other import duties, as well as not charging such VAT when selling, along with other benefits.
6.Jurisdiction and Cross-border transactions.Cloud services use resources when needed, where needed, for the required volume. Similarly, cloud services are architected for redundancy. So, jurisdiction plays a key role for cloud services. Typically, copies of data exist simultaneously in different data centers, sometimes located in different countries, and data is typically transferred from one data center to another, usually in connection with shifting workloads, without the knowledge of the customer. For lawyers, change of jurisdiction is a change of the rules of the game. Thus, if you are a cloud services customer based in Mexico, does your data leave Mexico and if so, to where, and what levels of protection, in terms of privacy, extra-judicial access to your data, and intellectual property rights should you expect in those jurisdictions? Conversely, if you are a customer not based in Mexico, is your data transferred to data centers located in Mexico, and similarly, what level of protection should you reasonably expect under local law. If you are contracting with a U.S.-based cloud services provider, if the data center is located in Mexico, bear in mind that such provider will need to comply with both local laws and U.S. laws. Accordingly, contractually obligating the cloud services provider not to transfer data from Mexico may clear up a number of issues, but as intimated above, the analysis does not stop there. The next ITU World Conference to be held in Dubai next December 2012 may answer some questions on internet governance and define some rules about jurisdiction.
Meanwhile, if you believe not to be ready for taking some rain from the cloud business in Mexico, maybe it is time to start asking the right questions to the right people.
I have been busy working on several projects. That is why I have missed some many interesting topics for my Blog. So, I decided to keep up with these topics in a nutshell.
Mexican Tax Authorities have finally signed agreements with tax heavens Isle of Man, Cook Islands and Cayman Islands for exchanging tax information. The purpose of these agreements is to fight tax evasion.
Ministry of the Interior (SEGOB) issued rules for electronic filing and files of proceedings before such Agency. These rules are another step to cut red tape and complete the digital government project.
Ministry of Communications (SCT) issued the rules for “Reducing the Digital Divide”. This program target low-income families granting subsidies on purchasing laptops and internet access. Whether these rules help to push low-income families into the digital age or not, the Rules will sure help a little.
Telecom Commission (COFETEL) set bands 71 to 76 GHz and 81 to 86 GHz, for free use without the need of concession, permit or filing. These bands are pretended to be used by wifi spots.
The Minutes for the International Telecommunication Union were published (Signed on Altalya, Turkey on November 24, 2006).
Promise to stick to my editor schedule …