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How much does it cost to launch a startup: budget, funding and legal support

Published in: Intellectual Property
by Arlo Canella
Home > How much does it cost to launch a startup: budget, funding and legal support

Bringing a startup to life is a complex undertaking that requires insight, sound financial planning and legal support. In this article:

What is the budget needed to start a startup?

The initial budget needed to launch a startup varies widely depending on the specifics of the project and the target industry. As a general rule, one can consider a cost breakdown as follows:

Legal aspects: between 2,000 and 10,000 euros, including company incorporation, trademark registration, intellectual property protection and legal advice.
Product or service development: between 10,000 and 100,000 euros, depending on the complexity of the product, the skills required and the need for prototyping or software development.
Marketing and sales strategies: between 5,000 and 50,000 euros, including the development of a marketing plan, creation of promotional materials, management of communication channels and sales activities.
Considering these expense items, it is clear that the fundamental costs at startup, while they can vary greatly depending on the specific needs of each startup, are far from negligible.

In order to “save money”, startups are created by teams of people who include the skills essential to the startup. However, it is very easy to wreck the project if, before devoting oneself to the establishment of the company, clear agreements are not made about “who will do what” – this type of agreement between individuals is called an “investment contract” and precedes the establishment of the company.

This is another reason why it is essential to turn to experienced professionals in the field, such as consultants and specialized lawyers, to take one step after another, in the right order, without making crucial mistakes. Let’s see how it is possible to finance yourself.

What are the possible sources of funding and what are the related risks?

As we have seen, the “investment contract” – which is then nothing more than the agreement between the founders-must take into account what the efforts in terms of time and economic resources will be for the startup phase of the startup. Possible sources of funding include:

  1. Personal funding: the investment of the founders themselves. Related risks: none specific, but personal sacrifices may be involved that need to be carefully balanced.
  2. Funding from family and friends: loans or investments made by people close to the founders. Related risks: liability, potential strains on personal relationships.
  3. Business angels: private investors who provide capital and expertise. Related risks: sale of company shares and potential loss of control over the startup.
  4. Venture capital: investment firms specializing in startups and growth companies. Related risks: divestment of significant company shares, loss of control, and active involvement of investors in decision-making.
  5. Public funding: grants, outright grants and incentives offered by government agencies and public institutions. Related risks: bureaucracy, timing of disbursement, and possible compliance with specific requirements that distract from development priorities.
  6. Crowdfunding: raising funds from a broad investor base through online platforms. Related risks: platform fees, marketing to promote the campaign, and efforts to meet contributors’ expectations.
  7. Incubators and accelerators: programs that offer support, mentoring and funding to selected startups. Related risks: divestment of company shares and joining a predetermined program (the quality of support received is not always adequate).

Each of these funding sources has advantages and disadvantages. The truth is that no one funds startups for free and, with the exception of public grants, everyone wants something in return and, therefore, there are related risks or a price to pay.

Consequently, even for “funding” it is advisable to consult a lawyer who specializes in managing this phase to draft a contract consistent with what you have in mind. Even when there is already a lawyer or accountant on the founding team, it is advisable to seek a third-party professional who can act as a mediator and consider the interests of all parties involved in an impartial manner.

How do costs vary over time?

A startup’s costs vary depending on several factors, including business expansion, market evolution, and the internal needs of the organization. Some costs may remain stable or even decrease while others may increase considerably.

Several strategies can be adopted to optimize these costs:

  • Constant monitoring: keep track of expenses and analyze data to identify trends, inefficiencies, and unique opportunities.
  • Reducing fixed costs: consider adopting more economical solutions for office, energy, logistics and other essential services.
  • Process optimization: improve operational efficiency through automation, implementation of advanced technologies and waste reduction.
  • Personnel management: adopt flexible hiring strategies, such as remote work, project work or the use of freelancers to reduce personnel-related costs.
  • Negotiation with suppliers and partners: seek more favorable terms, discounts or promotions that can reduce the cost of procurement and outside services.
  • Strategic collaborations and synergies: establishing relationships with other firms to share resources and expertise, increasing efficiency and reducing expenses.
  • Diversification of revenue sources: developing new and different products, services or sales channels to increase revenue and reduce risk.
  • Monitoring and optimizing operating and maintenance costs is critical to ensuring the sustainability and growth of a startup.
  • Working with experts and taking a proactive approach to financial management can help ensure the long-term success of the business. Starting a startup or enterprise requires insight, timing, and specific expertise.

This is a task that, although it sounds mathematical, is not at all. When it comes to doing business, a calculation like 1+1+1 can make 3, 10 or 100 depending on a wide variability of factors and circumstances. Turning to experienced professionals in the field can make all the difference.

How to take the first steps?

It is possible to simplify the costs associated with starting a startup by dividing them into five main phases or categories:

  1. Self-evaluation phase: includes the time and resources spent on assessing the business idea, skills, aspirations and feasibility of the idea (as a matter of practice, this phase should be handled under secrecy).
  2. Research and validation phase: includes analysis of the market, competitors, and gathering feedback through preliminary testing. The costs involved also include any expenses for access to industry reports or external consultancy (e.g., in the case of innovative products or processes, prototyping and patenting costs need to be assessed before the idea itself is disclosed).
  3. Planning phase: these refer to the creation of the business plan, the search for co-founders, and the formation of the team. In this phase, the expense of any professional consulting is also considered (in a country like Italy, where the tax burden reaches and exceeds 50 percent, when talking about business planning it is not enough to make a “shopping list”).
  4. Development and legal phase: includes the realization of the product or service (development and prototyping), legal aspects such as the establishment of the company and the protection of intellectual property (note that, in the case of a patent, secrecy must be maintained until the filing in order not to lose the related rights). In addition, costs for the headquarters or facility, if needed, should be considered.
  5. Launch or financing phase: includes expenses for promoting and selling the product or service, creating an effective pitch, and seeking financing. In this phase, expenses for any advertising campaigns, promotional events, and participation in trade shows or conferences are also considered.

What is the role of the law firm during startup?

Uno studio legale come Canella Camaiora offre una vasta gamma di servizi legali per aiutare le startup in fase di avvio, garantendo la conformità alle normative e minimizzando i rischi legali. Tra i servizi offerti, è possibile individuare:

Scegliere uno studio legale come Canella Camaiora per la consulenza necessaria durante la fase di avvio di una startup offre numerosi vantaggi, tra cui:

  1. Esperienza specifica nel settore delle “nuove imprese” (basato però anche sull’esperienza conseguita nella consulenza prestata alle “grandi imprese”);
  2. Capacità di prevenire e risolvere problemi legali, riducendo i rischi e i costi associati;
  3. Assistenza nella gestione di questioni complesse e interdisciplinari, grazie a un team e alla sinergia con professionisti specializzati in diversi ambiti;
  4. Accesso a una rete di contatti e risorse utili per la crescita e lo sviluppo della startup, ad esempio nella ricerca di bandi e finanziamenti.

Affidarsi a uno studio legale con esperienza nel settore delle startup può fare la differenza nel garantire un avvio più solido per la nuova impresa, contribuendo a creare le basi per trasformare un’idea di valore in un business duraturo.

A law firm like Canella Camaiora offers a wide range of legal services to help startups in the startup phase, ensuring regulatory compliance and minimizing legal risks. Among the services offered, one can identify:

  • Intellectual property management: protection of trademarks, patents, copyrights and trade secrets, ensuring the protection of the startup’s innovations and competitive advantages.
  • Drafting of agreements between founders.
  • Advising on the choice of corporate form: assistance in selecting the legal structure best suited to the startup’s needs, such as LLCs, LLCs, partnerships, etc.
  • Drafting of contracts: drafting of commercial, labor, supply, distribution and other agreements essential to the management of the business.
  • Assistance in raising financing: advice on seeking financing, including investments from business angels, venture capital, public financing and crowdfunding, as well as drafting related legal documents.
  • Advising on regulatory compliance: guidance on laws and regulations applicable to the startup’s target industry, such as privacy, data protection, security, and other regulations.
  • Dispute and litigation management: legal representation in commercial, contractual, corporate or other disputes, with the goal of resolving conflicts in an effective and timely manner.

Choosing a law firm such as Canella Camaiora for the advice needed during the startup phase offers numerous advantages, including:

  1. Specific experience in the field of “startups” (based, however, also on the experience gained in advising “large enterprises”);
  2. Ability to prevent and resolve legal problems, reducing risks and associated costs;
  3. Assistance in handling complex and interdisciplinary issues, thanks to a team and synergy with professionals specializing in different fields;
  4. Access to a network of contacts and resources useful for the growth and development of the startup, such as in the search for calls and funding.

Relying on a law firm with experience in the startup sector can make all the difference in ensuring a stronger startup for the new venture, helping to create the foundation for turning a valuable idea into a lasting business.

© Canella Camaiora Sta. All rights reserved.
Publication date: 7 April 2023
Last update: 7 September 2023

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Avv. Arlo Cannela

Avvocato Arlo Canella

Managing Partner of the Canella Camaiora Law Firm, member of the Milan Bar Association, passionate about Branding, Communication and Design.
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