Welcome to part 4 of our 5 part blog series supporting our recent webinar “How to launch your business in 8 weeks with a no-code MVP“. You can request a link to the webinar recording here.
As a founder on the brink of launching your MVP (Minimum Viable Product), you’ve probably already weighed the benefits of traditional software development against the allure of no-code platforms and the speed, cost-effectiveness, and ease of use of no-code development have tipped the scales in its favour. But before you dive headfirst into this innovative approach, it’s crucial to understand the legal implications that come with it. In this article, we’ll explore key legal aspects such as intellectual property ownership, tax reliefs in the UK market (particularly EIS and SEIS), and how investors perceive startups built on no-code platforms.
Intellectual Property: Who Owns What?
One of the first questions that arise when using a no-code development platform is the issue of intellectual property (IP) ownership. In traditional software development, you own the code created by your developers. With no-code platforms, the situation can be slightly more complex.
Understanding No-Code Platforms
No-code platforms provide pre-built modules and drag-and-drop functionalities that allow you to create applications without writing code. Examples include Bubble, Adalo, and Webflow. These platforms are incredibly powerful, enabling rapid development and iteration. However, since you’re using their proprietary technology, understanding the nuances of IP ownership is crucial.
License Agreements and Terms of Service
Each no-code platform has its own licence agreements and terms of service. Generally, you own the final product you create using their tools, but the underlying components (the actual no-code modules) remain the property of the platform provider. It’s essential to thoroughly review the terms of service of your chosen no-code platform to ensure that you have full ownership of the end product and that your IP rights are protected.
Custom Code and Integrations
If your MVP requires custom code or integrations beyond what the no-code platform offers, ensure that any additional code written by third-party developers is explicitly assigned to your company. Have clear contracts in place to transfer ownership of any custom development to your business.
Tax Reliefs: Maximising UK Market Benefits
Tax reliefs can provide significant financial benefits to startups, particularly through the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) in the UK. These schemes are designed to help early-stage companies raise capital by offering tax reliefs to investors who purchase new shares.
EIS and SEIS Explained
- EIS (Enterprise Investment Scheme): Provides tax relief to investors who buy shares in your company. It offers 30% income tax relief on investments up to £1 million per tax year. Additionally, if the shares are held for at least three years, any gain is free from Capital Gains Tax.
- SEIS (Seed Enterprise Investment Scheme): Targets even earlier stage companies, offering 50% income tax relief on investments up to £100,000 per tax year. SEIS also exempts gains on SEIS shares from Capital Gains Tax if the shares are held for at least three years.
Eligibility for No-Code Startups
To qualify for EIS or SEIS, your company must meet specific criteria, such as being unquoted at the time of the share issue, having a permanent establishment in the UK, and not exceeding a certain number of employees or gross assets.
The good news is that building your MVP using a no-code platform does not inherently disqualify you from these schemes. However, meticulous record-keeping and transparency in your development process are essential. Make sure your business plan clearly outlines the use of no-code platforms and demonstrates how it contributes to your company’s growth and innovation.
Applying for EIS and SEIS
To apply for EIS or SEIS, you’ll need to submit a detailed application to HMRC, including information about your business activities, financials, and how the investment will be used. Once approved, you can issue compliance certificates to your investors, allowing them to claim their tax reliefs.
Investor Perspectives: Attractiveness of No-Code Startups
Investors play a crucial role in the growth of any startup. Understanding how they perceive no-code platforms can help you better position your business for funding.
The Appeal of No-Code Development
No-code development offers several advantages that can be attractive to investors:
- Speed to Market: No-code platforms enable rapid prototyping and iteration, allowing you to get your MVP to market faster. This speed can be a significant selling point, demonstrating your ability to adapt and respond to market needs quickly.
- Cost Efficiency: By reducing the need for a large development team, no-code platforms can significantly lower your initial costs. This cost efficiency can be appealing to investors, as it means more of their capital can be directed towards growth and marketing efforts.
- Focus on Innovation: Using no-code tools allows you to focus more on your business model, customer acquisition, and product-market fit, rather than getting bogged down in the technical details of development.
Potential Concerns
Despite these advantages, investors may have some concerns about startups built on no-code platforms:
- Scalability: One of the primary concerns is whether the no-code platform can handle your growth as your user base expands. It’s essential to demonstrate how you plan to scale your product, including potential transitions to custom code if necessary.
- Platform Dependency: Relying heavily on a third-party platform can be seen as a risk. If the platform experiences downtime or changes its pricing or policies, it could impact your business. Having a contingency plan and showcasing a clear understanding of how to mitigate these risks can alleviate investor concerns.
- Technical Expertise: Investors may worry that a lack of in-house technical expertise could hinder your ability to innovate or solve complex problems. Building a team with a mix of technical and business skills and showcasing a deep understanding of your platform’s capabilities and limitations can help address these concerns.
Practical Steps to Address Legal Implications
Legal Counsel and Advice
Engage with legal counsel who understands both traditional and no-code software development. They can help you navigate the complexities of IP ownership, ensure your contracts with developers and platform providers are robust, and guide you through the EIS and SEIS application process.
Clear Documentation
Maintain clear and thorough documentation of your development process, from initial planning to deployment. This transparency can be invaluable when applying for tax reliefs or seeking investment. It demonstrates professionalism and a commitment to best practices.
Future-Proofing Your Product
Consider the long-term vision for your product. While no-code platforms are excellent for MVPs, think about how you’ll scale and potentially transition to custom development as your user base grows. Having a roadmap for this transition can reassure investors and provide a clear path for your startup’s growth.
Conclusion: Embracing No-Code with Confidence
Choosing a no-code platform to build your MVP is a strategic decision that offers numerous benefits, from rapid development to cost savings. By understanding and addressing the legal implications, such as IP ownership, tax relief opportunities, and investor perceptions, you can confidently move forward with your no-code journey.
Remember, thorough preparation and transparency are your best allies. Engage with legal experts, maintain clear documentation, and have a roadmap for scalability. With these steps, you can leverage the power of no-code development to bring your SaaS startup to life, attract investment, and achieve your entrepreneurial goals.
By carefully navigating these considerations, you’ll not only build a solid foundation for your MVP but also position your startup for long-term success.
If you ever need help with no-code development, sales, marketing or legal strategies, don’t hesitate to reach out to us, we’d love to hear from you.