Real estate investment FinTechs aim to provide innovation in the real estate space, such as providing unique mortgage platforms or shortcuts for closing property purchases. If you are thinking of starting a real estate FinTech, it is useful to know what legal issues you should be aware of at each stage of growth. This article provides guidance on the four key stages of your startup.

1. Research and Development

Market research will provide you with a firm foundation of knowledge to build your business and technology, so invest the time and resources to conduct detailed investigations. Importantly, research will help you identify your target market. For example, will you target property buyers and sellers, or also large businesses (like banks) that provide real estate services to consumers? This will consequently define your growth strategy. 

Research is a great way to identify gaps in the market, so you can capitalise on meeting that gap when setting up your own FinTech. For example, the property investment platform CoVESTA conducted research that indicated that the bar for property investment was gradually getting higher for Australians. So they set up a platform that allows consumers to start or join a property syndicate to achieve their investment or property goals.

Legal Needs

As your business grows, you will need to meet different legal requirements or issues. The table below identifies key legal requirements at the Research and Development (R&D) stage.

 

Legal Need Purpose
Business Structuring Setting up your business structure correctly can help your company grow quickly. A good business structure can also help:

  • protect your company’s assets;
  • limit your personal liability; and
  • benefit you from a tax perspective.
Australian Financial Services Licence
(AFSL)
You may be required to obtain an AFSL if you are:

  • providing real estate services; or
  • offering services to AFSL providers.

The Australian government has a regulatory sandbox for FinTech startups. For the first 12 months of your FinTech startup, you may not need to apply for a licence. This allows you to conduct detailed R&D without having to comply with AFSL regulations.

Confidentiality Agreement In your R&D stage, you will probably talk with developers, potential investors, and other key personnel about your business. Signing a confidentiality agreement with these parties can help protect your innovative ideas in these initial conversations.

 

2. Pre-Minimum Viable Product (Pre-MVP)

This stage is all about practical preparations. Select your software developers and get your product development underway. Finalise your branding and start to conduct marketing campaigns to get word out about your product and business. Remember to have protections in place to protect your intellectual property (such as your business logo) as best you can.

You should think about holding a soft/ beta launch before launching your platform in full. This will help you test the platform, giving you time to fix any issues with the platform or financial model.

Legal Needs

The table below identifies key legal requirements of the Pre-MVP stage.

 

Legal Need Purpose
Trade marks A trade mark lets you build brand identity and loyalty. Registering a trade mark gives you the exclusive right to use your mark for a renewable period of time. It also protects your mark from being used by your competitors.
Development Agreement If you are engaging an external developer for your website and software, you should have a formal agreement in place with them. A development agreement should detail:

  • the scope of work;
  • the assignment of the IP to you on completion (otherwise the developer may own the IP); and
  • cancellation rights.
Employment Agreement Use formal employment agreements when hiring staff. As an employer, you will also need to comply with the National Employment Standards and any relevant awards.
Patents A patent is the exclusive right to monetise an invention for up to 20 years (or eight years for an innovation patent). You may gain patent protection if you have developed a new product, or mechanical step or process, that differs from what currently exists.

 

3. Launch

Your product is finally ready to be launched – congratulations! Ensure the terms and conditions that are part of the application process reflect how your real estate investment FinTech operates. Getting a lawyer to look over your terms and conditions can help avoid potential disputes with consumers down the track.

Legal Needs

The table below identifies key legal requirements of the launch stage.

 

Legal Need Purpose
Terms and Conditions A Terms and Conditions document contains services clauses and details consumer payment terms and other obligations.
Website Terms of Use This document protects the intellectual property on your website. It also limits your liability in regards to the content on your website.
Website Privacy Policy This document ensures that your business complies with the Privacy Act. You should have a privacy policy on your website if you are solely operating online. It is particularly important for a real estate investment FinTech, as you will be processing large amounts of data with personal information.  
Software as a Service (SaaS) Agreement SaaS agreement is the contract between you and your clients. If you are providing services through an online platform to large businesses, you will need an Enterprise SaaS Agreement.
End User Licence Agreement (EULA) A EULA is a contract between a software developer and the end user. When you have an enterprise SaaS agreement with a large business, you will also need a EULA. The business’ employees or customers (the end users) will need to sign up to the EULA.

 

4. Growth Stage

If your startup is in a high growth phase, you may be thinking about raising additional capital. One way of achieving this is by seeking equity investment from venture capital funds and other professional investors. Injecting investment capital into your business gives you greater financial security to expand your operations and grow faster.

For example, BrickX runs a property syndicate platform through which Australians can invest in a property. It acquired investment from Reinventure and NAB Ventures that let them secure their customers’ investments while it ran the properties.

Legal Needs

The table below identifies the key legal issues of the growth stage.

 

Legal Need Purpose
Capital Raising When seeking investment to raise capital, you may need to:

  • finalise a pitch deck or information memorandum;
  • negotiate a shareholders agreement; or
  • draft or finalise a share subscription agreement, SAFE note or convertible note.

 

Key Takeaways

Knowledge is power, especially when it comes to starting up a business. Knowing what legal steps and documents are involved at each stage of growth can help you avoid nasty surprises down the track.

For further advice on how to start up your business, or help with meeting legal requirements, contact LegalVision’s startup lawyers on 1300 544 755 or fill out the form on this page.

Sam Auty
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