Why Having a JVA is Important as a Tech Startup

  • Startups and corporates in the emerging markets prior to incorporation have at one point or the other made vital fiscal and other material arrangements with respect to their would be formed companies.
  • More often than not, either due to lack of skilled advisory or otherwise, these arrangements are not documented in their proper forms.

This post seeks to identify JVAs as a vital contract option for investors wanting to partner up as well as promoters of startups in the incorporation stages of their companies and touch on important reasons why it might beneficial for them to have a JVA.

Importance of JVAs

Joint Investment Opportunity- With a JVA in place, companies can effectively explore diverse partnership opportunities. This will result in shared financial and economic responsibilities sparing companies from solely undertaking huge investment projects. Startups and companies would be emboldened to partner up without fear of future liabilities and issues with a well crafted JVA.

Diversity and Enhanced Market Penetration

one of the biggest upsides JVA offers is foreign investment opportunities. Local startups may collaborate with foreign entities broadening investment bandwidth. Here, the combined forces of market disruptors would definitely help to achieve bigger market inclusion beneficial for all parties involved.

Profit-Loss Sharing

  • Just like a typical partnership, JVAs offers the parties involved a platform for optimum risk mitigation. In the event of an investment catastrophe, parties to the JVA are well able to stomach the loss as opposed to unilateral liability. Also, profits are enhanced with access to larger capital inflow.
  • Other advantages range from larger marketing scale, documentation advantages, etc.
  • There is no mandatory legal requirement that obliges startups and business partners to have a JVA but for the purpose of commercial expediency, it is quite suitable to have JVAs when embarking on specific projects and investments. This always help to solidify investment arrangements and give the intended projects some bit of legal force.

References

1 Corpbiz, “Joint Venture Agreeement” available at  https://corpbiz.io/joint-venture-agreement accessed on March 15 2023

2 Investopedia, “What are the Primary Advantages of Forming a Joint Venture Agreement?” available at https://www.investopedia.com/ask/answers/033115/what-are-primary-advantages-forming-joint-venture.asp accessed on March 15 2023

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