Ten important agreements for ed-tech startups

Introduction 

The edtech sector raised $1.4 billion in 2020 alone, compared to $1.8 billion raised by edtech startups across 303 deals between 2014 and 2019. According to data, online test preparation businesses like BYJU'S, Unacademy, Embibe, and others received 79 percent of the total capital raised in 2020, followed by 8.4 percent for online certification firms like upGrad, Vedantu, and others. Edtech startups in India have recently made headlines for a variety of reasons. Because of the lockdown, they've had the chance to really shine.

These EdTech businesses are making it easier for students to study for challenging exams. Edtech businesses in India are altering the Indian education landscape with the goal of making education truly fascinating. These Edtech businesses all target distinct student pain points and have varied price points. These businesses go on to demonstrate that anyone can learn if they so desire.

What is edtech startups?

EdTech is a term that combines the words "education" and "technology." It is technology (hardware or software) that is used to improve educational outcomes. Today, we see businesses employing virtual reality, multimedia, automation, and other technologies to make education more engaging and approachable. EdTech includes interactive screens, online classes, and MOOCs.Ed-tech companies employ technology to make education more accessible to everyone. Examples for edtech startups are Byjus, Brainly, Classplus , CueMath, Edukart , Unacademy, etc.

1.Interim Service Agreement

Because it's an Ed-tech firm, an expert may be called upon to perform more than one work. He may be asked to work on future projects. As a result, an interim service agreement becomes necessary. It is an agreement formed for a person to supply additional services. It must specify the parties to the agreement, which are the client and the service provider, as well as a brief background of the parties, the agreement's term period, whether the term period can be extended, and what procedures must be followed to extend the term period, the services that the service provider is obligated to provide to the client, the service provider's salary, and any addendums. 

2. Non- Disclosure Agreement

To raise funds, every startup requires investors. And to do so, one must divulge secret information to investors. As a result, a non-disclosure agreement (NDA) is one of the strategies to preserve confidential information. A non-disclosure agreement (NDA) is a legal document that requires one party to keep the confidentiality of the information disclosed by the other. This can prevent someone from revealing or exploiting the company's confidential information. A confidentiality clause is included in every deal, however, it is always preferable to have a Non-Disclosure Agreement.

It must have the following information and clauses:

The Parties Clause specifies who the agreement's parties are.

Scope of confidentiality: The NDA must include a clause that classifies and defines what constitutes confidential information. The party sharing the information must ensure that the classification and description of confidential information are broad enough to cover all given information and do not leave any loopholes for the other party to exploit. Confidential information encompasses both oral and written communication.

Responsibilities of the Party Receiving the Information: This clause must include obligations prohibiting the receiver from not only sharing sensitive information with a third party but also from exploiting it for his gain or use.

In the event of a breach of the NDA's terms and conditions, the remedy must be included in the NDA. This remedy can take the form of monetary compensation or an injunction.

Exceptions: Exceptions to confidential information must be included in an NDA. This must cover scenarios in which a person can divulge secret information.

3. Terms and Conditions of Website

Though it is not a legal necessity, it is preferable to require users to agree to User Terms to limtogal liability and prevent misuse of the website/app. Any person who accepts to access your website or registers for an account immediately agrees. 

4. Privacy Disclaimer

Privacy isn't a laughingstock. Article 21 of the Constitution guarantees everyone the right to privacy. Rule 4 of the Ministry of Communications and Information Technology Notification, 2011 requires businesses to provide and disclose their privacy policies on their websites. The following information must be included in any privacy policy required by law:

Types of sensitive or personal data or information acquired Passwords, financial information such as bank account, credit card, debit card, or other payment instrument details, physical, physiological, and mental health conditions, sexual orientation, medical records and history, and biometric information are examples of sensitive data or information.

5. Policy on Cookies

When you visit a website, it puts a little text file called a cookie on your computer or mobile device. If your services fall under the authority of the European Union, you must create a separate cookie policy. It can, however, be mentioned in Privacy Policies in other places. The Cookie Policy must include a notice that the website uses cookies, followed by an explanation of what a cookie is and how it works, which type of cookie your website is using, and why it is being used.

6. Refund and Return Policies

Users should be informed of their right to a refund if the Company provides paid services. This aids in acquiring the users' trust. These policies inform users about refunds for various services, including what kind of services they can claim refunds for, how long they can claim refunds for, and whether or not they can claim refunds. By accepting these policies, the user and the firm engage in a contract in which the user cannot claim more than they are legally entitled to, and the company must refund users by the policy.

7. Contract of Employment

This contract outlines the rights, responsibilities, and obligations that an employer and employee have toward one another. The following clauses must be included in this agreement:

Employee responsibilities, the scope of work, period of employment, remuneration and incentives, policy for reimbursement of transportation and travel expenses, leave policy, and termination process must all be included in this paragraph.

Reference to corporate regulations: This clause must include company policies relating to the employee's workplace code of behavior. Companies these days have severe policies against sexual harassment, so keep The Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act, 2013.

Non-Compete Clause: This clause prohibits employees from competing in the same industry as their employer while they are employed by that company.

Clauses of Lock-in and Penalty: An employer invests in an employee's training and skill development. As a result, this clause protects the employer from any losses resulting from the employee's early termination of the employment agreement. This clause establishes a minimum lock-in term, after which the employee must pay compensation if the lock-in period is violated.

8. Loan Agreement 

Because loans are taxed less, it is one of the finest ways to raise funds. Loan Agreements are often created by lenders; nonetheless, it is critical to understand what is contained in a Loan Agreement to avoid being exploited.

9. Agreement of the Founders

A founder's agreement is a contract between the company's founders. Certain clauses must be included:

Equity Ownership: This will describe the percentage of the company's equity ownership (capital and shareholding) that each co-founder will have.

Vesting of Founders' Shares: This must include the procedure to be followed if one of the co-founders quits the company, as well as the rights of the surviving founders to the leaving founder's shares.

Founders' Roles and Responsibilities: This section will detail each founder's responsibilities to the company. Managerial, administrative, and financial obligations are examples of responsibilities.

Transfer of Shares and Encumbrance: This paragraph prohibits firm founders from directly or indirectly selling, assigning, transferring, pleading, disposing, or creating encumbrance on their shares without the prior approval of other co-founders.

Right to increase capital: This clause specifies if the founders have the right to purchase new shares in proportion to their shareholding in the firm if the company issues new shares.

Future Investment: Because a firm will always require investments, it is prudent to state how these funds will be raised in advance.

Non-Solicitation: Because the founders are full-time employees, they may be prohibited from soliciting any employee or client mode

IP Assignment: This clause must include information regarding who will own the IP rights over the design or the idea of the product developed by one of the founders of the company.

Confidentiality: This clause restricts the founders to share confidential information with any third party to the contract. It is always better to make an NDA instead of just adding a confidentiality clause in an agreement.

Termination: This clause shall contain details about the events when the agreement shall terminate.

Dispute Resolution and Governing Law: This clause shall state the jurisdiction of the agreement and dispute resolution method which founders must opt during the time of dispute.

IP Assignment: This provision must specify who will control the intellectual property rights to a product designed or created by one of the company's founders.

Confidentiality: This condition forbids the founders from disclosing confidential information to any third parties involved in the contract. It is usually preferable to sign an NDA rather than simply include a confidentiality clause in a contract.

Termination: This clause specifies the circumstances under which the agreement will come to an end.

Dispute Settlement and Governing Law: This clause specifies the agreement's jurisdiction and the dispute resolution mechanism that the founders must choose in the event of a dispute.

10. License Agreement for End Users

It will supply its services via an app, website, or software, as it is an Ed-tech startup. As a result, it is preferable to bind them in an agreement in order to safeguard IP rights and prevent others from stealing your work. The end-user, or the individual who has paid for your services, will have access to all of the courses, teaching techniques, and study materials that you have created.

Conclusion

These are a few of the agreements that could be beneficial to an Ed-tech firm. When it comes to starting a business, many people overlook the laws. To save money, they do not contact a lawyer and simply duplicate the agreement's format. This, however, may risk the future of their businesses. Before starting a business, it's always a good idea to speak with an attorney. A good agreement and sound guidance can save a lot of money and effort in the long run. It lowers the likelihood of them being exploited. One of the most crucial elements to consider when starting a business is legality. It's not something you can take for granted.

References 

• https://www.mondaq.com/india/contracts-and-commercial-law/739632/key-considerations-in-founders39-agreement

• https://blog.ipleaders.in/ten-important-agreements-ed-tech-startups/

• https://inc42.com/infocus/startup-watchlist-2021/startup-watchlist-10-indian-edtech-startups-to-watch-out-for-in-2021/amp/#aoh=16247071863994&referrer=https%3A%2F%2Fwww.google.com&amp_tf=From%20%251%24s

• https://www.smartbusinessbox.in/edtech-startups-in-india/

Abhaya Mohan