9B15M107

This document is one of the 5 authorized copies to be used in the BBA, Project Legal Framework, , 2018-2019, 2018-01-19

INNOVATE LLP: LEGAL DILEMMAS IN THE START-UP WORLD1

Matthew Wong, Adrienne Ng, and Darren Meister wrote this case solely to provide material for class discussion. The authors do not
intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names
and other identifying information to protect confidentiality.

This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the
permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western
University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com.

Copyright © 2015, Richard Ivey School of Business Foundation Version: 2016-01-27

Michelle Lee sat down with a coffee in a small café in downtown Toronto, mentally decompressing after
her first meeting with a lawyer about her nascent software start-up. She took out her laptop and resumed
working on her coding session. She absent-mindedly stared at the code while sipping at her coffee, her
mind racing after the formal consultation with a lawyer specializing in issues related to start-up
businesses. The lawyer had raised several concerns about Lee’s business that she had not previously
considered, leaving her pondering her next choices.

THE CANADIAN LEGAL ENVIRONMENT FOR START-UPS

Small enterprises had been booming in Canada. According to Industry Canada data, as of 2012, Canada
had just over 1.08 million small businesses (i.e., businesses with 1 to 99 employees on payroll).2
Furthermore, Industry Canada also reported that between 2008 and 2009, more than 150,000 new small
businesses were created in Canada. Consistent with how difficult it was for new small businesses to
succeed, only 22,000 (about 15 per cent) survived the year.
For start-up businesses in Canada, the focus of many entrepreneurs was typically getting their idea to
market, establishing cash flow and building critical early relationships with customers, suppliers, investors
and partners. During this hectic and stressful time, entrepreneurs and founding teams were usually
preoccupied with their businesses. However, entrepreneurs must manage all those concerns while ensuring
legal and regulatory compliance at both the provincial and federal levels. The legal and regulatory
compliances required particular attention in the heavily regulated pharmaceutical, biotech, food products
and mining industries. As a result, start-up entrepreneurs might find themselves juggling the rapid
1
The materials provided in this case and in the accompanying teaching note are for information purposes only. These
materials constitute general information relating to areas of law familiar to Adrienne Ng and the lawyers at Innovate LLP.
They do not constitute legal advice or other professional advice, and, as such, readers should not rely on the contents of
these materials, which do not necessarily represent the opinions of Adrienne Ng, Innovate LLP or its clients. If you require
legal advice, you should retain competent legal counsel. Adrienne Ng, Innovate LLP and its partners will have no liability for
any damage arising from the misuse of any information provided on these materials. The information provided on these
materials is not legal advice and should not be relied upon as such. Doing so without seeking the advice of legal counsel
constitutes a misuse of the information.
2
Industry Canada, Small Business Branch, Key Small Business Statistics, Industry Canada, Ottawa, August 2013,
www.ic.gc.ca/eic/site/061.nsf/vwapj/KSBS-PSRPE_August-Aout2013_eng.pdf/$FILE/KSBS-PSRPE_August-
Aout2013_eng.pdf, accessed February 16, 2015.

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development of their business, unaware of their legal options and responsibilities. New entrepreneurs were
especially challenged when they lack the expertise or guidance to navigate these circumstances.

SOFTWARE DEVELOPMENT TOOLS

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Eight months earlier, Lee had left her job as a software developer at a modest firm that created banking
software. It had been a steady job after Lee had finished her undergraduate degree in computer science
several years prior, but it was dull work that no longer captured her interest. For the past few years, Lee
had spent a considerable amount of her free time writing small mobile apps for fun. It had begun with a
few simple apps: alarms, calendars and even a few games. Over time, she had developed increasing
confidence in writing software for Apple and Android platforms. Increasingly, Lee found her mind
drifting to new things she could do with mobile apps compared with the tasks she was paid to accomplish
while on the job. Work was going well; she was compensated fairly and worked with a good team. Lately,
however, she had been feeling a growing desire to do something else with her life. At work, her manager
had suggested that she might soon be promoted to full-time project management. Currently, she was
performing a mixed role comprising programming and light administrative/management activities. Lee
recognized that if she stayed the course, she could find herself doing this job for the next 10 or even 15
years. She was surprised at how little excitement that prospect held for her, and she recognized some
serious symptoms of job malaise.
About a year earlier, Lee had met for a drink with her old high-school friends, Rachel Chan and Nelson
Gill. The trio regularly got together to hang out and relax. They had been friends for many years and
frequently got together at the end of the workweek. Chan and Gill were both computer engineers and,
similar to Lee, had been in the workforce for the past few years since finishing university. Like most
people in their late twenties progressing in their careers, Chan and Gill had settled into comfortable
routines at work. After one of Lee’s particularly long rants about the tedium of her job, Gill challenged
her, “Well, why don’t you do something about it?” “Like what?” she replied. “You’re always talking
about your apps. Could you do something with that full-time?” Chan suggested. Since then, Lee had
pondered leaving her job to start doing something with app development full-time. But although she was
interested in mobile app work, she had never sold an app publicly and did not know what would even sell
well enough to make up for her lost salary. Still, the idea nagged at her — the possibility of pursuing her
hobby as a job was an exciting possibility.
Lee spent the next several months focusing her thoughts on what might become a viable business idea, not just
a one-off hobby project. In the process of tinkering with her portfolio of app projects, she came up with an
idea. She decided that she wanted to focus on creating more effective software development tools. After
experiencing many frustrations with existing development tools on her desktop or laptop, she started coding
her own. Lee felt that developing apps for mobile by using common development packages was cumbersome
and slowed down her work. Lee coded a few different tools that helped to streamline her programming
workflow. She then realized she could package these tools into her own development suite. This development
suite, specifically designed for quick mobile application development, would be her idea.
Although only in a prototype stage, she was excited enough about these development tools that she
showed them to Chan and Gill. Both engineers were intrigued by Lee’s prototypes. Since Chan and Gill
used some standardized industry development suites at their jobs, they could see the value and
improvements in Lee’s software. Sensing their interest — and trying to prove that her hobby had some
substance — Lee encouraged them to play around with the code and work on it themselves. Soon, the trio
was meeting weekly to discuss new ideas for the software suite. Lee was spending every free moment
writing down ideas and churning out new code, while Chan and Gill were regularly sending her updated
source code on various modules.

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This dramatically increased focus on the “side project” began to take its toll on Lee’s job. She was eating
dinner at her computer in her apartment, staying up late coding and drawing flow charts, and was arriving
at work late, tired and unfocused. Her manager was starting to notice a change in Lee’s attention and
productivity. Things came to a head when Lee finally decided to focus full-time on her new project. She
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accepted a month-long leave of absence but when it became clear in the fourth week that she had no real
interest in going back, Lee resigned from the firm. It was a stressful time and, more than once, Lee
questioned whether she had made the right decision, but with Chan and Gill’s encouragement, she took
the plunge. Freed from her daily job, Lee committed herself 100 per cent to the project, which the group
had begun to call SDT for Software Development Tools. Lee was coding now like she had never coded
before, spending hours a day writing new code, integrating Chan and Gill’s work, compiling and testing.
While Chan and Gill maintained their daily jobs, the three friends frequently met at Lee’s place, where
the team would plan, strategize and code over take-out food. And so it was that, eight months after Lee
had quit her job, SDT’s flagship product DevCOP (for Development Coding, Organizing and Project
Management) was nearing alpha build completion.

AN ANGEL INVESTMENT OPPORTUNITY AND SEEKING ADVICE

While the team had mostly kept SDT’s software in-house, Lee had, from time to time, consulted with
some of her computer science friends from her undergraduate days. Several of them had gone to work at
both established firms and start-ups in Toronto, Waterloo and Silicon Valley. Although Chan and Gill
were both reluctant to share their product idea with “outsiders,” Lee knew and trusted these former
colleagues. Many of them were experienced programmers and, in some cases, start-up veterans with little
professional or financial motive for taking advantage of her. Lee was particularly close with Leo
Martingrove, who had recently returned to Toronto from San Francisco after selling his start-up to a large,
U.S.-based mobile game company. Lee had been showing Martingrove various iterations of DevCOP
over the past several months, and he was impressed with Lee’s work.
On the most recent meet-up with Martingrove, Lee was shocked when the entrepreneur casually offered
to invest in SDT and DevCOP. Martingrove had become wealthy after selling his company and had been
keen on the work Lee had been doing. While Lee, Chan and Gill had, thus far, been working frugally,
incurring limited expenses, their work had reached a point where some investment would certainly help.
Lee knew that in the next six to eight months, if SDT was going to really grow, they would need a more
formal workspace, additional developers and a concentrated sales effort. Martingrove asked how much
Lee calculated SDT would need to get to commercial release, a question that Lee realized she had not
thought much about. Lee threw out a ballpark figure of $25,000,3 which Martingrove chuckled at, but did
not question. “Okay, look,” Martingrove said, “why don’t you think a bit more about what you might
need and I’d be willing to invest a bit in your company . . . with pretty favourable terms.” It dawned on
Lee that she did not really have a company per se and she expressed as much to Martingrove. “Well,
you’re on your way, Michelle, but if this software suite is going to go somewhere, you’re going to need to
start figuring some of this stuff out.” The pair finished off their drinks and parted ways, although Lee left
feeling distinctly more concerned about her business than optimistic.
It occurred to Lee that it might be time to start seeking some legal advice on SDT, especially given what
Martingrove had mentioned. She sat down at her computer and typed “Toronto start-up lawyer” into
Google. Immediately she regretted this decision. “What am I even looking for?” she thought to herself,
“What do I know about finding a lawyer, a good lawyer? What do I know about dealing with lawyers?” It
occurred to her that she did not even know how much lawyers cost or whether she could afford a lawyer.
Lee fired off an email to Chan and Gill, mentioning a possible investment opportunity with Martingrove

3
All currency amounts are shown in Canadian dollars unless otherwise noted.

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and asking whether either of them knew a lawyer. Gill got back to her first and named a friend-of-a-friend
that was a lawyer. “Check my LinkedIn page,” Gill wrote. “She’s on there, maybe give her a shout?” Lee
promptly checked Gill’s LinkedIn profile and searched for Adrienne Ng, a lawyer specializing in start-up
companies with the firm Innovate LLP (Innovate). Gill knew her through some friends, so Lee quickly
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drafted a brief introductory email mentioning the contact and a desire to meet informally over coffee to
possibly discuss some legal advice for her burgeoning start-up. Lee read it over once more, hit send and
then went back to work on the latest iteration of code.
The next day, she received a reply from Ng, who suggested that Lee schedule an appointment to meet her
at Innovate’s office for a formal consultation. Lee was slightly taken aback. She had never dealt with a
lawyer before, in any capacity, and was not sure what was involved with speaking with one in a formal
capacity. She also hadn’t explicitly discussed with Chan and Gill about talking to a lawyer and was not
sure how they would feel about it. In fact, she was not even sure whether Chan and Gill had official
standing with SDT. Lee sat pensively for some time as she considered these issues. After taking some
notes about these and other issues, Lee sent Ng a reply requesting a meeting the following week. She
decided to check in with Chan and Gill to gather their thoughts.
Two days later, the trio sat in Lee’s apartment during one of their weekly planning sessions. Lee had just
finished explaining the situation with Martingrove and had shown them the email from Ng. It was clear to
everyone that they were approaching a milestone in their project and the next step would see their ad hoc
arrangement more concretely specified. Chan looked somewhat grim, while Gill had a decidedly neutral
look on his face. “What’s the matter?” Lee asked. Chan let out a sigh and opened up. “I have to tell you
guys, I’m not entirely sure I want to keep going with this. I’ve had fun and I’d be interested in helping out
still, but things have been going well at work and I’m thinking of easing back on this project. I’m not sure if
I want to fully commit if we’re talking about making this official.” Lee looked at her and nodded slowly.
While she was not entirely surprised — Chan hadn’t seemed as enthused about the project as of late — she
was still a bit shocked that Chan might fully back out. Lee turned to Gill who looked at them both and sat
back in his seat. “I think I’m still in,” he began, “but I am with Rachel on this. . . . I’m not sure if I can do
this full-time. Don’t get me wrong, this is cool stuff, but I’m not sure if I want to do this as anything more
than a side thing.” Lee felt a slight twinge of panic as she suddenly considered the possibility of pursuing
this project on her own. While she had done the majority of the work, she had always relied on the support
of these two friends. She was not sure whether Martingrove would still be interested in investing if the
business was just on her shoulders. Lee decided to keep their options open; she would go talk to Ng the
following week and get an idea about what they were looking at. They also agreed that, under the
circumstances, Lee would personally absorb the cost of any consultation fees incurred.

INITIAL INTERACTIONS WITH A LAWYER

The following week, Lee arrived at Innovate LLP’s Toronto office, where Ng came out to greet her. Ng
was a partner, a barrister and solicitor and a trademark agent at Innovate. A practising lawyer specializing
in start-up companies, her background was also in chemical engineering. Ng had been an entrepreneur
herself, having started or co-founded several businesses. She shook Lee’s hand and walked Lee to her
office. “How are you, Michelle?” she began. “I received your email and am happy to speak with you. I
understand that you know Nelson Gill?” Lee grinned and talked about her personal and professional
background with Gill. Ng chimed in with how she knew him from various overlapping friends and
occasions. She noted, however, that while they shared some of the same friends, unfortunately, there was
not really such a thing as speaking with a lawyer “informally.” “Oh sure, I understand,” Lee said,
although not exactly understanding. Ng sensed her confusion and explained to Lee that lawyers have
certain ethical and professional obligations that were mandated by their respective regulatory law society
or bar association, arising from interactions with potential clients. Furthermore, during any consultation,

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lawyers would invariably give legal advice that would expose them to liability (i.e., being financially or
legally responsible for their advice). “In other words,” Ng added, “lawyers need to be thoughtful and
careful about what they say to potential clients. Even if we were best friends, it wouldn’t be appropriate to
‘informally’ dispense legal advice about your business.”
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To help clarify what happens during an initial consultation, Ng described a typical scenario to Lee.
During a consultation, a client had the opportunity to present their situation to the lawyer, and the lawyer
would offer some options — solutions as well as an estimate of costs. After this initial consultation, the
client would have an opportunity to formally retain the lawyer. Even if the client decided not to retain the
lawyer, whatever was disclosed during the consultation would still be subject to solicitor–client privilege.
“I’ve heard of that before,” Lee noted. “What does that mean?” Ng explained that solicitor–client
privilege meant that the lawyer was obligated to not disclose the contents of the conversation to anyone,
including law enforcement and the courts. Retaining a lawyer meant the client would sign a retainer
agreement and provide the lawyer a retainer amount, a sum of money held in trust by the lawyer’s firm
for the client. Amounts owing on future invoices would be drawn from that retainer amount, with the
lawyer possibly asking the client to replenish the trust account from time to time.
Having outlined the context of the consultation and the conversation to follow, Ng asked Lee about this
new venture and her questions and concerns. Lee began to describe Software Development Tools,
DevCOP and her professional relationships with Chan, Gill and Martingrove.

WHO IS THE LAWYER REPRESENTING?

Ng listened to Lee’s situation intently. When Lee mentioned her ad hoc work arrangement with Chan and
Gill, she paused to think before addressing this issue. She noted that a lawyer represents and advocates for
only one person or entity at a time, whereas companies, such as partnerships or corporations, were their
own entity. Lawyers would often ask clients whom they wanted the lawyers to represent. In the case of a
start-up, lawyers would ask clients whether they wanted to be represented as a co-founder, as a
shareholder/owner or as the company itself. For example, Lee, Chan, Gill and the corporation could
choose to jointly retain the same lawyer. However, in such a case, everyone would need to be comfortable
with the nature of joint retainers, which would mean that everything told by one person to the lawyer
would be shared with the other two people. Lawyers could also choose to stop the joint retainer if they felt
that a conflict of interest was arising, and they could no longer represent the best interests of all parties.
Lee admitted that she had not put much thought into what kind of final arrangement Chan and Gill may
want to be involved with, but that both had expressed some reservations about joining on “officially” in a
full-time capacity.

CREATING A BUSINESS ENTITY FOR SDT

Ng explained to Lee that, in Canada, a company can be one of three different types of business entities: (i)
a sole proprietorship, (ii) a partnership or (iii) a corporation. She explained the primary features and
differences of these entities.

Sole Proprietorship
A sole proprietorship is a type of business entity only possible with a single founder. This individual is
the business entity. In a sole proprietorship, the founder would be fully responsible for all debts and
obligations related to the business. All profits would also belong solely to the founder. From a legal
standpoint, no difference existed between the founder/owner and the business itself. As a result, creditors

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(people owed money by the business) could go after the personal assets of the founder (e.g., the founder’s
house and personal savings).

Partnership
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A partnership is often a good business structure when a company has more than one founder and they
don’t want to incorporate the business. A partnership is established through a partnership agreement,
which can include terms relating to disagreements and the dissolution of the business. Each partner would
share in the profits but also the liabilities. No difference would exist between the co-founders/partners of
the business and the business itself. Creditors could also go after the personal assets of the partners. Also,
partnerships had no continuity; if one partner left, then a new partnership was formed with the remaining
partners. Similarly, if a new partner was added, a new partnership was also formed. In both situations, a
new partnership agreement marked the start of a new partnership.

Corporation
A corporation is distinct from the other kinds of business entities, in that the corporation is considered to
be its own legal entity, separate from its owners. A corporation has limited liability, so its shareholders
(i.e., the owners) will not be personally liable for the debts, obligations and acts of the corporation. For
start-ups interested in raising capital, a corporation is usually the best choice, since the concept of shares
in the corporation makes it easier to “sell” small parts of the company to investors. Corporations also
make it much easier for the co-founders to do such things as share vesting (earning shares over time).
Corporations also have continuity, so shareholders can come and go, and the same corporation continues
to exist. A corporation can be a provincial corporation or a federal corporation, with each having different
regulatory compliance implications.
After explaining these different business entities, Ng suggested to Lee that she could perhaps own a
company with Chan and Gill as a partnership or a corporation. However, because they may be seeking seed
financing, or they may implement a share vesting structure, a corporation might make the most sense.

EQUITY SPLITTING AND VESTING OF SHARES

Lee reiterated to Ng that Chan and Gill had indicated that they might not be interested in working with
SDT full-time and, thus, presumably also not interested in owning part of the company. Ng warned Lee to
consider that the pair might choose leave the company when the going gets tough or when they did not
feel like working on it anymore. Although Lee indicated that, thus far, Chan and Gill had enthusiastically
contributed, Ng also warned her that they might not put in as much work in the future. Any of these
scenarios would not be desirable, and Lee really needed to think hard about whether she wanted to work
with Chan and Gill on this start-up going forward. If she did choose to continue working with them, Lee’s
concerns could be addressed in several ways.
It was very common for a start-up’s co-founders to agree to have their shares vest, which meant that the
co-founders would earn their ownership of the company over time. Ng explained that a typically vesting
scheme would see shares vest over four years with a one-year “cliff.” This arrangement meant that each
co-founder would earn 25 per cent of the shares they were entitled to each year. In the first year, they
would receive their first 25 per cent only after the first-year mark was passed. After that, each co-founder
would earn 1/48th of their entitled shares each month, which would give the co-founders flexibility, in
terms of ensuring that the key players stuck around long enough. If they did not or if things did not work
out, then a co-founder would not own a substantial stake in the company and would also no longer be

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actively working on it. The remaining equity that the exiting co-founder hadn’t yet earned could then be
used to attract another co-founder/shareholder.
In another share arrangement, the co-founders could agree to split the equity. For example, Chan and Gill
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could agree to own less of the company relative to Lee, especially since Lee would be spending far more
time on the project. For example, the trio might agree to split the shares 60 per cent to Lee, 20 per cent to
Chan and 20 per cent to Gill, or some other configuration.

RAISING FUNDS

“You mentioned this potential investor, Leo Martingrove, had approached you about possibly putting some
money in SDT?” Ng asked. “Yes,” Lee replied, “I am not quite sure what that entails though.” Start-ups
typically raise funds through either debt financing or equity financing, Ng explained. Debt financing, like a
bank loan, involves borrowing money that will eventually need to be paid back with interest, usually at a
rate predetermined with the lender. Equity financing refers to selling shares to an investor. An investor buys
these shares from the company, injecting money into the company. In exchange, the investor becomes a
shareholder of the company and, like a co-founder with shares, becomes a part owner of the company. In
that sense, start-ups should raise funds this way only when absolutely necessary, as diluting ownership of
the company may lead to important implications down the road. What investors ask for will vary by
investor, but the points of contention between a start-up and an investor might include the following:

• The percentage of the company the investors will own for a given sum of investment dollars
• The rights their shares will have (e.g., voting rights, anti-dilution rights, etc.)
• Whether they will receive a seat on the board of directors (a governing body that oversees the company
activities)
Generally speaking, Ng warned, trading away a large percentage of the company for a small amount of
money is undesirable. Once an investor is a shareholder, that person will have all the rights that
shareholders have under the relevant provincial legislation or the Canadian Business Corporations Act.
Lee pondered this information after having taken some notes. “Who is allowed to be a shareholder?” she
asked. “Good question,” Ng replied. “Start-ups cannot seek investment from and sell shares to just
anyone,” she noted. A start-up will likely be a private company (versus public) and securities regulations
prevent private companies from issuing shares to the public. There were exceptions, however, as shares
can be issued to co-founders and to friends and family (as defined by the appropriate securities
legislation). Shares can also be issued to accredited investors. For example, according to Ontario
regulations, an individual whose net income before taxes exceeds $200,000 in both of the last two years
and who expects to maintain at least the same level of income this year is considered to be an accredited
investor. The reasons for these regulations were to protect the general public. Public companies were
highly scrutinized and must follow strict comprehensive, regulatory regimes, whereas private companies
were not under the same scrutiny. This difference explains why anyone can invest in a public company —
because the regulatory system provides a base level of safety — but not just anyone can invest in private
companies. Furthermore, the onus of complying with the securities regulations rests with the start-up, not
the investor. Thus, start-ups need to do their own due diligence to ensure that the investment is allowed.

ASSIGNING INTELLECTUAL PROPERTY

“How would you describe how you, Rachel and Nelson have been working on the project so far?” Ng
asked. “Well, I’ve been doing most of it. . . . I would say that I’ve written probably 85 per cent of the base
code. Rachel and Nelson have been contributing some code and ideas here and there, and then I would

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 Page 8 9B15M107

integrate their material into the base package,” Lee replied. “Okay, that’s good to know, as we should talk
about intellectual property, or IP,” Ng said. She continued to explain that without any agreement in place,
all the work that is done, coding, etc., belongs to the person who created it. If or when the three co-
founders form a business entity, they should execute an IP assignment agreement, whereby all the work
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that they have done and the corresponding IP is assigned to the new company. If other friends were
“helping out” on the project, those friends should also sign an IP assignment agreement to the company.
In exchange for assigning their IP, the co-founders, friends, and anyone else who had worked on the
project should be given something of value in return, such as a nominal sum of money. “An agreement is
not valid unless there is an exchange of things of value,” Ng cautioned.

NAMES AND TRADEMARKS

“Michelle, you may not like this, but I should tell you that ‘Smart Development Tools’ and ‘Development
Coding, Organizing, and Project Management’ are terrible names for a business and product,” Ng said.
“Really? Why? I kind of liked them. . . .” Lee replied. Ng explained, “The reason is that they make really
awful trademarks.” A trademark is a recognizable sign, word or expression that identifies products or
services of a particular source from those of other sources. By this nature, trademarks cannot be
descriptive; they cannot describe the product or services offered by the company. “How would Smart Dev
Tools identify and distinguish itself from other companies that make development tools?” Lee asked.
“This is probably a moot point as it is unlikely Smart Development Tools would be considered a
trademark in common law, and it is unlikely that it can actually become a registered trademark,” Ng
added. The same would likely go for Development Coding, Organizing, and Project Management. Lee
looked a bit crestfallen, as over the past several months, she had become quite used to the names. She had
even sketched a few possible logos that she liked. “Think of the best brands in the world,” Ng began.
“They are all made-up words that don’t mean anything and nothing in the trademark is remotely
descriptive of the products and services offered.” As examples, she pointed out Nike, Apple, Google,
Samsung, Intel and McDonald’s. She paused for a moment, “DevCOP could actually work, as long as
there is no reference made to “coding,” “organizing,” and “project management.” In any case, you may
want to think the names over.”

UNCERTAINTIES OF ENTREPRENEURSHIP

Lee sat back in her seat, mentally reeling under the weight of things she had learned during the
conversation. She suddenly felt very underprepared. “Feeling a bit overwhelmed?” Ng asked with a smile.
“Yeah, a bit,” Lee sheepishly replied. “Don’t worry about it; entrepreneurship is very exciting but also
very nerve-wracking as you know. There are many things you need to think about, but with the right
knowledge and help you can get through it,” Ng offered. “But you should really think hard about whether
you want to start a company with Rachel and Nelson, especially given that they may not be ready to
become entrepreneurs right now. If you’re not careful, there may be friction in the future, which may lead
to the downfall of the start-up or with your relationship to these friends,” she said.
“I would offer one last piece of advice,” Ng said as Lee was getting up. “Seek out as many entrepreneurs
as possible to learn more about their journeys and what they learned on the way. This will help you figure
out what the pitfalls might be, but can also help build a support network.” Lee shook Ng’s hand and
thanked her profusely for her help. She stayed behind to work out some additional administrative details
before grabbing her coat and heading out. There was a coffee shop she knew well down the street, so she
headed over there lost in thought about what her next steps should be.

The Ivey Business School gratefully acknowledges the general support of the John M. Thompson
Case Studies and Curriculum Development Fund in the development of this case.

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