Fatal startup mistakes and what entrepreneurs need to succeed 🛡️ | Michael Buckworth (Buckworths)

there are 3 things that a successful entrepreneur needs. The first is an idea that will grow in scale. The second is to execute it right. And then the third thing is a bit of luck. Most entrepreneurs fail on the second one, the execution. The most successful entrepreneurs are able to balance the need to move fast, the need to take risks, and the need to almost do it their own way. It's the risk point, right? They've managed to balance that with the need to also take advice, listen to the advice, and, and get stuff done properly.

This week's Millennial Master is Michael Buckworth, a seasoned legal expert turned entrepreneur with over a decade experience navigating billion-pound deals. Michael decided to flip the script and focus on what truly ignited his passion, empowering startups to scale and thrive. From setting up his own law firm, Buckworth, to becoming the go-to legal guru for unicorns and emerging businesses, Michael has transformed the legal landscape for entrepreneurs. In this episode, Michael shares the most common legal pitfalls startups face and how to avoid them, why having a business prenup is essential to save your startup from Disaster, and what separates a good entrepreneur from a great one. This episode is brought to you by OffWork. Gym memberships, gift cards, free coffee, and pizza Fridays— well, these staff perks just don't cut it anymore. That's why OffWork gives your team something they already love. Travel. They can book their own flights, pick their own hotels, and plan the perfect getaway—all with the travel fund you set up for them. It's super easy. Just set the contributions, and OffWork handles the rest. Better time off means less burnout, more motivation, and happier employees. Give your team a perk they'll actually love. Check out Offwork today on offwork.com. Millennial Masters is proudly sponsored by Jolt, the UK's top web hosting service. Whether you're launching a WordPress site or scaling up a custom app, every great project needs a reliable home. That's why Jolt has hosting plans starting at just £3.95 a month. With unbeatable deals on domain registrations too! Why Jolt? It's a no-brainer! There's no waiting around with support within 30 seconds on live chat. Your site stays live no matter what with over 99.99% network uptime. And you can also pay with Bitcoin or American Express. So you can rack up those points too. How good is that? Sign up today and enjoy your first 3 months free. Head to jolt.co.uk to get started.

Michael, welcome to Millennial Masters. Thank you. I'm delighted to be here. So you spent over a decade in mergers and acquisitions, bit of Ally McBeal meets suits, right? How did you end up being an entrepreneur yourself?

What's the journey so far? A decade, you're making me feel, you're making me feel pretty old there.

So you're right though, I started off on what I like to flippantly call the dark side of law.

So doing sort of half billion plus M&A, and I worked for two New York firms. So trained at one of them and then moved to another one, albeit in their London offices.

And I don't know, in a weird way, it is a bit Ally McBeal sometimes. So I was, I was working on these big deals, some of which are on the front of the FT, sort of really important, I guess, deals. And I enjoyed it, but it didn't necessarily tick all the boxes for me. So I was interested in doing things that were challenging, new, interesting in terms of law.

Being on deals that were on the front of the FT was of less relevance to me, to be frank. So back in 2011 or 2010, 2011 with the banking crisis, there was less M&A around. And so I ended up doing a lot of capital markets work. So effectively sort of doing listings for companies in emerging markets. I'll be honest, I hated it. It really was not my cup of tea. And I, I blanked my boss at the time and said, you know, we should work with startups, by which I meant unicorns and some bigger startups. And to my astonishment, he said, yes, go for it, do it. I sort of went out and set up a nascent startup practice within the firm. But obviously when the M&A came back, the investment banks were doing business again. The firm was less enthusiastic about startups who, let's be honest, probably couldn't pay their fees as well as the investment banks. And so with their permission, I left, took that sort of small stable of clients with me and set up Buckworth.

So that was sort of the origin of the firm.

I guess the big difference for me and the sort of excitement of doing what I do is with startups, you can really change the narrative. So you get involved as a lawyer early, you're helping the founders get the strategy right. You're helping them get the legal documentation in place that will enable them to grow and scale. But. Also getting much more involved in how the business is going to look in the future. If you compare that to working with bigger clients, don't get me wrong, there's interesting things there, there's challenges there, but often the clever stuff is done and there's a lot more sort of less interesting churn.

The first big leap was naturally starting your own firm and leaving what was otherwise a cushy and comfortable and likely well-paid job at a big international firm. What made you take this big leap into the unknown? Yeah, and it was a big leap.

And I think my parents at the time thought I completely lost the plot. Actually, ironically, the thing I remember from that time was my parents effectively telling me I was completely insane, and that I shouldn't be doing what I was doing.

I think it was a couple of things. I'd always wanted to run my own business.

I'll be honest, I had never thought it would be a law firm. I'd always assumed it would be something else. But I think there's a there's a degree of truth in the idea that you should, you should do what you know, when it comes to, in terms of setting up a business. And obviously, I know law and new law.

To that extent, it was, it was doing something I'd always wanted to do.

I think the other thing was, I wasn't necessarily happy doing the legal work that I was doing, but had found this niche in startup that I actually quite enjoyed. And so there was a degree of this was, this was an extension of what I was doing, but was something quite exciting.

But I guess the final thing is the thing that every startup and new business needs, which is a niche and you wouldn't know it now because there's lots of firms who focus on startups and all the big firms do bits of startup stuff. Back in 2011, there really weren't, you know, startups were serviced by high street firms who perhaps viewed them as small businesses and didn't quite get the sort of the intricacy of dealing with them.

And then some of the big firms did bits of startup for free, really for profile. But there was nobody really in the space who focused on startups that could say, we are a law firm working with startups.

There was a problem to be solved.

And when we sort of jumped into that niche and originally sort of doing work with startups, we were very much the only people doing it properly. And so there was that sort of problem to solve that we solved.

You're right. A lot of service-based businesses, and here we're talking about accountancy and legal advice, can see startups as small businesses, but they don't always have the same aims, especially when we're talking about growth and scaling up and losses along the way. From your legal side, what are the key differences between an SME and a startup? What differentiates them? I think it's a couple of things.

I mean, I think there's a different attitude between startups and SMEs. I mean, I think a lot of startup founders are go-getters. They, they want to get stuff done. They often want to get it done quickly. I think with bigger businesses, once they're more established, change is more difficult. You know, they have to go through more people to do stuff. There's more people controlling budget. There's a, there's a process in place that has to be complied with before you start doing crazy things. Whereas with startups, you can pretty much do it. If the founders want to do it, they can pretty much do it straight away. I think there's a difference there. One of the downsides of working with startups is that we spend a lot of our time almost sort of educating about the difference between what we do as solicitors and what they can get on some of these precedent platforms. And I think it's increasingly a tricky conversation, particularly as AI has come into the mix, because there are some clients who don't, frankly, don't see the value in lawyers. They would much rather do this stuff themselves. They'd much rather use ChatGPT or whatever it is. They soon come a cropper and it's always unpleasant for us to come in to work with a client where, because something has gone hideously wrong because they've used dodgy precedents, or they've used AI, we'd much rather come in early and make sure everything is done properly and therefore avoid all the issues. So that's sort of one of the, I guess, the irritants that, that we have to deal with. But it is just reality, right?

While we're at it, let's, let's talk about it. So for entrepreneurs and even small businesses, you have a range of platforms, digital platforms that say for smaller fees, allow you to create vesting arrangements, investor documents, etc. And in the last year or so, especially AI has come into the game. But you said, especially when it comes to AI, these tools can go awfully wrong, right?

So if we take them separately, the Preston platforms and then the AI, I think with the precedent platforms, there's a place for it. And I think I sort of get the logic that if you're an early-stage startup, you're looking to raise a bit of money, you want to get stuff up and running, the precedent platforms offer a service. And I think that there's a, there's a value to it and a place for it. I think the difficulty comes really in two places.

One, a lot of startups believe those precedent platforms are providing them with legal advice, and they're not, and they're not insured to do so. And they're often not qualified to do so. What they're doing is they're giving you a sort of generic document that, and maybe a bit of sort of informal advice as to how to use it, but they're not doing what we as solicitors do, which is be able to say to you, here is legal advice, you should do this, you shouldn't do that. And also, we don't think this is standard in the market, you shouldn't be accepting this, you should push back and propose this. So that value-add you don't get with the precedent platforms, and hopefully you do with Solicitor.

I think in terms of AI, the problem is most people are using the wrong AI.

So if you go on ChatGPT and you tell ChatGPT to draft a document for you, what it does is it looks at the whole internet.

It looks at a bunch of precedent documentation that it finds and it pulls something together. The amount of information it's looking at is huge. And for obvious reasons, it can't necessarily discriminate between what is good and what is bad. So if you've got 1,000 precedents out there, it's looking at all of them and coming up with something that almost, you know, summarizes all of that stuff. And in the world of the internet, there's a whole load of rubbish that is appalling. And so the, the AI pulls it together and comes up with something that doesn't necessarily work. So I think that's point one.

I think point two is I don't think AI, by the way, is good for drafting documents. I mean, there's, there's legal tech out there now that works off precedents and can be quite useful, but just going to ChatGPT and getting it to draft something, I don't personally think that's going to work at the moment.

So for legal stuff, ChatGPT, bad AI, but you said there's some good AI?

So it's mostly made for law firms. The way that, the way that AI, I think, helps in the legal space is where you have a controlled environment. So you put into the AI algorithm I don't know, 100 of your firm's precedent shareholders agreements, and you let the AI take that good data and come up with a document that you can use in certain scenarios. So you've got your precedent in the software, and AI is basically tweaking to reflect commercial terms and improving. Now, that's the re— that's a, that's a way of using it that works because the data that it's looking at is good data in the first place. Compare that to ChatGPT, where it's looking at all sorts of rubbish. I think that's the first thing.

But I also think this, the second point is massively important, which is that AI has to be used with intelligent advice and with sort of people who are reviewing it to make sure it's correct.

And if you, as a layperson, get even a good AI engine to draft a legal document for you, you don't have the experience or the knowledge to be able to figure out what's good about that document and what's bad about it. So you need a lawyer or someone qualified to be able to go through it and go, all right, it massively screwed up this clause, that, that doesn't help, or for whatever reason, this provision is, is not friendly for your interests.

You need somebody to do that thinking even whilst you have that document.

And I think the problem with AI is that people are so focused on deliverables, they get a document, it's called a shareholders agreement or whatever.

And from their perspective, that's all they have to worry about. And of course, shareholders agreements are not made equal. You have good ones, you have bad ones, you have middling ones. You need that sort of expert view on top of it.

They can come and bite you back. And they can.

And there's a really funny story on this that, I mean, awful for the person involved, but objectively, I guess, moderately entertaining. There was a, there was a leading barrister who was doing some litigation. And before a case gets to a sort of a court hearing, what has to happen is that the counsel produces a case summary. Which is effectively sort of for the judge to review and understand the sort of key legal principles that support the position.

Somewhere something went wrong. Either he used ChatGPT or something similar to draft that case summary, or a minion who was working for him did.

For whatever reason, he didn't review it properly.

It got submitted to court, and in that case summary, there was a case reference which was absolutely central to his argument that was made up. It didn't exist. And the AI algorithm had, I think, looked at the relevant case law, figured out where it thought the answer should be. So where the case law should go and basically made up this case reference. Now, obviously you can imagine that's a huge screw up. The judge in the case was distinctly not amused, reported this poor chap to the Bar Standards Council and he got struck off. And the scary thing is that this is not a layperson, a member of the public making a mistake like that. This is someone super qualified and super experienced. So you can see that, you know, if you don't, if you don't think about AI and you don't sense check it and really review it, massive things can go wrong. And I think that's, that's the point that everyone needs to sort of grapple with that it's a useful tool. Yes.

But you have So take it with a pinch of salt and really think about what it's telling you.

And that means that sometimes the entrepreneurs and startups coming to you come a little bit too late for help, right?

It does happen. Thankfully, I think the area where things are too late tend to be twofold.

So it tends to be tech. I spend every seminar I ever do, I say to people, do not do anything with shares without speaking to a lawyer or an accountant first, because every time you do anything with shares, there is a calculation for tax purposes. And if you happen to, for example, issue shares to somebody when the shares have a material value, and they're not paying that value, so they're not paying market price, they're landing themselves with a tax liability.

So in those circumstances, often there's nothing we can do.

And those are, I guess, the most difficult ones, because a co-founder in good faith using precedent documentation issued a bunch of shares to somebody coming on board, it's landed them with £100,000 tax liability. Really not much we can do to solve that. The other area where we have problems that are harder to resolve is actually with IP. So the classic used to be that somebody creates intellectual property for you, perhaps source code for your website or app, they own that intellectual property. And so you need it transferred from them to your business. So what used to happen was people just didn't get it transferred. And so we had to go away and get an IP transfer done later, possibly when the person who created the IP didn't want to sign or was not incentivized to sign. What actually happens, when you could, you could view it as an improvement, I guess. But what often happens at the moment is people do get an IP agreement signed, but it doesn't work. And they've used a precedent that just doesn't actually transfer the IP. And so at a later date, they then have to go back and get another one, another one signed. The slight wrinkle on it is that if they hadn't signed it in the first place, the first time the question is asked about IP agreements, it would have been spotted. So probably before the company has material value, because they got an IP agreement signed, when they're asked if they got one done, they said, oh yeah, we did, we've sorted that.

And you often find nobody thought about it or spotted it until much later.

And only when the company's got significant value, sometimes even when it's being sold, has somebody like us looked at it and been like, guys, this doesn't work. And so then they have to get an agreement re-signed in circumstances where actually, the person who they're asking to sign a document could potentially hold them hostage. So I think those are the areas that are very difficult to resolve. Most of the rest of it, we can resolve problems, it just bluntly costs the client more than if they'd done it right in the first place.

One, one question I have in this domain, and it's something I bumped into myself in my endeavors, and I'm wondering what your advice is for other entrepreneurs is how do you evaluate the IP and how soon should you have it on your balance sheet?

Yeah, so that's a good question.

So IP is in simple terms, value determined on the revenue that it, or the potentially the profit that it generates. So if the business isn't trading, then at a very, very sort of simplistic level, the IP doesn't really have much value. Once the business is trading, particularly when it's profitable, then the IP starts to have a significant value.

Whether or not you should sort of attribute value to it on your balance sheet is actually a more complicated question.

So one of the things to be aware of is the tax relief schemes for angel investors in startups, so SEIF and EIF, which are the sort of two relief schemes there. They require that when the company raises the investment, its gross asset values are below certain levels. So one of the mistakes that startups make is they actually, they, they, they capitalize the amount of time spent on creating IP on their balance sheet. That gives the IP a value and pushes the company through the net asset value threshold. And so it can actually effectively mean they cease to be eligible for particularly the baby scheme, SEISS. So I think my view, my view would be if you think there is a reason for attributing value to your IP on your balance sheet, get tax advice, talk to your accountant. And make sure they've thought about SCIF, EIF, because, you know, that's where the sort of immediate problems can come from.

You've worked with countless startups over the years. You've said a decade or more. We won't bring that in anymore, just to think of that. What is the one mistake you see entrepreneurs making time and time again?

There's a few of them, but the one I'll pick is not putting in place founders agreements and particularly not putting in place reverse vesting structures over shares that actually work. So founders fall out all the time. I don't know what the percentage is, but I would say probably amongst our clients, it's, it's north of 50%. Uh, at least one of the founders, you know, I say falls out, but leaves, disappears for whatever reason from the business. Um, there's a couple of problems that that can, can cause that the main one relates to shares and how you get shares back off them. And so what you have to have in place is what are called reverse vesting structures, which in simple terms means the founders have all issued their shares upfront when the company has no value, but they're deemed to earn those shares over time. So let's say over 3 years, if the founder leaves before they've earned everything, the shares that they haven't earned are taken off them. Without correctly drafted mechanisms to take those shares back, you can't take the shares back. And so the biggest problem that we see, and I guess the one we see most often, is there's been an issue, founders left, and there's no mechanism to get back their shares, or potentially the mechanism to get back their shares is hugely tax inefficient, and therefore is not terribly helpful. So I think that's probably the number one. And the really annoying, the sort of painful thing about this is, it's so easily resolved. A simple founders agreement that covers vesting and things like IP and other things is not terribly expensive to put in place. If it's put in place upfront, it can solve so many problems.

And on the flip side, sometimes this causes companies to go bust.

So we have a client at the moment where there's a 50-50 shareholder split. There's been a falling out. My read is I suspect that company will go bust because there wasn't a founders agreement and essentially the founders can't talk to each other. They, they are, they are not best buddies at the moment. And so it really is one of those things that can kill a business. It's so easy to sort out in the early stages and get right. But so many startups don't, don't do it because they just figure it's not going to be a problem. They, they're going into business with their mates or partner, or whatever it might be. And they just assume these things are going to work out.

Naturally, when you start a business with a business partner, you, you think of the rosiest situation rather than the darkest one. So when would you say is a good time to put this agreement in place if naturally, when you start, you're full of optimism, and you, you don't consider that the worst situation?

I always sort of compare this to getting married, right. So prenups are less of a dirty word in the UK than perhaps they used to be. But if you think about a prenup, it isn't about divorce at all, actually, it's about, about saying, understanding the perspectives of your partner, when it comes to money, understanding the sort of financial position, understanding where their sort of priorities or concerns are. So if you run a business, and that business is your sole source of income, clearly you're going to want to hive that out of, you call it marital asset, if there is a, if there's a divorce for whatever reason, or frankly for any reason at all. So you, you have that early conversation that makes sure both partners understand priorities in terms of finance, where the financial position of each party sits, allows you to have a talk about what we think about these things, what would happen if we have children, what happens if we divorce. And then you put that into a document that is relatively easy to put together because it's all theoretical. Put it in a drawer and hopefully forget that document forevermore. Founders agreements are exactly the same. So when thinking about when you want to do this, you want to do it as early as possible. You want to do it before the value, probably roughly when the company's incorporated, because the longer you leave it, the harder those conversations are. And I think when thinking about these things, often the biggest benefit of putting in place a shareholders agreement is actually that the founders talk to each other. About their expectations for the business. And the flip is that when co-founders fall out, more often than not, it's nothing substantial. It's just there's been a different, a different expectation. So one co-founder may have fully understood that the business is not going to be profitable for the first 5 years, and it's going to take a decade to sell it. The other person has gone into this and they've thought, well, this is a great business, we're going to be making a million quids worth of profit in year 2, and we're going to sell it for 100 million in year 3. Now, if the parties can talk to each other upfront, then hopefully they understand that there's a difference in expectation, talk about it, and figure out a common approach and sort of a common expectation. And that in itself, agreement aside, solves a lot of the issues.

So the key advice here is get a business prenup before you start or as soon as you start.

Yeah, and talk to each other a lot, all the time, continually.

Because people have been asking you these questions lots of times, you've basically written a book to help entrepreneurs on their journey. It's called Built on Rock. I have a copy here beside me. Tell me what inspired you to create the character that is basically leading this business journey in your book.

Yeah. So as you've said, in the book, there's a sort of theoretical founder who, for each chapter, we sort of set out what he's doing with his business. Why did I do it? Well, I'll be honest, writing a book about legal stuff is, is quite challenging because it's difficult to make it interesting.

You know, it's not like writing a fiction book, which you can have all sorts of exciting things going on.

There's a limit to the excitement you can, you can do with a legal book. So it was about sort of trying to make it, I guess, relevant and readable.

So in terms of trying to make the book itself readable, there's lots of case studies and examples of actually often client sort of experiences that we've had to try to help the reader understand how this sort of kicks in in practice. And I think the idea of the theoretical startup was the same thing. It's about applying the, if you like, the legal lesson to an actual business. And so the reader can see they've understood, for example, how investment rounds work. Now they can see how the, how the particular founder in this instance has, has sort of gone about their investment round and where their challenges might be. So it was really just a sort of a tool to try to make it a bit more engaging.

Even with a book out there, do you still find yourself giving the same advice over and over?

To a degree.

So there's lots of similar conversations. I'm an entrepreneur in residence at a couple of London universities. And so yesterday I was, I was at LSBU and talking to some of their entrepreneurs. And a lot of those conversations are relatively similar, because obviously, new entrepreneurs setting up a business, they inevitably have a lot of the sort of same concerns and same worries. The good news, I guess, from my perspective is that there's also lots of really different conversations. Again, with startups, one of the exciting things is that every business is different. And so every business will have different challenges, different problems that they need to address. And a lot of the value that we add is being able to look at those, those specific challenges for a business and be able to say, all right, it's new and different and we've not seen it before. But it's actually quite like this challenge that this business had. This is how we dealt with it, or maybe this is how we wish we dealt with it and be able to sort of solve the problem that way. So yeah, there's lots of the same sometimes, but there's also lots of new and actually really exciting and innovative conversations we have as well.

You mentioned investors and a lot of startups and businesses try to seek investors, whether it's VCs or angels, investors. What are some of the common pitfalls you've seen in the relationships between entrepreneurs and investors and any key ways they can avoid them?

I think the good news is that in the UK market, at least angel terms are pretty founder-friendly these days. And actually the earlier stage VCs, and actually frankly, some of the later stage VCs in the London market, most of the reputable ones are investing on relatively standardized terms as well. So there's always bits of stuff that's sort of specific to a deal, but generally everybody's sort of acting well, acting in good faith, and there's not demands for more outrageous terms. So I think that helps.

I think where things can go wrong, as a rule of thumb, I say to clients, complexity is a problem and probably flags an issue.

So at the moment, there's a lot of money laundering/fraud going on from a couple of foreign countries. And we see these bizarre structures where investors are proposing, you know, a whole bunch of intermediary entities to almost shield the identity of the investor. They're sort of doing loans combined with equity, which is actually very unusual in the UK market. And so not convertible loans, but putting money in, lending it back to them and then pushing it back into different entities.

So as a rule of thumb, anything that doesn't make sense is overly complex or is unusual, is probably a red flag.

In my experience, we, we do sometimes have clients who really want us to look into this stuff, because for whatever reason, they really want to take the money. And more often than not, if it's a complex structure, there's, there is something wrong. So I think keep it simple and be concerned about complex stuff.

I think the second thing is, is sort of connected with it. But I think increasingly compliance is massively important.

You know, money laundering compliance, compliance with sanctions rules, and then Financial Promotion Regime compliance. I think these are dull, they're boring topics. Startups tend not to focus on them, but they're massively important. If you take investment from somebody who hasn't signed a Financial Promotion Regime certificate, so that's a certificate confirming they're a high net worth or sophisticated investor, or by the way, individual investors.

If you don't sign one of those certificates, A, you commit a criminal offense, but actually B, directors can become personally liable to refund to the investor their investment money.

A lot of startups don't get it and they don't realize it. But of course, when you put it that way, they pretty clearly, it's a very important thing to get right.

And I think on the sanctions side, there is the sanctions regime, which has been greatly expanded due to the Ukraine war.

What it effectively says is that anyone resident in, so everyone living in Russia is sanctioned. And I think again, a lot of startups aren't necessarily aware of the intricacies of the regime.

The problem for directors is if they take money from someone who's sanctioned, again, they commit a criminal offense and it does carry a prison sentence.

So it's a very serious point. So I think getting that compliance done right is the second thing that's massively important. And I think probably the final thing I would pick up would be understanding the commercials of deals. Things like liquidation preferences, anti-dilution provisions, they seem conceptually to be quite straightforward in that I think a lot of startups can quite easily understand that a liquidation preference gives an investor the amount of their investment as a priority against other investors. What they don't necessarily understand is the long-term economic impact that can have, and actually how it makes it incrementally harder for them as founders to get any value out from the business.

So I think that's the sort of third thing.

It's, it's people looking at term sheets and going, yeah, you know, liquidation preference is standard in the UK. Fine. I'll accept it. Or anti-dilution provision, perhaps not standard, but all 3 VCs who, who we've spoken to have asked for the same thing. Therefore, I'll accept it. And they haven't necessarily understood the long-term economic impact that it has and the harder that they're making it, making it for them to be able to generate any value from the business.

So a lot of the capital can come from outside of the UK. We know entrepreneurs and startups are keen on getting the money and getting on with the business and going through their growth journey. Would you be comfortable sharing which type of countries and investors from those countries they should be extra careful about?

Yeah, so I should probably caveat it by saying, with the exception of countries that are obviously sanctioned, most countries in the world have good, honest investors. And I'm certainly not suggesting that you should not take money from investors in any of the countries that I'm going to mention, because clearly there are great VCs and great angels in them. In terms of the areas that are slightly higher risk, so Dubai at the moment, we're seeing more problematic sort of investors than perhaps we used to. Don't know why that is, but we've seen, and by the way, it's not necessarily that they're individuals in Dubai. What often is the case is there's a Dubai company that has got people sat behind it who may be sanctioned or may be laundering money for whatever reason. And so Dubai's a jurisdiction which seems relatively popular for people up to no good. We've seen a bit of a trend from some companies based in Turkey recently. So there's a couple of bizarre, really bizarre sort of Turkey structures floating around, all of which are raising a fair few red flags. I think beyond that, it's a bit weird sometimes that different countries or structures in different countries pop up from time to time. So a couple of years ago, probably 4 or 5 years ago, we saw about 5 or 6 different investors all talking to clients and they were based in BVI. Now BVI usually, to be fair, is a, I mean, it's obviously a tax haven.

That's the British Virgin Islands for— Yeah.

Yeah. British Virgin Islands. Yeah. It's a tax haven, but it's actually usually a fairly reputable jurisdiction and we don't, I mean, it's used by lots of VCs. We don't tend to see problems there. But about 4 or 5 years ago, we had within about 6 months, we had sort of 4 or 5 structures through the BVI that were raising major red flags. So I think it's, I think it's about less about jurisdiction and more about sort of, you know, being able to spot the red flags, you know, if structures are overly complex, or you don't know who it is you're talking to, or who is the who are the individuals behind the investment structure, the sort of, those are the red flags you should keep an eye out for. And that's when you should be reaching out to lawyers and saying, what do you think? Give us a view.

You mentioned Dubai and a number of entrepreneurs and millennial masters I've been speaking to on this podcast have mentioned Dubai as an extremely business-friendly place where they would be keen on setting up some business structures in order to avoid paying some of the higher rate tax here in the UK. Have you found merit to this claim?

I think, I think there's a couple of big caveats when it comes to offshoring or using offshore structures to reduce tax liability. I think the first point I would make is if startups wish to raise investment from UK investors, so particularly UK angel investors, they have to comply with the SCIS and EIS rules. So those tax relief schemes for angel investors, that requires you to have a UK permanent establishment. So either a UK company or a foreign company with a material business presence here, that blows a massive hole through structuring the business offshore to try to reduce UK tax. And effectively, I'm being overly generalistic, but you know, it's a bit of a, it's a bit of a toss-up. You either offshore and reduce your tax liability, or you are able to raise investment with SCIS, EIS. In my experience, being able to raise investment in the UK for most startups is worth more than reducing tax liability. And there's a very good reason for that, which is a lot of startups are not massively profitable, if profitable at all. And so if they're not profitable, they're not paying tax in the UK or at least corporation tax anyway.

To start with. I think that is a good start.

Potentially a step for later.

Yeah.

I think the second point is it isn't just about where your company's incorporated. It's also about where the company's owned and operated from. So to give a really simple example, if you're operating a business in the UK, you're resident in the UK, your offices are here, it doesn't really matter if you're operating that through a Dubai company or a BVI company or anything else. If that Dubai company is owned and operated from the UK, it's a UK tax resident company, and therefore it pays tax in the UK in exactly the same way as a UK incorporated company would. So setting up a Dubai entity in those circumstances doesn't help. The way to, or one of the ways, or the sort of principle, I guess, to resolve that issue is you end up setting up a Dubai company that is owned and operated out of Dubai. So perhaps you have Dubai lawyers running it, maybe you have complex trust structures. You're talking then about significant expense, significant complexity, and it becomes a lot more complicated and actually a lot riskier to do.

So I'm not, I'm not saying don't do it.

I'm not saying don't offshore businesses. There are clearly circumstances where, you know, it makes sense. And let's be honest, none of us like paying tax and would love to— all of us, I suspect, would love to reduce our tax in a lawful manner. But I don't think it's the easy solution that people think it is. It's expensive. It may not even work if you need to be in the UK and you're running businesses in the UK. And so I think it's something that if it were me, it would be something that I would wait until there's significant value in the business and then have a look at it. You know, bearing in mind it's going to cost money to do and likely to have ongoing sort of legal and compliance costs to keep the structure compliant with tax rules.

So it might cost more to offshore than the profits and tax you would save yourself if you try to do it too early. Is that my correct understanding?

Exactly.

And I think you also have to, have to remember the risk of it going wrong. So, you know, if you just think about celebrities, there is a very, very long list of celebrities who have got involved in tax optimized structures that have been promoted by all sorts of purportedly reputable people. And it's transpired the structure doesn't work or HMRC has voided it. And those celebrities have been hit with, I mean, in some cases millions of pounds worth of back taxes, penalties, and interest that of course they've had to pay. If you're going to offshore and you're going to put in place a structure that shields earnings from UK tax, you need to be damn sure that that structure works and that it continues to work as tax laws change. And you need to understand that if you've got it wrong or your advisors have got it wrong or HMRC is smarter than you think they are, and they managed to change the law in a way that you don't spot, you're going to be liable for all the back taxes. So there is a risk associated with this, I think, is what I'm saying.

Let's turn the tables and talk about yourself and your business and your entrepreneurial journey. You've named the business and the firm after yourself, and you've built a strong personal brand through speaking, writing, advising, you're a mainstay at a lot of events. And I've met you myself at the business show in London in early November. How important has this been for your business, putting yourself out there as the lead consultant and advisor?

It's a plus and it's a minus, to be honest. The positive is by sort of branding the business with my own name, I guess, my own brand. I think it can help make the business more personal. You know, at the end of the day, when people instruct lawyers, they are instructing based on the individuals that they work with. They are looking for people who are trustworthy, who, that they trust them to help them make very important decisions.

So personal branding helps with that.

The downside of it is, to a degree, it's certainly not the case all the time, but to a degree, people want to speak to the Buckworth. And so there's a degree to which particularly new clients, they, they want to speak to me. I only have a certain number of hours in a day and I have a huge team behind me. So that can be tricky sometimes. And we, we also spend in the background a lot of time and energy promoting the individual lawyers in the firm and their brands because they are as competent as I am and incredibly good at what they do. And so it doesn't really make sense for everything to come through me. So there are positives and minuses with personal branding. Would I do it again? Probably not. I'd probably call it something more generic if I was to set up a law firm again, which, let's be honest, I would probably not be wanting to do. But I mean, I think it's, yeah, it's a tricky one. But I think if I was setting up a law firm again, I probably would do something generic because you can then you can benefit from the personal branding along with sort of promoting, more easily promoting, sort of the other people in the team. How big is your team right now?

So it's a good question.

I'm so relatively small in the grand scheme of things. We have no aspirations to be absolutely massive. I think law firms are interesting, are interesting businesses, because there's often a desperate sort of rush for growth. And there's this feel that you know, you want to be 50, 100 lawyers because it's sort of better in some way. And whilst I get it, I think what it also means is that you have to keep 50, 100 lawyers busy. And to a degree, you can't be as choosy about the work that you take on. I think at our size, we're able to be a little bit picky. So we work on interesting work. We take on clients that we enjoy working with, and we don't have to take less interesting churn work. We don't have to work with clients that we don't think fit with our brand, our ethos, our approach to business. So I think the size we're at is great. We grow organically from time to time, we reduce organically from time to time, dependent on market and other stuff. But yeah, we're sort of— the size we're at is, is probably about right. Yeah, more or less.

The pandemic hit kind of like halfway through your business journey. How has it changed your take on remote hybrid working, both for the firm and for the businesses you've been advising? I am, I have quite a controversial view on this.

I think remote working is a disaster. I come at that from a law firm's perspective, I guess. So what we found during the pandemic, and we obviously in compliance with the law had teams working from home at various different points. What we found was that junior lawyers particularly really struggled. They stopped developing, you know, the quality of work went down, the number of mistakes in work that I was reviewing dramatically went up. And it really negatively impacted on both the quality of the work they did, but also on interpersonal skills, how they engage with their team, all of that kind of stuff. My firm belief is that particularly junior lawyers, they, they benefit from being in the office. They, they learn from osmosis, that sort of idea of hearing senior people talk to clients or hearing conversations within the team. And they get a huge amount of benefit from that. And they simply don't get it at home. And so we've always been very, very open with the team. We want people in the office full-time. We have an expectation that the team will be in the office full-time. And we only recruit people who sort of buy into that. I think just looking at it from the other perspective of recruitment, I feel that our experiences in recruitment have pretty much sort of reinforce my view. So when we interview candidates who want to join us and they have been working a significant portion of their time from home, very often their technical skills are not up to scratch and very often their experience isn't what we would expect. It's really harsh because I think if you were a trainee lawyer during the pandemic, I think you were at a significant disadvantage because you probably were at home, you probably didn't have that much contact with senior people, and so through no fault of your own, your technical skills are not where they should be. But I certainly think that that is in many cases the case. And we have a preference to— when recruiting, we have a preference for recruiting people who've primarily been in the office because they tend to be more experienced and better at it.

Do you still get to interview a lot of the recruits yourselves, yourself? And if so, what is a key question that kind of like gives away the true personality of a candidate and you really assess them on?

My team do most of the initial interviews.

I tend to do the final interview and it depends on the role, but I'm generally looking at two things. One is technical expertise, particularly with more senior lawyers. And then the second most important thing is, is that personality point. Because we're a small team, we do care that people will fit in and It's extraordinary how, how people come and come across in an interview differently to the way that they are in reality, or at least the way they are when they sort of settle in. I wouldn't say there's a single question that we ask that, that sort of solves or answers that question. I think it's more about trying to get the individual relaxed, having a conversation with them and seeing sort of what comes out of that. So My approach is always, I try to avoid question and answer. It's very much a conversation and really let, let candidates talk. I think that's good for them. It gives an opportunity for them to, to a degree, lead the conversation, you know, sell themselves without the sort of slightly more rigid approach of questions and answers. But it also gives us an idea to get a feel for who they are. And I always sort of, I always sort of take the view that I think a little bit of being slightly flippant, but a little bit of crazy is a good thing. If you want to be a good lawyer, you need to be a little bit mad because it really helps. So a little bit of crazy, I think, is a good thing. But I, and I also think that people who have interests, there's, it doesn't really matter what it is. You could be interested in horse riding. You could be interested in running, gym. We've had people who have been interested in obscure bits of dancing. We had one, one candidate who was incredibly interested in a particular monarch in ancient Egypt. All of that stuff's great. And it's actually really interesting and fascinating when they talk about the things they're interested in, you actually see their personality, like that's often when people shine. And I think it's because they stop being nervous, they feel they're on a safe topic, and you sort of see who they are. So yeah, I guess my approach is sort of get people talking, have a chat and see what comes out of that.

Just before we started recording this chat, you were also telling me you've been up at an ungodly hour. So you clearly are an extremely busy person and work very long hours. What are some habits or routines that keep you grounded and productive when there is so much to do?

Yeah. So I think organisation is one of them.

So I have a to-do list on my desk all the time.

Written or electronic? Written, actually. So written, written. So I have that on my desk all the time.

The first thing I do in the morning is update my to-do list, figure out what I'm going to do during the day. I always call it, I don't know, 6 AM. I always look at my emails and figure out sort of what the priorities might be.

So I think that's number one. Number two, I pause my emails.

So I have Boomerang for Gmail, which is a system that enables you to pause emails coming into your inbox.

I use it constantly.

And I do it because I'm one of these people, if there's an email in my inbox, I'm worrying about it. And I want to review it and respond to it. It doesn't make any sense. But in inexplicably, if it's not in my inbox, I'm not going to worry about it. So if I need to get work done for an hour, I pause my emails, nothing comes into my inbox, and I can focus on doing the work. And I think for me, that's been— I've probably been doing that for about 10 years now. It's, it's probably the single most important way that I manage stress and all that kind of stuff. And I guess sort of on the third thing, sort of, I'm quite careful to separate as best I can, sort of work time and home time. So I tend to finish at roughly the same time each day, go home, have dinner, play with the dog, all that kind of stuff. My emails are paused. Most circumstances, work doesn't necessarily intrude with that. You know, similarly, at the weekends, I try not to work weekends. But if I am doing a bit of work, there are times during the day that I am switched off. So I take the dog for a walk, 4 or 5 in the evening, I'm in bed at half 2 in the morning, Dog walking time, I'm off, I'm offline. I'm not working. You know, that's the sort of the time when I went out, my brain switches off.

But I think it's, I think it's that.

And I think the important thing is to get that balance. You can work hard, but you need to make sure that when you're not working and you're having home time or chill out time or whatever it might be, that you're genuinely switched off. Because if you're always thinking about work, you never get downtime. You never enjoy anything and you just burn out. Every time.

Also, to run a growing and successful legal practice and business for over 10 years must have taken some sacrifices. What sort of sacrifices have you made in order to be where you are today?

I guess there's several, right?

I mean, one is time. You can't set up a business and do it half-heartedly. It just doesn't work. And so I think any founder entrepreneur will, will recognize this sort of idea that for the first couple of years, at least, you are compromising. You're not, you're not going out with your friends every night, you're spending your weekends working, you're very much sort of business focused.

And I think there are costs with that.

You spend less time with your family. If you're not careful, you can lose touch with friends. So I think 100%, I, I had that. I remember it for the worst holiday I've I ever had. I went on holiday to Greece with a bunch of friends. And there was a big, big mess of a deal going on at the time. This was 10 years or so ago when I was less good at organizing stuff. And I spent the entire holiday working. And it was horrible because I was working less efficiently because I wasn't in the office, I was in Greece. But also you have that sort of peer pressure from friends that come on, stop working, come and enjoy the holiday. So I think after that holiday was like, never again, big priority is to make sure holidays are carved out and that that's time away from work. I think the second thing is there is, there is also that sort of cost thing, right? When you run your own business, you, you are effectively responsible for making sure that everybody gets paid their salary. And you have to be aware that people need their salary to live and they expect that to be paid. And that's a huge pressure. You have to manage the books. You have to make sure there's enough cash floating around to always be able to pay people because they are working as employees. Not taking the risk that you as a business owner take. I think that responsibility is huge and stressful at times. I remember in the early days when we were obviously, our revenue was less, there were times when it, it looked tighter and you would, I'd sort of be sitting there with my COO who actually still with the firm and we'd be sort of saying, uh, salary's coming up. What do we need to get paid to make sure we can pay them? So I think, I think that's the sort of second pressure. I guess the third thing is that sort of reputational point, doing what I've done and putting my name on the firm, you don't half tie your own brand to the firm. And so when mistakes are made, which inevitably happens, it's a very personal thing. And I think you have to, or one of the lessons I learned very early on is that members of the team will from time to time make mistakes. The learning from those mistakes is how to make sure they don't happen again. And that's the most important bit. But the other thing is actually realizing that touch wood, thank God, all the mistakes that have been made have not been material and have all been solved and solvable, but realizing that You can't beat yourself up over silly stuff that other people have done. And I think that was something I found very hard in the early stages that somebody made a typo in a document and I was beating myself up about it because I felt it reflected on me. And I think over time you just have to accept this stuff does happen. The way that what matters is how you resolve it and making sure that A, this stuff doesn't happen again, but also that, you know, you've got that problem solved and it hasn't caused a bigger problem down the line.

10 years into your business. You can't turn back time, but you can reflect. What advice would you give to Michael when he started the business a decade ago? What's one key thing you wish somebody told you when you started? Good question that.

I think it would probably be that last point I was talking about, which is that it is not to beat yourself up too much.

I think lawyers are bad at sort of getting stuff wrong and acknowledging that they can't do something.

We're trained from the get-go that everything has to be right all the time and that we have to be, it's not that we have to be on top of everything, but we have to, we should know what we're doing at all, at all points. And I think, I think that particularly when I first started the firm 10 years ago, I would have found it very difficult to sort of adapt to the reality that sometimes things aren't perfect. Sometimes clients don't want things to be perfect. And I remember there was a really early stage client, or a client we had really early stage when we first set up the firm. They weren't interested at all in perfect documents. That wasn't what they wanted. They wanted to focus on the sort of key legal issue. And I remember, and their approach was always, this is a contract we're signing with a client. I only want you to look at these 5 clauses. And the agreement would be awful. There'd be all sorts of things in it that weren't great. And the first couple of times I went back to the client and said, I've looked at these 5 clauses, this is what you need to do. But also there's a bunch of issues here in the other stuff you haven't asked me to look at. The client wasn't interested. Like they understood their risks. They were completely fine with the fact the document wasn't great. They were, they just wanted advice on those key points. So I think I used to find that incredibly difficult. And I think sort of, I felt it impacted on my brands and on me that stuff was going out that I'd reviewed that wasn't perfect. I think you just— and something I learned relatively quickly was, there has to be a balance. And sometimes that's driven by the client. And it's not to say that you don't warn the client that there are issues, of course you do. But at the end of the day, if the client doesn't want those issues resolved, that's the client privilege. And you know, you sort of live with that one.

You naturally read a lot of books to qualify as a solicitor, lawyer, and further on. But alongside your business journey, are there any books that have inspired you or shaped your own entrepreneurial journey that you'd like to mention? I run a reading list, and I make sure that I include them all in the show notes.

In terms of book names, top of my head, no, but there's a very, very good book by Branson. I suspect he's written quite a few, but there's a very good one that he wrote. I'm guessing it was probably about 10 years ago that sort of talks about the ethos of being a founder and sort of setting up businesses. I actually found that really, really fascinating. He's a, he's a really interesting guy. You probably know the story that Necker Island, he, he bought almost by accident. Accident. So I think he'd been on a date with, I don't know if it was a girlfriend or somebody he was just dating, but he'd been on this date and he'd sort of seen this island for sale for quite a lot of money. And he'd made this lowball offer, like a fraction of what it was on the market for. And I think he sort of said it was partly to impress this lady he was on a date with. You know, the buyer went and went and also the seller went and accepted the offer. And that kind of ballsy risk-taking, I think, is really integral to being an entrepreneur. It takes a certain person, type of person who can actually do that. It takes a bit of luck to get away with it. And I think Branson, Richard Branson, sort of, he combines in a way all of the best bits of an entrepreneur. And it helps that most of his sort of gambles have paid off. And he's been very successful. As I said, it was, yeah, I think He wrote, as I said, many books, but there was one particular book about 10 years ago that was, I thought was really inspiring.

And a final parting question I'd like to ask you, Michael, is from all your experience, what separates a good entrepreneur from an average one, let's say?

Well, there are three, in my view, there are three things that a successful entrepreneur needs. The first is an idea that will grow in scale.

The second is to execute it right. And then the third thing is a bit of luck. Most entrepreneurs fail on the second one, the execution. And the flip from my side is that that is obviously where lawyers get involved. So I think the most successful entrepreneurs, certainly that we've seen, they are able to balance the need to move fast. The need to take risks, and the need to almost do it their own way. It's the risk point, right? You know, do it their own way and take their own decisions. They've managed to balance that with the need to also take advice, listen to the advice and, and get stuff done properly. That doesn't, by the way, always mean, and I don't think it should mean that when your lawyer tells you to do something, you always do it in exactly the way that they've asked. But it does mean that you can listen to advice, understand it, filter it, and do the important stuff at the right time. And so I think it's that sort of balance between fast movement and taking risks and balancing advice that you get and doing what you need to do to make sure the execution is done right.

That's a great spot to end this episode and quite a few things to think about. Thank you so much, Michael.

Thank you very much for inviting me on.

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