Interview with BIH Mentor Tytus Cytowski - Navigating Legal Complexities in Tech Startups

Tytus Cytowski, mentor at Bulgaria Innovation Hub, is a distinguished American technology lawyer and the founder of Cytowski & Partners. He has crafted a thriving startup law practice centered on aiding European startups in scaling and fundraising within Silicon Valley. Tytus embarked on his entrepreneurial journey by establishing his own law firm amidst the financial crisis in New York City. His extensive background includes roles at a venture capital fund and as a financial services lawyer at a prominent international law firm in New York.

Specializing in seed/series A financing, 'flip' transactions, and exits, Tytus represents startups from renowned accelerators such as YC, 500 Startups, and Techstars. Known for his diligence, pragmatism, and deal-oriented approach, he is one of the foremost VC lawyers for CEE startups aiming to secure global investor interest. Tytus holds law degrees from Harvard Law School (LLM) and Warsaw University (LLB), and is admitted to practice in New York and Poland. In addition to his mentorship at various incubators and accelerators in the USA and EU, he advises governments and large corporations on innovation.

Can you share your journey in the legal field and what inspired you to work closer with the tech industry?

After graduating from Harvard Law School, I started my professional career as a capital markets lawyer on Wall Street. My specialty was financial engineering. In 2008, during the financial crisis, I lost my job and had to reinvent myself. It turned out that my financial engineering skills translated well into the tech industry. In this process, I discovered that I understand founders and investors from the CEE/SEE region better than most US lawyers. Eventually, I moved from New York to Silicon Valley to be closer to my clients.

How did you first get in contact with BIH, and what motivated you to join its mission? 

I was working with many CEE/SEE founders in Silicon Valley, including Ivan Osmak from GTMHub. Ivan introduced me to BIH. From the get go, I wanted to get involved as I appreciated the hard work that Pavlina and Bogie put in to build a real community. I also wanted to pitch in as I noticed that many founders from the Balkans were underserved from a legal standpoint. I saw this in Bulgaria in 2014, and I was trying to figure out how to better serve Bulgarian entrepreneurs. Bulgarian founders were extremely talented and motivated but made many mistakes that prevented their startups from launching into unicorns.

From a legal perspective, what should startups be aware of when preparing for fundraising rounds, and what are the key legal documents they need to have in place?

Reading and comprehending the term sheet from the investors is key. Many first time founders just want to sign the term sheet and get the money. As a founder you should step back and review the term sheet with your lawyers and angel investors. The term sheet is usually one page long and many key items are only flagged in it. It is fundamental to understand the terms and how investor rights work. The second legal document to understand is your startup’s cap table and how the cap table will work post-financing. You can make a lot of mistakes in the cap table, which impacts the founder’s ownership stake in the company. The third key area is to get a head start on cleaning up any legal problems before the financing arrives. You don’t want the investors to back out after they see skeletons in the closets. From my experience, many early-stage companies in CEE/SEE have their share of inactive founders or IP that was not properly documented.

How important is intellectual property (IP) protection for startups, and what steps should they take to safeguard their IP?

IP is the true value of the company, and without IP you only have founders. The main task is to have proper agreements between founders, employees and the company. Frequently founders don’t invest in legal protection and don’t have the proper paperwork to protect the company prior to the financing. Each startup should have a Silicon Valley IP transfer agreement. The IP assignment should work under Bulgarian law but also meet the expectations of Silicon Valley investors.

Are there any best practices for contract negotiations that startups should be aware of, particularly when entering into agreements with investors or partners?

You should always get a lawyer involved in talks with VCs and large customers. Founders are great at products but don’t have the appreciation of legal complexities or problems that can arise. American agreements tend to be lengthy, which takes a bit of patience from Bulgarian entrepreneurs. The agreements should be written in plain English so that non-lawyers will be able to understand them. I would also try to avoid any ambiguities in the legal language. 

What recommendations do you have for founders who choose to be part of the BIH accelerator?

BIH is primarily a community of entrepreneurs that help each other. I would recommend talking to all of the mentors. Don’t be shy to ask for help. Each mentor  is a great entrepreneur that has achieved success in Silicon Valley and wants to help you. They have not only a wealth of personal knowledge but a network that can help you. Mentors are very curious, and they want to learn more about you.

Secondly, the BIH program does not end with the demo day. You should stay in touch and follow up with the mentors after the program ends. As a future unicorn, you have an opportunity to give back to the community.

The possibility for Bulgaria Innovation Hub to achieve these milestones is achieved with the support of America for Bulgaria Foundation (ABF) - an independent, nonpartisan, and nonpolitical American grant-making foundation working in partnership with Bulgarians to strengthen the country’s private sector and related democratic institutions. For more information, please visit: https://us4bg.org/