Bank of America has a website called Small Business Online Community, the mission of which is to “create a thriving online community that empowers people in building a successful business.”  A few weeks ago, a gentlemen called me, after reading some of my posts on IndianaStartup.com and interviewed me regarding the raising capital and potentially giving up control in the process.  The article, which you can find in its entirety here, is pretty good, and give some interesting perspectives (other than just mine).

Here are some excerpts quoting yours truly:

Still, Indiana business attorney Brian Powers, who also runs the blog http://Indianastartup.com, points out that such a power-sharing arrangement can work-it just depends upon the individual circumstances of the parties involved. “Investor control is not necessarily a bad thing, especially if you have a young business that will be gaining partners that have greater industry expertise and business connections than you do,” he explains. But if a business owner can’t take an emotionally detached look at his company’s real long-term needs, he or she might be better served by bringing in a third party to help facilitate offers and find the best match. “That’s what I often do,” Powers explains. “I end up helping companies through the process of figuring out that what they’re usually being offered is a pretty good tradeoff for the money.”

What helps Powers assess what is or isn’t a pretty good tradeoff is the fact that he’s been on the other side of the table. “In 1998, I was part of a dot-com startup company that raised $1 million in capital through an equity round,” he explains. “Back then, though, we got ridiculous valuations and didn’t have to give up control to get it. Those days are long gone now.” For a short primer on these valuations and their role in determining equity investment, check out Powers’ blog: http://indianastartup.com/business-funding/raising-venture-capital/raising-venture-capital-how-much-should-you-give-up/.)

I recently read a good post on Venturebeat.com about 6 common legal mistakes startups make.  Some of these have been covered elsewhere on this blog – some not.  Here is the cliff notes version- check out the post itself for more details:

• IP Ownership – make sure it can be transferred to the startup.
• Choice of Entity – choose carefully.  They recommend a corporation instead of an LLC.  I disagree on a certain level, as I have stated before on the blog and my Indiana Law Practice Blog.
• Place of Incorporation – they say Delaware.  Again, I disagree to an extent (see this post).
• Vesting Restrictions – make sure founders stock vest over time, otherwise you run the risk of a founder leaving early on and keeping all of his /her stock.
• Securities Law Compliance – beware of not complying when issuing any securities to anyone, no matter who they are.
• Legalzoom – avoid like the plague.  Hire an attorney!

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The short answer is YES!

Lots of technology startups, internet startups and software startups I work with have typically developed some degree of intellectual property prior to actually organizing a business entity (corporation, LLC…etc).  Sometimes that IP is very early stage, sometimes, especially in the case where a founder is a developer or engineer, the IP may be very far along in terms of development.  Sometimes that IP may simply be a domain name. This may not seem like a big problem initially – but if the company ever wants to (a) enter into any significant contractual relationships relating directly or indirectly to the IP, (b) raise capital via private equity or debt, or (c) sell the business, not assigning the IP to the company can be a big problem.  The other parties in the transactions mentioned in the previous sentence will require that the company represent that it owns the IP – and when it can’t (because it doesn’t) – those other parties will require that it be duly assigned by the founder to the company.  What is the founder then demands a big payday?  What if he walks – and takes the IP with him?

To prevent all of this and a litany of other problems, founders should assign to the company whatever IP they own / have developed that is related to the business of the company – and the assignment should be made upon inception when the first grant of stock is made to the founder.  This may be done via a simple, broadly worded, IP assignment agreement.

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A friend and colleague of mine, David Castor, recently posted a series of entires on his blog about developing a good business model for early stage companies.  In a nutshell, he suggests that any good business model includes (1) a strong market opportunity; (2) a solid management team; and (3) a sound capital structure. Check out the links below if you want to read the entire series – its good stuff.

Entrepreneurial Law – Developing a Good Business Model – Part I
Entrepreneurial Law – Developing a Good Business Model – Part II
Entrepreneurial Law – Developing a Good Business Model – Part III
Entrepreneurial Law – Developing a Good Business Model – Part IV
Entrepreneurial Law – Developing a Good Business Model – Part V

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These seem kind of obvious, but according to successful, serial tech entrepreneur, Marc Andreeson (the guy who founded Netscape and pretty much paved the way for the modern Internet), the 3 criteria for any successful start-up are:

1. A substantial market opportunity.
2. A product that is 10x better than its competition.
3. An outstanding team.

He says #2 above can be compromised to a degree, but the other 2 are not optional.  Can’t say I disagree with these, as I am guessing that most start-ups that fit the above description are wildly successful.  Regardless, the video below is worth a watch – check it out.

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If you are an entrepreneur, be sure to clear your calendar from the evening of Friday June 4th – Sunday June 6th and attend Indianapolis Startup Weekend.  I have been reading about these events for a couple of years, have always heard great things, and plan on attending myself this year.

I have included some brief information on the event below – but to learn more and register for attendance, be sure to visit http://indianapolis.startupweekend.org/.

Startup Weekend recruits a highly motivated group of developers, business managers, startup enthusiasts, marketing gurus, graphic artists and more to a 54 hour event that builds communities, companies and projects.

Founded in 2007 by Andrew Hyde, the weekend is a concept of a conference focusing on learning by creating. It is known for its quick decisions, ‘out of the box’ thinking (oh no, the buzzwords are attacking!), unique facilitation technique and letting the founders show what they can do. The program has already met with success in indianapolis, Toronto, New York, Hamburg, Houston, West Lafayette, indianapolis, DC and more.

The participants that attend a Startup Weekend decide what they want to tackle over the weekend and come out at the end with several developed companies or projects. Attendees are responsible for bringing the same desire and passion to the project and walk out of the room with the task at hand, in a short 54 hours. Sound intense? It is.

A typical weekend might go something like below, although most weekends find their own schedule that works best:

6pm Friday: Everyone gets together; figures out who else is there; what would be interesting to build. 7pm: Pitches start (if you have an idea for a product you pitch it to the group). 8pm: Teams start breaking off (generally about nine teams will form during the weekend, creating nine products or companies). 9pm: Hopefully teams have solidified their concept and created an elevator pitch (even a simple one) by now. 10pm: Break off to a bar or coffee shop to continue the discussion and attempt to paper prototype out their application.

9am Saturday: Crowds pour in; work starts on development. Noon: Lunch.

3pm: More coding, business plan development, and a special guest (music, vc, sponsor etc). 6pm: Special guest drop-ins and pitches from the teams. 9pm: Gut check on the product; basic prototype building; group get-together for drinks and to talk about the products everyone is working on.

9am Sunday: The day’s work starts again. Noon: Projects are being developed; live website with signup is possibly set up; more special guests drop in. 6pm: Sink or swim time for those looking for a weekend launch. 9pm: Presentations from each company; what worked, what didn’t, what could go better and contacts are exchange for those continuing in the future.

What do Attendees get?

Startup Weekend provides an unprecedented level of networking, team building, learning, and life changes for its attendees and their communities. Don’t forget that there will be 6-7 meals and drinks provided. There is a reason that most attendees come back for every event – it’s just plain fun and provides amazing opportunities you can’t get anywhere else. Sometimes a company emerges, sometimes one doesn’t, but every time people leave with more experience, insight, knowledge, friends, and resources than they came with.

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I just read an excellent post on the StartUpNation.com blog about cost effective ways to market a startup business.  The post provides some excellent advice on how to come up with, and implement, a good marketing plan.  I use a few similar techniques in my law practice, and have had some success in doing so.  You can read a blurb from the post below, or you can read the entire post by clicking here.

How much should I spend on marketing?

The answer is: It depends.  What are your revenue goals?  What kind of business do you have?  For some companies, it might be appropriate to spend more than others.  The key is to have a budget and use it wisely.  For many smaller companies, low cost and no cost marketing strategies such as networking groups, social media, publicity and direct mail can be very effective.

What marketing strategies should I use?

Again the answer is; it depends.  Strategies will differ based on what your business is, who your customers are, and where they are, and what your revenue goals are.

Survey what other companies in your industry have done that has worked and hasn’t worked.  Ask your CPA to help you with a budget, and then stick to it.  And most importantly, measure the results of your marketing efforts to you can understand what is working and what is not.

A very common question I get from entrepreneurs involves the timing of actually incorporating or organizing (depending on whether a corporation or LLC is formed) a formal business entity through which to conduct business.  There are lots of factors to consider. I recently read an interesting “decision matrix” by Ryan Reynolds, which takes into consideration factors such as:

• The number of founders.
• The degree of risk of experiencing some sort of lawsuit.
• Whether your start-up is seeking outside fundings.
• Whether and what sorts of contracts you are signing.

I tend to agree with this these factors for the most part – at least as a way to quantify the need (for those people that like to quantify things before making a decision).   Typically, though, I will recommend that a business incorporate or form an LLC as early in the process as possible (assuming the cost is not prohibitive – and it shouldn’t be so long as you find counsel that can help you do so for a reasonable fee).  For entrepreneurs that are serious about their business endeavor, forming a business entity is usually the first step toward making things “official.”  When someone goes through the process of organizing an LLC, opening a bank account, retaining an attorney, retaining an accountant…etc…what was once an abstract business plan or hobby becomes more tangible…and a platform is created from which to focus and launch the business (not to mention the obvious legal advantages such as limited liability that are discussed elsewhere on this blog).   What it really boils down to is this – when you are serious about starting up and executing a new business, that is when you should seriously consider spending the time and money to incorporate or organize a formal business entity (corporation of LLC).

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I recently stumbled across the “Lean Start-Up” Process, a term coined by Eric Ries, 31, an engineer, entrepreneur and blogger. His inspiration was the lean manufacturing process, fine-tuned in Japanese factories decades ago – which focused on eliminating any work or investment that doesn’t produce value for customers.  This is a concept I am familiar with in my solo, virtual law practice – operate lean and focus only on providing good legal service.  Any effort or energy expended otherwise is of no benefit to me nor my clients.

Part of the this process also involves developing a “minimum viable product” that will please some customers, and then build the business from there, responding and reacting rapidly to market responses to product changes.

Below is a great slideshow that illustrates the process.

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The internet has changed the way people do business – and it is changing the expectations people have about receiving legal services. People want legal services fast, without paying an arm and a leg. While there will always be a time and place for traditional, hourly legal services, certain transactional legal services lend themselves very effectively to being offered over the internet.  Some people resort to legal forms companies, such as LegalZoom, to obtain “online legal services.”  Forms companies can’t provide legal advice, only a lawyer can. Thats why I created IndianaOnlineLegal.com.

Over the past year, a good deal of my solo legal practice has been driven by the various blogs and sites I maintain on the internet.  One thing I have learned is that not everyone that finds me wants a “traditional” experience with an attorney.  They know what they want in terms of legal advice or documents.  They want it quick, and they want it to be affordable.  They don’t need or want to meet face to face.  They don’t want to visit an office.  They don’t want broad representation.  Some of them need an LLC formed.  Some of then need a power of attorney.

IndianaOnlineLegal.com caters to the needs of these people.  By using carefully designed, interactive questionnaires that help me quickly assemble documents, I am able to provide certain legal services and legal documents at a fraction of the cost that some other attorneys charge. In fact, the prices on IndianaOnlineLegal.com are right on par with non-attorney legal form sites such as LegalZoom.com. Keep in mind that LegalZoom.com is not an attorney and may not give you legal advice – I can.  And the option to receive legal advise regarding your documents is available (sometimes bundled with the price of your document, sometimes at an additional cost).

As the site grows, I will be adding to the menu of legal services and documents available.  Everything will be offered for a low, fixed fee. Check it out to see if it meets your legal needs.

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