Business Start-Up Toolkit- A Guide to Lean Startup Legal & Advisors

I was reading an article in this month’s (June 2012) Entrepreneur magazine by Ann C. Logue entitled “Beyond the Handshake- Having a business partner can be valuable.  Having the wrong-or no-partnership agreements can be disastrous.”  It details the experiences I hear every day by founders, entrepreneurs, and startups.  Most know they need quality legal and business advice in the early stages of their growth, but don’t want to spend the money on it.  With the advent of online document and template sharing, discount legal document prep companies, and companies out there like LegalZoom and RocketLawyer offering low-cost or free legal documents, I very often hear and see the impact that is having.  I have worked both in the trenches of many a cash-poor startup and also as an attorney advising these same type of companies or founders and wanted to give some additional guidance and solutions from both perspectives.

Education and information are some of the most critical areas for any start-up.  They need to know their product, know their market, learn how to commercialize their product or service, and how to go from idea to a functioning business.  I put together a handbook with some of the common areas operationally, administratively, financially, and legally in my Startup Bootcamp 101 e-Book (Click to download free pdf) to provide some basic education on those aspects of business start-ups.  There are web resources that I have tried to compile as well at this Blog, but there are tons of resources in the form of books and online materials.  Some recommended books are Venture Deals by Brad Feld, the Lean Startup by Eric Reis, and the Startup of You by Reid Hoffman.  I will discuss some of the do’s and don’ts when trying to stay within a “lean startup” mentality, but also when you do yourself a disservice by trying to cut corners to save money.

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Permanent Beta (or pBeta)- The New Color of Your Parachute

My site pBeta.Us is in development to provide entrepreneurs, founders, businesses, and really anyone tools, resources, guidance, and a forum to discuss the development of their own permanent beta.  P-Beta is a state of being fluid and constantly changing and adapting to your environment, the market, and your personal or business needs.

Reid Hoffman, co-founder of LinkedIn, in his recent book “The Start-Up of You“  describes how running a start-up can be compared to how individuals should approach their career progression.  He uses the term permanent beta to describe the process of what start-ups use and people can learn from.  Beta has several definitions, but the core has to do with measuring existing change or whether change needs to occur.  In finance, beta often has to do with volatility of pricing, so measuring how much change is involved.  In the tech world, beta is often the label applied to so-called “beta tests” where a computer product or software is launched in its current state to see if there are any problems with the software that need to be fixed and to get a reaction from the market to measure other aspects related to marketing as well.  It comes down to being willing to and measuring change based upon current conditions and the marketplace.

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Why Venture Capital is not “Vulture Capital”

There is this feeling among many founders and entrepreneurs that venture capital is the “dark side” and inherently evil.  I have been very surprised to hear things like “we don’t want to go down the road with Vulture Capital” in the heart of venture capital in places like San Jose, Menlo Park, Mountain View, San Francisco, and Palo Alto.  While I do agree that there are some bad apples, negative aspects of VCs and VC funding, and a general perception of VCs as sharks, I would argue that VCs are an invaluable part of the US economy and the use of VC funding has been extremely useful in the growth of many successful US companies.

Part of the problem is that people don’t understand exactly what VCs do and how VC works.  The public only hears about a VC firm making billions off of an IPO and how VCs are like vultures that swoop in and take over the company and get rid of all existing employees.  You can read my take on issues of company founders having a hard time giving up control here, but giving up some control is required in many situations to bring in the capital to make the company grow.  Investors put money into a company to make money, not to make the world a better place.  That is business 101.

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Why Tech Startups Get Funding, Not More “Meaningful” Ones

I read a good post yesterday from Chris Dixon on his blog about why there aren’t more “Meaningful Startups.”   In the article and comments, the discussion had to do with why tech companies, more specifically, internet startups get the majority of funding instead of companies that seem to solve a bigger societal problem, such as curing a disease.  He argues that the other what some might call “more meaningful startups” don’t get off the ground because they have a hard time getting funded and this is due to time to exit and amount of capital required.

I tend to see that funding and society are major reasons for the tech funding boom.

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“I didn’t realize an email or downloading an app could be an enforceable contract”

With the ever changing technology and world in which we live, practices of how things are done change over time.  This includes things like entering into contracts or modifying those agreements.  Many people try to rely on the “I didn’t sign anything” or “I didn’t know” defense to get out of a contract, especially in the online or electronic context.  These defenses may sound valid, but often people are not able to use them when it comes to things like email or online services.

Several laws were put into place on the federal level and adopted by some of the states that address concerns about online transactions or agreements.  The Electronic Signatures in Global and National Commerce Act (E-sign) and Uniform Electronic Transactions Act (UETA), and Uniform Computer Information Transactions Act (UCITA)(few states adopted this one) are all examples of such laws.  These laws seek to make electronic communication or transmission of information relevant in the modern world to create things like enforceable contracts.  They also put protections in place for consumers to avoid consumers being taken advantage of by things like hiding terms or conditions of use or making it clear that someone is being obligated by clicking on the “I accept” box or button.

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