Friday, May 25, 2012

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.

pBeta- Permanent Beta- 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.
Mr. Hoffman uses “permanent beta” to explain how start-ups and individuals should always be watching for changes that need to occur and being flexible to adapt in order to succeed and survive.  So in one’s career, one may need to adapt their thinking to react to market needs to stay competitive.  This willingness to change and adapt I believe is like a fluid motion where you are always aware of your environment.  To me, using the word “permanent” with beta tends to sound like a final point; however, I would argue that you should think of it as a “perpetual” beta.  The meaning attached is really the same, but to me, perpetual gives more of the meaning of the fluidity to constantly adapt to survive.  Continuously changing has helped me during some difficult times in my career.  When the type of work you want to do has slowed down due to the economy (the marketplace), you often have to find something else you may know how to do to survive.  I love helping start-ups and entrepreneurs; however, in 2008 and 2009, funding for small business and start-ups became much more difficult to come by.  I decided to refocus my law practice to an area of law that had become very needed with high demand which I already knew how to do, bankruptcy and foreclosure/real estate litigation.
Perpetual beta is the state of being always willing to adapt to the changing marketplace and moving in a fluid motion testing where you can be successful and making the necessary changes along the way.  Like a start-up, you may test certain things out and not be successful in many of them; however, you learn from each “failure” (although I don’t consider them a failure when you are trying and learning).
The purpose of this site is to constantly provide advice, guidance, resources, and some real like stories of people or company’s changes made to stay in perpetual beta.  Part of this site and my other main site is to tear down the veil of secrecy behind things that people want to or should know, such as the law, fund raising, finance, and venture capital.  Just as Jim Cramer has done on his TV show, books, and website Mad Money®.  He wants to educate the consumer and states “That’s why we try to help you understand the rules of their game.”  He is a former big banker making tons of money on Wall Street, but saw that people couldn’t make the changes they needed without the right info.  This is the information age and there is no reason to keep secrets behind the doors of lawyers, doctors, hedge fund managers, or investment bankers.  Cramer goes on to state, “You can’t make money in the market if you don’t understand it. It’s like playing Monopoly without knowing what Pennsylvania’s worth, or how much it costs to put a hotel up on Boardwalk. My job is to make sure you have not just the facts, but also the rules – and those rules are always changing.”
As the rules and market change, you or your business need to be able to change and learn.  I plan to do a century ride sometime before I die.  A century ride is a bike ride for 100 miles.  My bike skills have been in perpetual beta since I was 4 years old.  I went from a tri-cycle to training wheels to dirt bike and now I’m learning to ride long distances on a lightweight high-tech road bike (with wheels as wide as a toothpick which can be tough).  Keep your life in pBeta and teach others how to pBeta.Us.  Bring your comments or requests for info here and I would highly suggest Reid’s book “The Start-Up of You” which you can find online or at your local bookstore.

Friday, May 11, 2012

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.

Tuesday, May 8, 2012

Credit Report Use Limited In California Employment Decisions AB 22

A common question asked by start-ups or even just average average businesses is what information they can ask or use in vetting their potential employees.  Some common forms used may be background checks, drug screening, and reference checks.  Due to the economy creating many credit problems for average citizens (even more so with entrepreneurs who often use their own personal credit to bootstrap their company), I will take a look at the use of credit reports in making employment related decisions. 

Existing federal law provides that, subject to certain exceptions, an employer may not get a credit report without prior disclosure of that the employer wants to obtain one and the employee consents. Existing federal law further requires, subject to certain exceptions, an employer, before taking any adverse action based on the report, to provide the consumer with a copy of the report and a written description of certain rights of the consumer.