The TiE-Boston Institute organized a new workshop on “What Every Entrepreneur Must Know to Get Started—Legal and Other Important Issues for Early Stage Companies” on December 1 at the Foley Hoag Emerging Enterprise Center, Waltham. The main motivation was to provide an insight as to what it takes to start a company. With standing room only, it was attended by nearly 100 budding entrepreneurs. The speakers were William Sweeney, Comerica Bank and John Chory, Wilmer Cutler Pickering Hale and Dorr LLP.

The key topics covered were the: Idea, Name, Entity, Planning Phase, Team, Money, Venture Capital Terms and Exit Strategy.

The Idea discussion focused on differences between patents, trademarks, copyrights and trade secrets. The Name one picks is extremely important and it can convey the company’s mission. Even though there are various types of Entities such as Partnerships and Limited Liability Companies, registering it as a Subchapter C Corporation in Delaware was strongly recommended. According to Chory, “VCs usually do not invest in LLCs, there are employee compensation issues and there is no provision for “tax-free” reorganizations. C-Corp is the best option if you want to obtain VC funding, go public, do “tax-free” M&A deals or use equity to compensate employees.”

In order to develop the idea further, an entrepreneur needs to answer the following questions during the planning phase:
–    What is it you want to do and why?
–    Who are the customers and will they want your product/solution?  
–    How will you make it/develop it?
–    What is the sales channel?
–    What key positions will need to be filled?
–    How much capital will you need?
–    What does the market /customers say about products in the market today- where do they fall down?
–    What types of risk exist- technology risks (cost/benefit), market adoption?
–    How much will it cost to build product/develop service?
–    How will it be supported?
–    What is the revenue model- appliance, subscription, license, revenue share, etc.?

The Business Plan should address Description of Business, Market Analysis and what problem you are solving- need to answer why anyone wants or needs the product or service, Business Model- how are you going to make money, Management Team, including key positions to be filled, Key Risks and how these will be minimized or managed, Financial Projections and Funding Needs- timing and amounts. The presentation should not be more than 20-30 minutes and should not be overly technical.

One of the biggest mistakes new entrepreneurs make is not using a well-crafted offer letter dealing specifically with issues such as Employment is “at will”, Invention and Non-Disclosure Agreement, Non-Compete and Non-Solicitation Agreement, No violation/conflicts with former employer agreements and Equity information.

The best way to increase your chances of receiving funding from a VC is to “Do your homework- make sure that you know the investing focus of the firm from which you are seeking funding-look for “fit” and Get an introduction into the firm (from successful entrepreneurs funded by that firm, senior executives from large companies, lawyers, bankers),” said Sweeney. Finally, even though most entrepreneurs discard debt financing in early stages of the company, it is not such a bad idea.

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