Monthly Archives: March 2012

MIT Business in Gaming Conference

Date: April 5th | 8:00 AM – 4:00 PM

Overview: Goodwin Procter is a sponsor of the MIT Sloan Business in Gaming Conference (MIT BiG), which will feature a full day of panel discussions and keynotes and speakers. MIT BiG brings together video game industry professionals, local entrepreneurs and leading Boston area students and MBA candidates to address the challenges and opportunities facing the industry now and into the future. Insightful talks and presentations from panelists and keynote speakers will be featured throughout the day.

Event Registration

Twitter: @MITBIG

This post was authored by Founders Workbench.

Scenes from SXSW

The Goodwin Procter Startup Squad had a great time meeting clients and showing off the Founder’s Workbench at SXSW Interactive. We ate, we drank, we braved the rain, but most importantly we were introduced to some very exciting new companies. Thanks to all who stopped by our Founder’s Lounge at @parksideaustin. It was a pleasure to meet everyone and we hope to see you all again next year.

This post was authored by Founders Workbench.

The JOBS Act: A Game Changer for Emerging Growth Companies

The House of Representatives voted 380-41 to approve the Jumpstart Our Business Startups Act (the “JOBS Act”), which was previously approved by the Senate by a vote of 73-26. The JOBS Act is now headed to President Obama, who is expected to sign it into law. This bipartisan legislation is designed to stimulate job growth by making it easier and less costly for smaller companies to raise capital in the U.S. through a loosening of regulatory restrictions applicable to private offerings, initial public offerings and certain newly public companies.

What does this mean for your start-up? Click here for the full rundown.

This post on Free Legal Start-up Documents, Start-up Issues and IPO was authored by Founders Workbench.

Founder Agreements – Key Issues for Discussion

Founders of a start-up enterprise are often so consumed with the numerous issues related to the operation and financing of their new business, that they fail to carefully consider key issues related to the Founders’ relationships with each other. However, it is important for the Founders to address certain critical issues early on in order to avoid undesirable consequences or disputes at a critical point in the future.

One of the most important issues for the Founders to discuss is the initial capital structure of the company, and in particular, how the Founder shares will be allocated among the Founders. Essentially, the Founders need to decide upon an equitable distribution of the Founder shares based on the contributions that each Founder will be making to the company. Sometimes the Founders will decide to split the Founder shares equally based on the assumption that each will contribute equally to the business, however, there are numerous ways to slice the pie and the Founders should consider which allocation works in their situation. The Founders should also discuss a variety of matters associated with the Founder shares, such as transfer restrictions and vesting requirements. If a Founder holds unvested shares, such shares are essentially earned over time, such that they are subject to the company’s buyback right (typically at cost) in the event that the Founder’s service relationship with the company ceases. Vesting requirements specify how unvested shares become vested, or earned shares.

Founders may want to voluntarily subject their Founder shares to vesting to ensure that the members of the founding team remain committed to the company, as in the absence of vesting the Founder would have the right to retain his or her shares following a departure from the company. Various types of vesting schemes can be employed to ensure that the founding team’s objectives for a particular Founder are achieved. If the main concern of the Founding team is that a certain Founder remains committed to the company for a specified period of time, that Founder’s shares would be subject to time-based vesting, where the shares would vest over a specified period of time (for example, a period of time between three to five years is common) for so long as the Founder maintains a business relationship with the company. If, however, the main concern of the founding team is keeping a certain Founder motivated until a particular milestone is achieved (for example, until an investigational new drug application is filed in the case of a biopharmaceutical company), the Founders’ shares would be subject to performance-based vesting, where some or all of the shares would vest upon the occurrence of such milestone so long has the Founder remains employed with the company through such milestone.

A combination of time-based vesting and performance-based vesting can also be used. The Founders should also consider if the vesting of the Founder shares would be accelerated in certain circumstances. Oftentimes, accelerated vesting will be granted in connection with a sale of the company (single-trigger acceleration) or within a certain number of months after a sale of the company if the purchaser terminates the Founder’s business relationship within such period of time (double-trigger acceleration). If the founding team plans on raising a financing round for the company in the near future, it is likely that the financial backers will want to ensure that the Founders are committed to the company, and therefore may impose vesting requirements on previously issued Founder shares, if such restrictions are not already in place. In addition, if the investors believe the existing vesting terms are too “rich”, they may insist that the Founders restate those terms prior to their investment.

This post on Start-up Issues was authored by Laurie Burlingame.
 

Founders Flash

This week’s articles highlight a new life sciences VC fund, provide insight into being a female business owner, share tips on choosing the right kind of business to start, and discuss small business lessons learned from “The Hunger Games.”

Drug Giants Back New Venture Capital Fund – Mark Scott, New York Times Dealbook

Johnson & Johnson and GlaxoSmithKline are teaming up with the VC firm Index Ventures on a $199 million fund targeted at the life sciences sector.

Opening Doors for Women-Owned Businesses – Kate Lister, OPEN Forum

After three decades of running businesses, Kate Lister shares some insight on being a female business owner.

What Kind of Startup Is Right for You? – Nellie Akalp, Mashable

Six tips on choosing the best type of business for your abilities and assets.

Four Small-Business Lessons from ‘The Hunger Games’ – Kara Ohngren, Entrepreneur

The popular book and film can serve as a guide for your business.

This post was authored by Founders Workbench.

MIT Clean Energy Prize Mentorship Program

Date: Spring 2012

Overview: The MIT’s Clean Energy Prize (CEP) is a nationwide, $200,000 student venture creation competition that aims to catalyze a new generation of clean energy leaders with solutions to meet the world’s energy challenges through innovation and entrepreneurship.  Bill Schnoor will serve as a Judge, Bob Bishop, Jonathan Shapira and Jennifer Fang will serve as mentors.

Twitter: @MIT_CEP

This post was authored by Founders Workbench.

Obama Urges Legislative Action for Start-Ups

In January 2012, President Obama introduced the “Startup America Legislative Agenda” to Congress with the intent to ease financial and tax burdens on new businesses and to accelerate growth in start-ups.

The president’s legislative proposals include:

    • Tax Breaks
        • Permanently eliminating capital gain taxes on investments in certain small businesses to incentivize investors to fund start-ups and companies in the early stages of development.

       

        • Permanently increasing the tax deduction for entrepreneurs, allowing deductions of up to $10,000 (increased from $5,000) for start-up expenses.

       

 

    • Access to Capital
        • Providing start-ups with greater access to capital by creating a national framework for crowdfunding and allowing businesses to raise up to $1 million through that framework.

       

       

        • Deferring SEC reporting and auditing requirements for emerging growth companies for up to five years after their initial public offering.  As defined, these companies have less than $1 billion in annual revenues, have issued less than $1 billion in public debt over any three-year period and have a public float of less than $700 million.

       

 

    • Elimination of Visa Caps  Attracting foreign entrepreneurs to the United States by eliminating country-specific visa caps.

 

President Obama hopes that these legislative initiatives will provide easier access to additional capital, lower costs and greater growth opportunities for start-ups.  By increasing incentives for investors and providing a variety of funding and cost-saving opportunities for start-ups and small businesses, the president anticipates an expansion in entrepreneurial activity and concomitant job creation.

While the initiatives have given entrepreneurs and investors cause for optimism, doubt remains as to the likelihood of Congressional approval during an election year.  Time will tell whether the president has the bipartisan support necessary to turn these initiatives into law.

This post on Start-up Issues was authored by Nina Chen.

 

Founders Flash

This week’s articles profile hot new start-up Highlight, consider the pros of being a female founder, feature free start-up accelerator MassChallenge, and discuss what technology has done for entrepreneurs.

Highlight App Takes Automatic Location-Based Sharing to the Next Level – Sarah Kessler, Mashable

Start-up “Highlight” is the break-out star of South by Southwest.

Why Female Tech Entrepreneurs Have an Edge – Laura Smoliar, Inc.

Even in Silicon Valley, being a female founder has its advantages.

MassChallenge: A Colossal Startup Accelerator That’s 100% Free – J.J. Colao, Forbes

Boston-based start-up MassChallenge nurtures 125 young companies and doles out $1 million in grants each year.

Gazelles and entrepreneurs: A to M as fast as you can! – Kathy Kemper, The Hill

For entrepreneurs, technology has been a game-changer, dramatically lowering the cost of starting a business.

This post was authored by Founders Workbench.

It’s Never Too Early to Think About Privacy

The collection, use and disclosure of data is increasingly a key issue for businesses of all types, industries, sizes and locations.  Managed well, data can be an important or even critical business asset.  In contrast, a lack of adequate planning and preparation about data privacy and security can have long-term implications for a business, effectively limiting how it can use and share information, and in the worst situations, can result in significant liability and negative publicity.

Companies should consider adopting a privacy by design approach and integrating privacy considerations into their business model as early as possible.  As we have seen recently, even powerhouses like Google face complications when implementing privacy policy changes once data has already been compiled.  Of course, even the most well constructed privacy programs will likely need to adjust over time as laws, technology and business practices change, but planning ahead may help to avoid major overhauls that may result in consumer backlash or worse.

Privacy planning involves far more than drafting and posting a privacy policy.  Depending upon the nature of the business and the types of data that it uses, attention may need to be directed to: (i) disclosures made to consumers and other data subjects; (ii) internal policies and training; (iii) information security; (iv) agreements with vendors and service providers; (v) data sharing arrangements; and (vi) marketing initiatives and other key areas.

Effective privacy planning is not a quick or easy task.  However, taking the time to think about privacy early on and developing a comprehensive strategy to guide the company through its lifecycle will undoubtedly pay off.

This post on Compliance and Data Security was authored by Jacqueline Klosek.