Startup 101 Legal Issues - RefreshMiami

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Startup 101 crash course, from a legal perspective. You have an idea. Now what? You have a company. How do you get funded? You\'re up and running. Now what? …

Startup 101 crash course, from a legal perspective. You have an idea. Now what? You have a company. How do you get funded? You\'re up and running. Now what?

By Nicholas Robbins and Gunster Attorney Gaida Zirkelbach

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Transcript

  • 1. Startup 101 RefreshMiami by Gaida Zirkelbach, Esq. (gzirkelbach@gunster.com) and Nicholas Robbins, Esq. (nrobbins@gunster.com) GUNSTER – FLORIDA’S LAWYERS FOR BUSINESS
  • 2.
    • This presentation and related information have been prepared by Gunster, Yoakley & Stewart, P.A. for information purposes only and do not constitute advertising, a solicitation, or legal advice. Such presentation, materials and information contained herein is not intended to create, and receipt thereof does not constitute formation of, and attorney-client relationship. The presentation, materials and information should not be relied upon for any purpose without seeking legal advice from a licensed attorney. The information contained in this presentation and related course materials is provided only as general information and may or may not reflect the most current legal developments; accordingly, this information is not promised or guaranteed to be correct or complete. Gunster, Yoakley & Stewart, P.A. expressly disclaims all liability in respect to actions taken or not taken based on any or all the contents of this presentation or related course materials and information.
  • 3. I have an idea. Now what?
  • 4. Birth of an Idea and the Birth of a Company
    • Is this idea my idea?
    • Who owns my idea?
    • Can I stop others from using my idea?
    • How can I get paid for my idea?
  • 5. Choosing a Legal Structure
    • Limit liability, tax efficiency, corporate governance
    • Common types of entities:
      • Sole Proprietorship
      • Partnership
      • Corporation
      • Limited Liability Company
    • Where to organize – Florida v. Delaware
  • 6. Protecting Your Idea
    • Confidentiality Agreements
    • Work for Hire / Assignment Agreements
    • Register and Protect Intellectual Property
  • 7. Types of Intellectual Property
    • Copyrights
    • protect the expression of an idea (but not just an idea)
    • must be in fixed in tangible medium of expression
    • exclude others from reproducing, preparing derivative works from, distributing, performing publicly, or displaying publicly (with some exceptions, such as fair use)
    • exists upon creation – but registration with United States Copyright Office can provide additional legal rights
    • usually shown as: © Company Name, Year
    • examples : design of Coca-Cola bottle; text and images on a website describing a service
  • 8. Types of Intellectual Property
    • Trademarks
    • protect association of a company with its goods or services
    • prevent consumer confusion and others from benefiting from goodwill associated with your company’s products and services
    • usually shown as: Logo ™ (as soon as claim rights) or Logo® ( only after USPTO registers the mark)
    • examples : logo on Coca-Cola bottle; logo or slogan on a website associated with a service
  • 9. Types of Intellectual Property
    • Patents
    • protect ideas or inventions
    • exclude others from making, using, offering for sale, selling or importing
    • must be issued by the United States Patent and Trademark Office
    • must have utility; be novel; not obvious to an ordinary person at the time made; and thoroughly explained and documented
    • examples : shape of Coca-Cola bottle; computer software; novel service or product being sold on a website
  • 10. Types of Intellectual Property
    • Trade Secrets
    • Protect confidentiality of ideas and information
    • independent economic value from not being known by others
    • must take reasonable measures to protect secrecy
    • no registration requirement
    • examples : formula for Coca-Cola; source code
  • 11. Why Protecting Your Idea Matters
    • Attracting investment
    • Buyout
    • Exclusivity
    • Barriers to Entry
    • Licensing Opportunities
    • Joint Ventures
    • Defensive Purposes
    • Establish Expertise
    • Establish Brand Loyalty
  • 12. I’ve got a company. Who can fund it?
  • 13. Who are these Venture Capitalists?
    • Professional investors who manage a portfolio of growth companies (however, not looking to operate them).
    • Long-term outlook – 5-7 year investment horizon
    • Goal is to maximize return while limiting investment risk
    • Not lifestyle investors
  • 14. Private Equity Performance Index Investment Horizon Performance, 2005 What is Venture Capital?
  • 15. Comparison of Local Landscape Sources: 2008 NVCA Yearbook Crossbow Ventures, Inc. What is Venture Capital?
  • 16. Valuation
    • Supply and Demand
    • Market Environment
    • IPO Market
    • Public Market
    • M&A Market
    • Other VC Valuations
    • Deal Terms
    • Greater Demand from VC Community = Greater Upward Valuation Pressure
    What is My Company Worth?
  • 17. Source: DowJones VentureOne Convertible Preferred Convertible Participating Preferred Common Convertible Debt Other 0 20 40 60 80 100% 25.0% 66.9% 9.3% 4.7% 1.2% Type of Securities Issued to Investors What Does the Deal Look Like?
  • 18. Key Deal Considerations
    • Economics
    • - Valuation
    • Control
    • - Board seat
    • - Class vote on major corporate decisions
    • - Investor rights
    • Valuation Protection
    • - Liquidation Preferences 1-4 x
    • - Anti-Dilution Price Protection
    • - Dividends
    • - Rights of First Refusal
    • Liquidity Protection
    • - Redemption Rights
    • - Registration Rights
    • - Follow-Along and Drag-Along Rights
    • Type of Securities
    • Deal Structure
    • - Common Stock
    • - Convertible Note
    • - Preferred Stock
    What Does the Deal Look Like?
  • 19. Art of The Successful VC Deal 1. Realistic Valuation 3. Proven Management 4. Strong Investors 5. Shared Vision 2. Correct Capital Assumptions 6. Trust 7. “Market” Term Sheet 8. Experienced Company Counsel 9. Experienced Investor Counsel How Do We Get There?
  • 20. I’m up and running. Now what?
  • 21. Continue to Protect Your Idea
    • Relationships with Employees and Independent Contractors
    • Relationships with Vendors / Service Providers
    • Relationships with Customers and End-Users
  • 22. Employees and Independent Contractors
      • Work for Hire / Assignment
      • Confidentiality
      • Non-Competition
      • Non-Solicitation
  • 23. Vendors / Service Providers
      • Work for Hire / Assignment
      • Confidentiality
      • Non-Competition
      • Non-Solicitation
      • Licenses
      • Warranties
      • Liability
  • 24. Customers / End Users
      • Service Agreement / License Agreement / Purchase Agreement / Terms of Use
        • Signed, browsewrap, clickwrap
      • Privacy Issues
      • Social Media = user generated content
  • 25. GUNSTER.COM | (800) 749-1980 FORT LAUDERDALE | WEST PALM BEACH | JACKSONVILLE | MIAMI | STUART | TALLAHASSE | VERO BEACH Banking & Financial Services Business Litigation Corporate Environmental & Land Use Immigration International Labor & Employment Leisure & Resorts Real Estate Private Wealth Services Probate, Trust & Guardianship Litigation Securities Tax Technology & Entrepreneurial Companies Florida’s lawyers for business.