6/27/2006

Key Issues for Founders

"The reality is that most ventures fail because of people issues and are really a failure of the relationships among the team members. Teams come together around an interesting or exciting idea or opportunity and tend to get swept up in the idea. They often don’t talk about their shared aspirations, vision and what they want to get out of the venture. The venture gets launched without these discussions and then problems surface “Big Time” down the road when these undiscussed topics collide.

These problems can be surfaced and dealt with early on if Founders work at it. This can be done by addressing some of the...legal and business issues which the Founders of a new venture may want to consider in structuring their relationships among one another...

Of primary concern to members of the founder team is the question of how the equity in the new venture is to be allocated, both initially and over time...

A related question is whether a person whose stock has vested should be entitled to participate in the economic success of the venture after he or she leaves the company...[Other issues include:]

Transfers of Stock...
Take-along Rights...
Death/Disability...
Permitted Transferees...
Preemptive Rights...
Duration of Restrictions...
Control...
Proprietary Information...
Employment... Under what conditions can a founder be terminated and what consequences does this have to his or her stock ownership..."

Read more in this Founders Memo by Joseph G. Hadzima Jr., from which the foregoing was excerpted

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6/26/2006

Positioning a Technology Company for Acquisition

A glance at the table of contents of Mergers & Acquisitions: A Strategy for High Technology Companies(reprinted below) from Fenwick and West will give you an idea of the comprehensive and valuable nature of this resource for nascent technology companies looking to be acquired. As the article states:

"The statistics indicate that [a technology company] TechCo is more likely to be acquired than it is to go public. Given that reality, TechCo should invest the time to identify [larger companies] LargeCos that are the best candidates to meet TechCo's strategic needs. It also should identify the strategic objectives of those LargeCos and keep that data in mind during its business planning process.

It is one filter to determine whether TechCo's business decisions will expand or limit its value and exit opportunities. If acquisition remains the most probable exit strategy as TechCo grows, it might consider partnering arrangements instead of capital-intensive expansion of its infrastructure.

If TechCo decides to enter into merger negotiations, it should involve its investment banking, legal and accounting advisors early. They can help TechCo focus on what issues are critical to it, its Board of Directors, its shareholders and its employees.

Knowing TechCo's key issues at the beginning of the process increases the probability of meeting their needs. Planning for, negotiating and closing the acquisition of TechCo will be one of the most intense and challenging experiences of your professional life. Accomplishing an acquisition that meets the objectives of all of TechCo's constituencies can be one of the most rewarding."

Here is the article's table of contents:

"Introduction
Why Do Companies Acquire Other Companies?
What Creates Value in an Acquisition?
What Destroys Value in an Acquisition?
Why Do Some Acquisitions Fail?

Deciding to Be Acquired
Acquisition vs. IPO
Positioning TechCo to Be Acquired
When Should TechCo Consider Being Acquired?
The Acquisition Process
Use of an Investment Banker

Key Deal Issues
Valuation and Pricing Issues
Risk Reduction Mechanisms
Personnel Issues
Acquisition Structure
Type of Consideration Used
Tax-Free Acquisition
Acquisition Accounting

Troubled Company M&A Issues
Employee Incentive Issues
When TechCo is Near Bankruptcy

Implementing the Deal
Letter of Intent
Disclosure of Acquisitions
Time and Responsibility Schedule
Definitive Agreements
Board Approval
Necessary Consents
Integration Issues

Conclusion
Appendix A: Letter of Intent
Appendix B: S-4 Merger Time and Responsibility Schedule"

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Regulatory Compliance Guides

This Regulatory Compliance Planning Guide from IT-Observer offers a comprehensive overview of regulatory compliance issues, particularly those of concern to IT managers, stating:

"Regulatory compliance is a topic that few organizations can ignore. An ever-increasing number of regulations affect companies both large and small. The regulations and standards come from many sources, such as national and local governments. Examples include the Sarbanes-Oxley Act (SOX) and the California Law on Notice of Security Breach, formerly known as SB-1386. They also come from industry-specific oversight groups, such as the Payment Card Industry Data Security Standards.

What makes this situation even more complex is that any organization might need to comply with multiple sets of regulations, each of which mandates a separate set of requirements. Not surprisingly, many companies find it difficult to understand how to respond appropriately to these regulatory requirements, and then maintain their regulatory compliance through cost-effective processes and procedures. Finally, regulations often mention IT controls only in passing, and leave IT managers to determine exactly what they must do to achieve and maintain regulatory compliance.

The Regulatory Compliance Planning Guide is for IT managers who are responsible to meet the regulatory compliance obligations of their companies. The intent of this guide is to assist them in achieving two primary goals:

• First, to help IT managers better understand what they need to know to address their regulatory compliance requirements. To achieve this, the guide describes how IT managers can use a framework-based approach to compliance, and includes mappings of five common regulations and standards with which many organizations must comply.

• Second, to help IT managers understand how they can begin to address many of the IT control requirements that apply to their organizations. To achieve this, the guide provides information about solutions that you can use to address the regulatory compliance requirements for your organization."

The All-in-One Compliance Guide "is a collection of resources designed to help security professionals contribute effectively to their compliance programs. Each chapter is designed to address key concerns, whether you're learning about the regulations, working on process improvement or searching for effective products. The goal is to help you build a risk management program that can meet regulatory expectations..."

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6/22/2006

Ten Tips for Securing Your Data

"Operating systems and applications can always be reinstalled, but your data is unique--making it the most important thing on your computer or network. Here's a look at 10 ways you can protect that data from loss and unauthorized access.

#1: Back up early and often...
#2: Use file-level and share-level security....
#3: Password-protect documents...
#4: Use EFS encryption...
#5: Use disk encryption...
#6: Make use of a public key infrastructure...
#7: Hide data with steganography...
#8: Protect data in transit with IP security...
#9: Secure wireless transmissions...
#10: Use rights management to retain control..."

Read more in this article from TechRepublic.

6/21/2006

Tips to Avoid Employee Lawsuits

"Many small-business owners relish the informal workplace, where rules are bendable, office politics are nil, and staff members are treated like family...Entrepreneurs might be surprised to learn that they're vulnerable to the same worker complaints that plague larger corporations. The hottest area, currently, is wage-and-hour litigation, in which employees claim they weren't paid for overtime or provided meal or rest breaks...

Here are some ways small-business owners can protect themselves throughout an employee's lifecycle, from hiring to termination:

Don't hire the walking lawsuit...
Make sure employees are classified properly...
Maintain a clear discrimination policy...
Address problems when they arise...
Implement an evaluation process...
Document, document, document...
Be careful when handling a termination..."

Read more in this article from SmartMoney.com.

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When and Why to Seek a Patent Opinion

In Patent Opinion Basics from PLI, Marta E. Gross and Emily L. Rapalino "look at the circumstances in which inventors seek out legal opinions about 'issues surrounding a patent or patents.' The authors instruct on four situations in which a company might seek an opinion:

Freedom to Operate/Clearance Opinions - for instance, a company interested in expanding into a new field may be interested in obtaining an opinion to get a sense of the existing patent landscape in that field;

Invalidity Opinions - these involve conclusions, with supporting rationale, that a patent is invalid

Patentability Opinions - to advise clients whether pursuing patent protection for a given technology is worthwhile

Infringement Opinions - these advise clients on whether their patents tread on someone else's product..."

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How to Delegate More Effectively

"Delegation is an area of personal and professional management that many people struggle with. The difficulty stems from our need to control outcomes and a strongly rooted belief that we know how to do things best. It's hard to let go of control...

How can you overcome your mindset and become a better delegator? Here are some tips:

Realize that you just can't do it all...
Start by giving away small, uncomplicated tasks. As your confidence grows so will your willingness to delegate more...
Recognize success...
Realize that "Your Way" is not always the "Only Way."...
Work on giving others the tools to do what you do...
Appreciate others' accomplishments...
Seize the opportunity to work on more stimulating projects...
Understand the dynamics of authority and responsibly. Delegating does not mean giving up responsibility, and this is an essential lesson for true leadership.
Use the leverage..."

Read more in this article by Dianna Podmoroff from Mind Tools

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6/20/2006

Seven Fixable VC Presentation Mistakes

"The following are seven common tactical mistakes entrepreneurs make in their initial VC pitch which are simple to fix:

1. Not clearly stating in the beginning WHO the customers are, WHAT problem is being solved, and HOW the company’s product/service accomplishes it...
2. Not controlling the timing and pace of the meeting...
3. Worrying about the demo/pres that doesn’t work...
4. Not knowing who you are talking to ahead of time...
5. Not following up...
6. Attempting to force feedback immediately...
7. Inauthenticity..."

Read more in this Genuine VC post.

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DIY Limited Liability Company

This post from Scott Allen does a good job of explaining the filing formalities required to set up a limited liability company.

Often, however, the key element in using an LLC to run a business is the details that go into the Operating Agreement. The Operating Agreement functions like a combination stockholders agreement and corporate bylaws in the more familiar C-corporation or S-Corp. Consultations with an attorney are often prudent when drafting the Operating Agreement.

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6/17/2006

Seven KP Criteria for Startup Investment

Don Dodge reports the following as 7 rules for technology start-ups that Kleiner Perkins considers funding:

"Instant Value to customers - solve a problem or create value with the first use

Viral adoption - Pull, not push. No direct sales force required

Minimum IT footprint, preferably none. Hosted SaaS is best.

Simple, intuitive user experience - no training required.

Personalized user experience - customizable

Easy configuration based on application or usage templates

Context aware - adjust to location, groups, preferences, devices, etc."

Read more in this post from Don Dodge on The Next Big Thing

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6/15/2006

Business Proof of Concept Test

"The Business Proof of Concept Test [from StartupVentureToolbox] is designed to explore whether the entrepreneur has thought through the concept from a market size, intellectual property, human resources needs, competitive position and financial requirements point of view. The outputs from the test can be used as the basis for a business plan. The test is the equivalent of an investor's short list of important questions for analyzing whether to invest in the concept. By focusing on these questions early, the entrepreneur can resolve issues critical for success early on."

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6/14/2006

Squidoo Lens on Starting a Business

"You just heard that an old high school buddy of yours just sold his web horoscope business for tens of millions of dollars and you decide that it is time you get into it yourself. A web business can eventually just involve waking up in the morning and checking your latest signups and bank balance before making your way down to the golf course. But in the short-term it is probably going to involve long hours, frustrations, failures, no income, no success and no love.

This lens [Starting and running a web business on Squidoo] will guide you through starting and running a web startup business and everything that is involved in the process. Take shortcuts by learning from the mistakes others make and learn about what works and what doesn't work by absorbing the mass of information avaliable online now about the web, business, customers and marketing."Technorati Tags: , , , ,

6/13/2006

Our Role in the Center of the Universe

During my college reunion earlier this month at Princeton, I attended a marvelous, multi-media presentation by astrophysicist and cosmologist, Joel Primack, and his collaborator, philosopher, wife, Nancy Abrams, on their new book, The View from the Center of the Universe.

In the book and in their presentation, the authors use recent advances in astronomy, physics, and cosmology to frame a compelling new theory for understanding the universe and our role in it. In short, they argue for the hopeful and uplifting proposition that, rather than a meaningless speck in the vastness of space, we can validly consider ourselves to be located in center of the universe, occupying a unique place in the cosmos.

You can read an excerpt from the book at this National Public Radio site noting selection of the book by Alan Cheuse in his annual roundup of summer reading choices for All Things Considered.

More information is available at this Primack and Abrams website. If you join their mailing list, you will receive a URL with which you can read a complete chapter from the book, entitled "What Size is the Universe? The Cosmic Uroboros"

Global IT Compliance Summary

"There are many regulations worldwide that have numerous data protection requirements. Some of these regulations directly apply to IT practices, but many indirectly impact IT, and it is important that IT leaders are aware of them. Within the U.S., the regulations that have received the most press and most explicitly define IT requirements include the Health Insurance Portability and Accountability Act (HIPAA) and the Gramm-Leach-Bliley Act (GLBA). However, other laws that don’t explicitly state information security requirements, such as the Federal Trade Commission Act (FTC Act), still profoundly impact information security activities."

Read more in this comprehensive article from Realtime-ITCompliance (free registration required).

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Eight Step Patent Search Strategy

This eight step patent search strategy from the J. Murrey Atkins Library of UNC Charlotte is a basic guide to conducting a preliminary patent search of U.S. patents and published applications online in order to locate the relevant prior art related to a new invention. As you follow the steps, you may discover or think of other keywords and classifications that will enable you to refine and improve your search strategy.

The site also contains a link to a PowerPoint Presentation on the Eight Step Strategy.

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6/12/2006

OSHA Standard Interpretation Letters Offer Useful Guidance

"If you have visited the Occupational Safety and Health Administration's Web site at www.osha.gov, you know that it includes a number of resources to help small businesses comply with workplace safety and health regulations. These resources range from pocket-sized Quick Cards to comprehensive eTools that provide detailed information on specific industries or workplace safety and health issues.

One resource that you may have overlooked is OSHA's collection of standard interpretation letters, which constitute its official responses to written questions about compliance with the agency's requirements. (Note: OSHA requirements are set by statute, standards, and regulations. OSHA's interpretation letters explain these requirements, and how they apply to particular circumstances, but they don't create additional employer obligations.)...

So the next time you visit OSHA's Web site, take a moment to review the collection of standard interpretation letters. They offer a valuable resource for small businesses and others seeking guidance on OSHA requirements. If you don't find the answer to your question, you can write your own letter to OSHA.

Read more and find related links in article from NFIB from which the foregoing was excerpted.

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Manage from Strengths

One of the easiest things to do in the world is point out the faults and weaknesses of others. Usually without recognizing our own shortcomings. Managers often carry this to extremes by stressing areas of performance that need improvement and ignoring a person's strengths.

"To break out of the weakness spiral and to launch the strengths revolution in your own organization, you must change your assumptions about people. Start with the right assumptions, and everything else that follows from them - how you select, measure, train, and develop your people - will be right. These are the two assumptions that guide the world's best managers:

1. Each person's talents are enduring and unique.
2. Each person's greatest room for growth is in the areas of his or her greatest strength."

--Marcus Buckingham, from his book, "Now, Discover Your Strengths" commented upon favorably in this Random Thoughts from a CTO post.

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6/10/2006

Ten Factors to Consider Before Disciplining or Terminating an Employee

"Will your decision to discipline or terminate an employee come back to haunt you?...Analyze the[se] factors prior to taking any adverse action.

1. What is the employee's work record?...
2. How long has the employee been employed?...
3. Did the employee have notice of the rules and consequences?...
4. Has there been lax enforcement of the work rules
5. Is the work rule reasonable?...
6. Are the rules enforced consistently and uniformly?...
7. What was the length of time between the rule violation and the discipline?...
8. Is there evidence of a perceived bias against the employee?...
9. Is there any management culpability?...
10. Was a thorough investigation conducted?..."

Read more in this article from AllBusiness.com

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Estate Planning Basics

Please refer to this post from You and Yours Blawg for links from the Motley fool to "a great quick series of articles about Estate Planning at any stage of your life, from young single adult to retirement."

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6/09/2006

Entrepreneurial Nuggets of Wisdom

This O'Reilly Radar post and its comments contain much good advice for startups, particularly geeks who would be entrepreneurs. The post takes the form of explanations of the following "proverbs"

Starting

It's good to be king...Working in an environment you shaped to your own beliefs about how a company should be run is incredible...
Losing sucks -- shutting down a company is unbelievably difficult...
Building to flip is building to flop...
Prudence becomes procrastination...
Momentum builds on itself -- just start...
Jump when you are more excited than afraid...

The Idea
Pay attention to the idea that won't leave you alone...
If you keep your secrets from the market, the market will keep its secrets from you...
Immediate yes is immediate no -- does everyone immediately tell you your idea is great? Run away from it...
Build what you know...
Give people what they need, not what they say they need... You have to sherlock out the truth of the interest people express
Your ideas will get better the more you know about business...

People
Three is fine; two, divine...
Work only with people you like and believe in...
Work with people who like and believe in you...
Great things are made by people who share a passion...

Product
Cool ideas are useless without great needs...
Build the simplest thing possible...Simplicity leads to clarity in everything you do.
Solve problems, not potential problems...
Test everything with real people...

Money
Start with nothing, and have nothing for as long as possible...
The best investor pitches are plainspoken and entertaining...
Never let on that you're keeping a secret...Respond to the idea behind the question, without giving away more than you feel comfortable discussing...
No means maybe and yes means maybe...Keep on driving until the wire transfer is complete.
For investors, the product...matters far less...than the reactions of customers, the properties of the market, and the credibility of the team...
The best way to get investment is not to need it..."

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6/07/2006

Anderson Cooper Offers 360° Perspective to Graduates

"You stand before a field of freshly fallen snow..." With those words, Anderson Cooper reminded the class of 2006 of Yale University that upon graduation, the slate is wiped clean, and, quoting Lawrence of Arabia, "nothing is written" yet about their future paths.

I attended his address as part of the festivities surrounding my daughter's graduation. When combined with my travel to my own Princeton reunion and helping with the Habitat for Humanity Bicycle Challenge as it wheeled through Sewickley, blogging has been light of late.

I truly enjoyed Mr. Cooper's speech. He spoke with humor and humility and from the heart. While not specifically addressing the notion of entrepreneurship, he endorsed the entrepreneurial spirit, by recalling how he had secured his first reporting gig:

"Like many of you, I have a liberal arts degree, which is to say, I have no actual skill. And I majored in political science [cheers]. You’re excited about it now, but believe me, it doesn’t go very far. It means you can read a newspaper, but other than that, I’m not really sure...

The one thing I knew I liked was television and particularly television news...I figured okay, I’ve got a Yale degree, I’ll go give that a shot, I’ll apply for an entry-level job at ABC News, a gopher position. Like I’m totally qualified for this: answering phones, I’ll go do whatever Peter Jennings wants. I could not get this job. It took six months; they strung me along; I did interviews. I could not get the job...

But it actually was the best thing that ever happened to me. I decided that if no one would give me a chance, I’d have to take a chance, and if no one would give me an opportunity, I would have to create my own opportunity.

So I came up with this plan to become a reporter. I figured if I went places where there weren’t many Americans, I wouldn’t have much competition. So I decided to start going to wars...It was a very simple plan,...moronic, but it actually worked...just two years after doing this, of going on my own and going into wars, ABC News called me up and offered me a job as a correspondent...

For me, it was a lesson: two years before I tried to get an entry-level job and I thought that was the path, because that was the path that everyone took. And had I gotten that job there was no way I would have had the opportunities that I had; there was no way I would have seen the things I’ve been able to see...

When I was graduating and trying to decide what to do with my life, I really felt paralyzed because I thought I had to figure it out all it once. I had to pick a career and start down a path that I’d be on for the rest of my life. I now that it totally doesn’t work that way. It certainly didn’t for me...

My friends who are happiest now are the ones who kept taking steps based on what they felt right and what felt like them at the moment. If I had gotten that job on the set of ABC News there’s no telling where I’d be now.

When I started going to wars I had no clear goal in mind. There was no path that promised me success or job security. But I was listening really to myself and followed my passion, and I’m more convinced than ever that if you do that, you will be successful. I’m not talking about rich — perhaps you will be — but you’ll be fulfilled, and that’s the greatest success you can have..."

For the full text of his address, visit 2006 Commencement :: Class Day Speech :: Yale University