Business 16 Stanford Department of Continuing Education Class # 3, 10/12/09
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Business 16 Stanford Department of Continuing Education Class # 3, 10/12/09 Who needs help?
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Business 16 Stanford Department of Continuing Education Class # 3, 10/12/09. Who needs help?. Who needs help?. Everybody. Why do I need help?. You are most dangerous when you think you know it all Mere mortals cannot keep track of all the external trends You alone can’t know everybody - PowerPoint PPT Presentation
Transcript of Business 16 Stanford Department of Continuing Education Class # 3, 10/12/09
Business 16Stanford Department of Continuing EducationClass # 3, 10/12/09
Who needs help?
Who needs help?
o Everybody
Why do I need help?o You are most dangerous when you think you know it all
o Mere mortals cannot keep track of all the external trends
o You alone can’t know everybody
o External validation of your credibility is important
Why do I need help?
o Introductions
o Notice of key events you wouldn’t otherwise hear about
o Better intelligence about competition
o Sagely advice
o Avoidance of potholes
What kinds of help are there?
o Attorneys
o Accountants
o Scientific Advisors
o Business Advisors
o Board of Directors
What good are attorneys?
o None, if you pick a bad one
o There are lots of bad attorneys
How do I pick a good attorney?
o Find one who’s done a lot in the business you are interested in
o Find one who’s worked with successful companies in your field
o Call up a successful related company and ask them who they use
o Ask a lot of people; the good names will keep coming up
How do I pick a good attorney?
o Interview them; they will also be interviewing you
o Find one with which you have a good rapport
o Ask them about their fee structure
How do I pick a good attorney?
o Ask what other people you will be working with
o They will offer you to work with cheaper junior attorneys
o Some are good, others are training on your nickel
o Lawyers can be very expensive; use them wisely
What can an attorney do for me?
o Help incorporate/set up a basic business structure
o Partnerships vs. LLCs vs. corporations
o Equity issues
o Intros to potential investors/corporate partners
o Give you a lay of the land
What can an attorney do for me?
o Give you credibility; good firms don’t take all comers
o Good attorneys have been to this movie before
o Help you avoid basic mistakes and keep you out of trouble
o Many other things, but you have to use them wisely
What can an attorney do for me?
o You have to keep them in the loop, but you don’t want to be over-dependent
o Solicit their advice, but tell them what you want
o In general, they will not help you manage legal expenses
Warning Signs for the Wrong Lawyer
o They piss off everybody they come in contact with
o Documents measured in metric tons
o Overly legalistic/complicated language
o East-coastitis
o Phone calls not returned promptly
Warning Signs for the Wrong Lawyer
o Being charged excessively for standard documents (Non-disclosures, etc.)
o Can’t ballpark figures for tasks
o You just don’t like the guy
o He’s related to you or a friend of Mom
Who are some of the good firms?
o Cooley Godward
o Gunderson Dettmer
o Latham & Watkins
o Morrison Foerster
o Ropes & Gray
o Wilson Sonsini
o Many others; this town is lousy with lawyers
Choose the right lawyer…
o Firms that are good at general corporate law are not necessarily good at patents, real estate, employment, M&A, IPOs or litigation
o Litigators include just about every firmo IP firms include
o Shay Glenno Townsend & Townsendo Morrison Foerster
What about accountants; how boring…
o Yes, but necessary
o Investors will insist
o A good one will save your life
o They will help you figure out how viable your business really is
o Like oncologists, they are good at bad news that you need to hear
What about accountants; how boring…
o Good ones set up systems and routines
o They will present the numbers in any way that you find useful (YTD, YTY, variances, stagger…)
o Will keep you from mistakes that could cost you millions later down the road
How do I find one?o You probably need two
o You need a day-to day (actually, week-to-week) rent-a-CFO
o They come in once/week and do bookkeeping
o Again, ask around
o Second, you need a good accounting firm to do your books once/year
Which are the big accounting firms?
o Deloitte & Touche
o PriceWaterhouseCoopers
o Ernst & Young
o KPMG
Scientific/BusinessAdvisory Boards
o Absolutely necessary
o They have experience you don’t have
o They are in the trenches and the cutting edge
o They know lots of people who can help you
o They know lots of people to stay away from
o They can often act as mentors
How do I set one up?
o Find the thought leaders in your business, local and international
o Meet with them, find out if you clicko Plan to put together a group of 5-10 peopleo For an SAB, 50% academic, 50% industryo They are useless if you don’t use themo Offer to pay their expenses for a day-long
meeting once or twice a year
How do I set one up?
o Typically $1500 to $2000/day eacho Offer to hire them for an additional 2-3
days of consulting/year at the same rateo A nominal amount of equity o Set up a schedule of speaking with them
on a weekly basiso Pick people who like and respect each
other. They don’t have to agree
How do I set one up?
o Pick people who are not so old that they are irrelevant, and not so young that they know nothing
o Avoid professional consultants, lawyers, accountants, relatives
o Pick someone you would trust to shoot your dog; they may say your plan won’t work
Board of Directors: What does it do?
o Represents the shareholders interestso Represents all the constituencieso Maximizes shareholders’ valueo Sets company strategy/tacticso Checks on managemento Hires/Interviewso Approves business/operating plans/budgetso Does all of it in a legally responsible way
What does one look like?
o Minimum of 3, 5 to 7 optimal
o Add people only after careful consideration
o Only business people
o A commitment somewhere between SAB and Management
o Compensation usually stock, usually equivalent to a director-level employee (between .1% and .5% each)
o Venture capitalists & investors are usually uncompensated for board service beyond reimbursement of expenses
What does one look like?
o Usually your equity investors are represented
o A good balance is half industry people, half investors, and the president
Remember: o It is hard to kick people off boards
o You can make enemies out of previous allies
o Nonetheless, sometimes it is required
o Pick people wisely who will wear well
o Make sure people understand what the commitment is
o Don’t pick people who are too busy
