BOULDER — Entrepreneurs seeking to start their own businesses may be tempted to go it alone, but there are times when professional advice is critical, if they want to avoid the pitfalls.
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If dealing with an innovation, an invention, something new that will set the business apart in the marketplace, filing for a patent needs to occur within a year of when the innovation is disclosed, advised patent attorney Gina Cornelio of the law firm Dorsey & Whitney LLP.
And, said her colleague David Mangum, the company must be set up legally before signing a contract with a third party.
Cornelio, Mangum and public relations expert Doyle Albee, who operates MAPR Agency, spoke to attendees of BizWest’s IQ Awards Thursday night at the Jewish Community Center in Boulder. IQ recognizes the “innovation quotient” among companies in the Boulder Valley and Northern Colorado. At the event, 21 companies competed in seven categories for awards, with one innovation rated by the audience as the innovation of the year.
BizWest Publisher and Editor Chris Wood led Cornelio, Mangum and Albee through a series of questions designed to help startup companies navigate through issues that they might face.
Among the advice offered:
- If the innovation requires protection, make sure the patent is in place before talking even with investors. Investors rarely are willing to sign nondisclosure agreements, Cornelio said.
- While most companies in Colorado get their start structured as limited liability companies because of the flow-through nature of the structure in tax matters, “if you’re raising money from investors, most will want to see a Delaware C Corp. status,” Mangum said.
- Companies may need public exposure as they seek to get underway, to gain investors and customers. They should keep in mind the changing nature of the media landscape, Albee said. “Startups will need to be able to explain what they’re doing because there aren’t specialists in the media anymore,” he said.
It helps to have experienced people around you if you’re raising money, Cornelio said. Companies may need help making sure that all intellectual property is owned and protected. “Button everything up before your funding round,” she said.
The attorney selected to help needs “to know what a SAFE is. Not everyone knows,” Mangum said. A SAFE is an agreement to provide an equity stake when certain triggering events occur.
Companies should be aware that the media will discover when a fundraising has occurred because filing a Form D with the Securities and Exchange Commission is required and that document is a public record. “Get out ahead of it,” Albee said. He advised companies to disclose information early, when the story is easier to control.
Mangum said investors in startups are less interested in the innovation and more interested in the founder team. “The technology is important, but the tenacity and charisma of the founder team is most important,” he said.
Telling the story
Albee told the innovators in the room that they shouldn’t expect to see “a two-page article” on their company; those don’t happen very often. “But there’s always an opportunity to be quoted in a story,” he said. And contributed content can also be helpful in telling the story, although sometimes a company may need to pay to have a contributed article published.
As lawyers advising clients, Cornelio and Mangum said “it depends” whether they would advise a client to speak with the media.
“Are they [the client] a loose cannon?” Cornelio asked.
Albee as the public-relations expert said the nature of the response to media may change depending on the situation.
“Can I trust him [the client] to get on the phone and not say something ludicrous? Or do we say it in writing,” he said.
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