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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?. 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

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Presentation Transcript
why do i need help
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
  • External validation of your credibility is important
why do i need help1
Why do I need help?
  • Introductions
  • Notice of key events you wouldn’t otherwise hear about
  • Better intelligence about competition
  • Sagely advice
  • Avoidance of potholes
what kinds of help are there
What kinds of help are there?
  • Attorneys
  • Accountants
  • Scientific Advisors
  • Business Advisors
  • Board of Directors
what good are attorneys
What good are attorneys?
  • None, if you pick a bad one
  • There are lots of bad attorneys
how do i pick a good attorney
How do I pick a good attorney?
  • Find one who’s done a lot in the business you are interested in
  • Find one who’s worked with successful companies in your field
  • Call up a successful related company and ask them who they use
  • Ask a lot of people; the good names will keep coming up
how do i pick a good attorney1
How do I pick a good attorney?
  • Interview them; they will also be interviewing you
  • Find one with which you have a good rapport
  • Ask them about their fee structure
how do i pick a good attorney2
How do I pick a good attorney?
  • Ask what other people you will be working with
  • They will offer you to work with cheaper junior attorneys
  • Some are good, others are training on your nickel
  • Lawyers can be very expensive; use them wisely
what can an attorney do for me
What can an attorney do for me?
  • Help incorporate/set up a basic business structure
  • Partnerships vs. LLCs vs. corporations
  • Equity issues
  • Intros to potential investors/corporate partners
  • Give you a lay of the land
what can an attorney do for me1
What can an attorney do for me?
  • Give you credibility; good firms don’t take all comers
  • Good attorneys have been to this movie before
  • Help you avoid basic mistakes and keep you out of trouble
  • Many other things, but you have to use them wisely
what can an attorney do for me2
What can an attorney do for me?
  • You have to keep them in the loop, but you don’t want to be over-dependent
  • Solicit their advice, but tell them what you want
  • In general, they will not help you manage legal expenses
warning signs for the wrong lawyer
Warning Signs for the Wrong Lawyer
  • They piss off everybody they come in contact with
  • Documents measured in metric tons
  • Overly legalistic/complicated language
  • East-coastitis
  • Phone calls not returned promptly
warning signs for the wrong lawyer1
Warning Signs for the Wrong Lawyer
  • Being charged excessively for standard documents (Non-disclosures, etc.)
  • Can’t ballpark figures for tasks
  • You just don’t like the guy
  • He’s related to you or a friend of Mom
who are some of the good firms
Who are some of the good firms?
  • Cooley Godward
  • Gunderson Dettmer
  • Latham & Watkins
  • Morrison Foerster
  • Ropes & Gray
  • Wilson Sonsini
  • Many others; this town is lousy with lawyers
choose the right lawyer
Choose the right lawyer…
  • Firms that are good at general corporate law are not necessarily good at patents, real estate, employment, M&A, IPOs or litigation
  • Litigators include just about every firm
  • IP firms include
    • Shay Glenn
    • Townsend & Townsend
    • Morrison Foerster
what about accountants how boring
What about accountants; how boring…
  • Yes, but necessary
  • Investors will insist
  • A good one will save your life
  • They will help you figure out how viable your business really is
  • Like oncologists, they are good at bad news that you need to hear
what about accountants how boring1
What about accountants; how boring…
  • Good ones set up systems and routines
  • They will present the numbers in any way that you find useful (YTD, YTY, variances, stagger…)
  • Will keep you from mistakes that could cost you millions later down the road
how do i find one
How do I find one?
  • You probably need two
  • You need a day-to day (actually, week-to-week) rent-a-CFO
  • They come in once/week and do bookkeeping
  • Again, ask around
  • Second, you need a good accounting firm to do your books once/year
which are the big accounting firms
Which are the big accounting firms?
  • Deloitte & Touche
  • PriceWaterhouseCoopers
  • Ernst & Young
  • KPMG
scientific business advisory boards
Scientific/BusinessAdvisory Boards
  • Absolutely necessary
  • They have experience you don’t have
  • They are in the trenches and the cutting edge
  • They know lots of people who can help you
  • They know lots of people to stay away from
  • They can often act as mentors
how do i set one up
How do I set one up?
  • Find the thought leaders in your business, local and international
  • Meet with them, find out if you click
  • Plan to put together a group of 5-10 people
  • For an SAB, 50% academic, 50% industry
  • They are useless if you don’t use them
  • Offer to pay their expenses for a day-long meeting once or twice a year
how do i set one up1
How do I set one up?
  • Typically $1500 to $2000/day each
  • Offer to hire them for an additional 2-3 days of consulting/year at the same rate
  • A nominal amount of equity
  • Set up a schedule of speaking with them on a weekly basis
  • Pick people who like and respect each other. They don’t have to agree
how do i set one up2
How do I set one up?
  • Pick people who are not so old that they are irrelevant, and not so young that they know nothing
  • Avoid professional consultants, lawyers, accountants, relatives
  • Pick someone you would trust to shoot your dog; they may say your plan won’t work
board of directors what does it do
Board of Directors: What does it do?
  • Represents the shareholders interests
  • Represents all the constituencies
  • Maximizes shareholders’ value
  • Sets company strategy/tactics
  • Checks on management
  • Hires/Interviews
  • Approves business/operating plans/budgets
  • Does all of it in a legally responsible way
what does one look like
What does one look like?
  • Minimum of 3, 5 to 7 optimal
  • Add people only after careful consideration
  • Only business people
  • A commitment somewhere between SAB and Management
  • Compensation usually stock, usually equivalent to a director-level employee (between .1% and .5% each)
  • Venture capitalists & investors are usually uncompensated for board service beyond reimbursement of expenses
what does one look like1
What does one look like?
  • Usually your equity investors are represented
  • A good balance is half industry people, half investors, and the president
remember
Remember:
  • It is hard to kick people off boards
  • You can make enemies out of previous allies
  • Nonetheless, sometimes it is required
  • Pick people wisely who will wear well
  • Make sure people understand what the commitment is
  • Don’t pick people who are too busy
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