Business 16 Stanford Department of Continuing Education Class # 3, 10/12/09 - PowerPoint PPT Presentation

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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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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

Business 16Stanford Department of Continuing EducationClass # 3, 10/12/09

Who needs help?


Who needs help

Who needs help?

  • Everybody


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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