Thursday, July 24, 2008
Guest Speaker Series: David Gardner
David Gardner, co-founder of the Motley Fool, invited the LaunchBox08 companies to the Fool Offices in Alexandria, Virginia on 7/8. David shared his guidelines for entrepreneurs and answered questions about the Motley Fool and its exciting new service, CAPS.
Four basic rules for entrepreneurs:
1. Do something that you love
David and his brother grew up with a passion for learning and teaching about the stock market, and they were fascinated by the basic concept that one can own a part of a company that provides great products and services. Their passion has provided the necessary fuel that propelled the Fool into the successful business that it is today.
2. Make sure it is needed
"Business is there to solve problems and/or create new possibilities. The best businesses do both," advises David. His maxim certainly applies to the Motley Fool, which was founded in a time when getting financial advice was expensive and time-consuming. The Fool brought an easy-to-use service to the internet that helped to fill the information void.
3. Do it differently
"Take an angle that people haven't seen before." David and his brother created their service with an entirely different approach by siding with the small investor and creating a lighthearted atmosphere that was drastically different from typical financial advisory firms. Entrepreneurs have the advantage in that they can find the superior business model, even if they are much smaller than the competition.
4. Be ready to evolve.
The ability to respond quickly to changes can make our break your business. In 2001, David and his brother decided to turn the business around from an ad-supported model to a premium services model. The change resulted in a huge rebound in revenues, and brought new levels of success to the Fool.
Four basic rules for entrepreneurs:
1. Do something that you love
David and his brother grew up with a passion for learning and teaching about the stock market, and they were fascinated by the basic concept that one can own a part of a company that provides great products and services. Their passion has provided the necessary fuel that propelled the Fool into the successful business that it is today.
2. Make sure it is needed
"Business is there to solve problems and/or create new possibilities. The best businesses do both," advises David. His maxim certainly applies to the Motley Fool, which was founded in a time when getting financial advice was expensive and time-consuming. The Fool brought an easy-to-use service to the internet that helped to fill the information void.
3. Do it differently
"Take an angle that people haven't seen before." David and his brother created their service with an entirely different approach by siding with the small investor and creating a lighthearted atmosphere that was drastically different from typical financial advisory firms. Entrepreneurs have the advantage in that they can find the superior business model, even if they are much smaller than the competition.
4. Be ready to evolve.
The ability to respond quickly to changes can make our break your business. In 2001, David and his brother decided to turn the business around from an ad-supported model to a premium services model. The change resulted in a huge rebound in revenues, and brought new levels of success to the Fool.
Thursday, July 17, 2008
Guest Speaker Series: Mike Lincoln
On 7/2, Mike Lincoln of Cooley, Godward & Kronish stopped by the LaunchBoxDigital offices to offer his advice about preparing to raise venture capital and avoiding costly legal situations.
Five things that matter when you raise money
- Valuation: Valuation is the overall bottom line about the estimated worth of your company before and after raising a round of financing. This number is important, of course, but entrepreneurs often look at the figure with tunnel vision and forget about other important values that can have a big impact. For this reason, Mike recommends that chemistry between investors and founders should be something that is a high priority issue.
- Vesting: The subject of vesting matters – and it is negotiable. Mike encourages founders to take a look at the IRS Form 83b election, which can prevent a "double-dipping" tax on stocks vesting when dividends are issued to founders. Almost all Series A termsheets allow the venture capital firm to retain founders' stock in the event that they bail out.
- Liquidity preference: The liquidation preference provision basically sets out the hierarchy of who gets paid first. The venture capital firm's stock will be higher on the food chain than the founders, and the amount will typically be the amount invested by the firm. Several components of this provision are generally negotiable, such as the participation right, blocking rights, and board composition.
- Drag-along provision: This contract provision requires the forced sale of a company if a certain threshold amount of stockholders votes in favor of the sale. Some key points that are usually negotiable include what parties can participate, what the threshold amount is (e.g. 50% of preferred, etc), and the minimum acceptable price.
Five things that matter when you raise money
- Valuation: Valuation is the overall bottom line about the estimated worth of your company before and after raising a round of financing. This number is important, of course, but entrepreneurs often look at the figure with tunnel vision and forget about other important values that can have a big impact. For this reason, Mike recommends that chemistry between investors and founders should be something that is a high priority issue.
- Vesting: The subject of vesting matters – and it is negotiable. Mike encourages founders to take a look at the IRS Form 83b election, which can prevent a "double-dipping" tax on stocks vesting when dividends are issued to founders. Almost all Series A termsheets allow the venture capital firm to retain founders' stock in the event that they bail out.
- Liquidity preference: The liquidation preference provision basically sets out the hierarchy of who gets paid first. The venture capital firm's stock will be higher on the food chain than the founders, and the amount will typically be the amount invested by the firm. Several components of this provision are generally negotiable, such as the participation right, blocking rights, and board composition.
- Drag-along provision: This contract provision requires the forced sale of a company if a certain threshold amount of stockholders votes in favor of the sale. Some key points that are usually negotiable include what parties can participate, what the threshold amount is (e.g. 50% of preferred, etc), and the minimum acceptable price.
