Ann Arbor.com has a nice article on the Tech Brewery and even mentions a certain “tech-oriented law firm, which offers free advice to others in the Tech Brewery.”  You can read the whole article here.

–Matt

The Great Lakes Innovation and Technology Report (GLITR) is a daily read around these parts.  Matt Roush has covered the tech world from a Michigan perspective for almost ten years now.  That’s one of the reasons why we’re all very honored that our firm is featured in this GLITR article highlighting our commitment to working with technology startup companies.  From the article:

Added [Don] Baker: “We’ve made a commitment to working with startups, because we felt like in addition to the legal part, we had skill sets and network relationships that could be helpful to folks that were trying to get something started.”

[Randy] Safford said tech startups “have a lot of special needs — a high intensity need for legal services early in their lives. They have to plan their intellectual property strategy, go get patents, plan your fundraising, go get money, all o fwhich is extremely time consuming.”

The article also highlights our startup legal products.

–Matt

Our very own Don Baker is leading a panel discussion on best practices for startups and early-stage companies in raising investment capital.  Most entrepreneurs find capital fundraising to be daunting and a huge strain on the already difficult task of launching a new product or service.  Even when potential funding sources are identified, there can still be painful negotiations concerning valuation, price, and terms.  The whole process, however, can be made streamlined and accelerated by developing and following a capital fundraising plan.  Don has developed a program to help entrepreneurs develop just such a plan.

The panel discussion will take place on February 9, 2010 at 6:00 p.m.  South Oakland County location to be determined.  The cost $20 in advance and free for students registered by January 30th.  After January 30^th, the cost is $30 and $5, respectively.

All participants can get a full copy of Don’s article on the topic — the introduction for which can be found here.

The event contact is Andrea Reese at andrea.reese@yahoo.com and (586) 945-3306.

–Matt

Last year, early-stage venture firm Y Combinator “open sourced” the legal documents they provide to their startups to use with investors after Y Combinator’s seed funding.  The documents can be found here.  TechStars followed by releasing the legal documents they use as a starting point for seed-stage financing for their companies.  Those documents can be found here.  In both cases, the goal is to help young startups avoid at least some of the legal costs associated with first-round financing by simplifying, and hopefully standardizing, the negotiating process.

A client now points me to this TechCrunch article on The Funded’s release of its Ideal First Round Term Sheet for venture rounds (available here).  Like Y Combinator and TechStart, the goal is to reduce legal fees (which average $50,000 or more for a venture round) but also to protect founders by providing them with standard, founder-friendly deal terms for venture rounds.

–Matt

Putting a valuation on an early-stage company can be difficult, particularly when the company is pre-revenue and still developing its product or technology.  Nevertheless, because most early-stage investment (known as “seed” funding) is in the form of equity, the issue has to be addressed.  The company’s founders and the potential investors then go through an awkward dance where management says the company is worth X and the seed-investors say the company is worth Y (a number you can be sure is much less than X).  The parties will either come to an agreement or they won’t.  The worst situation is where an agreement is reached but one side (almost always the founders) feels that they’ve been taken advantage of.  This can lead to an acrimonious relationship between management and investors and hamstring the company in soliciting future investments.

In some cases, the founders and seed-investors choose to avoid the difficult issue of valuation altogether by agreeing to a convertible debt structure in which the valuation is determined at a future date; such as the first round of financing when valuation is less difficult to fairly determine.  Under this approach (and there are others), the investors receive a convertible promissory note in return for their investment.  The principal and interest on the note then convert to stock based upon the valuation established for the company on the Series A round of financing.  Because the seed investors undertook more risk than the Series A investors, the convertible debt is usually supplemented with so-called “warrant coverage”.  (A “warrant” is a stock option for investors.)  The warrant is usually exercisable for a number of shares of the Series A preferred stock (the number of shares being tied to a percentage of the face amount of the convertible note), on the same terms as the Series A investors, and at a favorable strike price.

–Matt