Refresh Miami Start Up 101

Information in this presentation is based on general principles of law and is intended for information purposes only. Use of this presentation does not create an attorney-client or any other relationship between the speakers and the user. Neither Gunster nor the speakers make any claim as to the comprehensiveness or accuracy of the information.

Startup 101

RefreshMiami by

Gaida Zirkelbach, Esq. ([email protected])

and

Nicholas Robbins, Esq.([email protected])

GUNSTER – FLORIDA’S LAWYERS FOR BUSINESS


This presentation and related information have been prepared by This presentation and related information have been prepared by Gunster, Yoakley & Stewart, P.A. for information purposes only and Gunster, Yoakley & Stewart, P.A. for information purposes only and do not constitute advertising, a solicitation, or legal advice. Such do not constitute advertising, a solicitation, or legal advice. Such presentation, materials and information contained herein is not presentation, materials and information contained herein is not intended to create, and receipt thereof does not constitute formation intended to create, and receipt thereof does not constitute formation of, and attorney-client relationship. The presentation, materials and of, and attorney-client relationship. The presentation, materials and information should not be relied upon for any purpose without information should not be relied upon for any purpose without seeking legal advice from a licensed attorney. The information seeking legal advice from a licensed attorney. The information contained in this presentation and related course materials is contained in this presentation and related course materials is provided only as general information and may or may not reflect the provided only as general information and may or may not reflect the most current legal developments; accordingly, this information is not most current legal developments; accordingly, this information is not promised or guaranteed to be correct or complete. Gunster, promised or guaranteed to be correct or complete. Gunster, Yoakley & Stewart, P.A. expressly disclaims all liability in respect to Yoakley & Stewart, P.A. expressly disclaims all liability in respect to actions taken or not taken based on any or all the contents of this actions taken or not taken based on any or all the contents of this presentation or related course materials and information. presentation or related course materials and information.


I have an idea. Now what?


Birth of an Idea and the Birth of a Company

Is this idea my idea?

Who owns my idea?

Can I stop others from using my idea?

How can I get paid for my idea?


Choosing a Legal Structure

Limit liability, tax efficiency, corporate governance

Common types of entities:Sole Proprietorship Partnership Corporation Limited Liability Company

Where to organize – Florida v. Delaware


Protecting Your Idea

Confidentiality Agreements

Work for Hire / Assignment Agreements

Register and Protect Intellectual Property


Types of Intellectual Property

Copyrights

protect the expression of an idea (but not just an idea)

must be in fixed in tangible medium of expression

exclude others from reproducing, preparing derivative works from, distributing, performing publicly, or displaying publicly (with some exceptions, such as fair use)

exists upon creation – but registration with United States Copyright Office can provide additional legal rights

usually shown as: © Company Name, Year

examples: design of Coca-Cola bottle; text and images on a website describing a service



Trademarks

protect association of a company with its goods or services

prevent consumer confusion and others from benefiting from goodwill associated with your company’s products and services

usually shown as: Logo™ (as soon as claim rights) or Logo® (only after USPTO registers the mark)

examples: logo on Coca-Cola bottle; logo or slogan on a website associated with a service



Patents

protect ideas or inventions

exclude others from making, using, offering for sale, selling or importing

must be issued by the United States Patent and Trademark Office

must have utility; be novel; not obvious to an ordinary person at the time made; and thoroughly explained and documented

examples: shape of Coca-Cola bottle; computer software; novel service or product being sold on a website



Trade Secrets

Protect confidentiality of ideas and information

independent economic value from not being known by others

must take reasonable measures to protect secrecy

no registration requirement

examples: formula for Coca-Cola; source code


Why Protecting Your Idea Matters

Attracting investmentBuyoutExclusivityBarriers to EntryLicensing OpportunitiesJoint VenturesDefensive PurposesEstablish ExpertiseEstablish Brand Loyalty


I’ve got a company. Who can fund it?


Who are these Venture Capitalists?

Professional investors who manage a portfolio of growth companies (however, not looking to operate them).

Long-term outlook – 5-7 year investment horizon

Goal is to maximize return while limiting investment risk

Not lifestyle investors


Private Equity Performance Index

Investment Horizon Performance, 2005

What is Venture Capital?


LocalVCs46%

OutsideVCs54%

OutsideVCs51%

LocalVCs49%

LocalVCs12%

OutsideVCs88%

California Northeast Southeast

Comparison of Local Landscape

Sources: 2008 NVCA Yearbook Crossbow Ventures, Inc.

What is Venture Capital?


Valuation

Supply and Demand

Market Environment

- IPO Market- Public Market- M&A Market- Other VC Valuations

Deal Terms

Greater Demand from VC Community = Greater Upward Valuation Pressure

What is My Company Worth?


Source: DowJones VentureOne

Convertible Preferred

Convertible Participating

Preferred

Common Convertible Debt

Other0

20

40

60

80

100%

25.0%

66.9%

9.3% 4.7% 1.2%

Type of Securities Issued to Investors

What Does the Deal Look Like?


Key Deal Considerations

Economics - Valuation

Control- Board seat- Class vote on major corporate decisions- Investor rights

Valuation Protection- Liquidation Preferences 1-4 x- Anti-Dilution Price Protection- Dividends- Rights of First Refusal

Liquidity Protection- Redemption Rights- Registration Rights- Follow-Along and Drag-Along Rights

Type of Securities

Deal Structure- Common Stock- Convertible Note- Preferred Stock

What Does the Deal Look Like?


Art of The Successful VC Deal

1. Realistic Valuation

3. Proven Management

4. Strong Investors

5. Shared Vision

2. Correct Capital Assumptions

6. Trust

7. “Market” Term Sheet

8. Experienced Company Counsel

9. Experienced Investor Counsel

How Do We Get There?


I’m up and running. Now what?


Continue to Protect Your Idea

Relationships with Employees and Independent Contractors

Relationships with Vendors / Service Providers

Relationships with Customers and End-Users


Employees and Independent Contractors

Work for Hire / Assignment

Confidentiality

Non-Competition

Non-Solicitation


Vendors / Service Providers

Work for Hire / Assignment

Confidentiality

Non-Competition

Non-Solicitation

Licenses

Warranties

Liability


Customers / End Users

Service Agreement / License Agreement / Purchase Agreement / Terms of Use

Signed, browsewrap, clickwrap

Privacy Issues

Social Media = user generated content


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