Entrepreneurs Through the Eyes of a Lawyer (Matt McKinney)

I’m a lawyer based in Boulder.  I’ve represented tech companies in the Boulder entrepreneurial community for almost 10 years.  This site has many blog posts on why Boulder is special, covering various perspectives.  I wanted to share a couple observations from my vantage point as an adviser to tech companies.

I suppose I’m an entrepreneur in some sense of the word – I started my own law firm about 2 years ago – Stack McKinney Law Group – with another lawyer, Michael Stack.  However, in the Boulder community, I use term “entrepreneur” sparingly and sheepishly in regards to myself.  Forming a law firm is easy.  Getting the law degree is the hard part.  And that’s not particularly hard with the roughly 200 law schools in the United States.  After the degree, you form an LLC and from there you really just need a phone, a computer, and an Internet connection.  Voila.  A law firm is born.

I suppose that’s a little bit over-simplified.  I did take a risk, albeit a fairly calculated one with minimal downside.  I quit a job.  I put up a bit of my family’s saving.  I took a leap of faith that I could sell services, create a brand, gain clients, and ultimately get paid.  But compared to the hearty souls I’m proud to call my clients, that was a walk in the park.  I had no product development cycle.  I waited 45 days to get revenue.   I didn’t have to worry about protecting IP.  I share this background because every so often a lawyer, or even a non-lawyer, will say “wow, you started your own firm – that sure was risky.”  And I say, “thanks, I guess so.”  But I think “what I did was nothing compared to the risk and sacrifice of my clients.”  This post is a small shout out of admiration and respect to those in the community who really put themselves out there to chase a dream or solve a problem.

The stereotypical tech entrepreneur is the college drop out (see M. Zuckerberg) or recent college grad (see E. Musk) hopped up on Cheetos and Red Bull in a dark basement or garage.   Nothing to lose, but everything to gain.  Reality, at least in my experience around here, is different.  Sure, I’ve seen the stereotype in living color, but I’ve also seen the 2 middle aged family men who gave up comfortable middle management careers to start a software company, bootstrap it themselves, putting retirement and college savings in jeopardy, and finding themselves running a 25 person software company 5 years later.    I know at least 2 tech companies started by married couples with kids.  They put it all on the line – savings, credit cards, mortgages.  Surely there were heartfelt conversations with spouses.  They took the plunge.  Then the newly married couple who threw caution into the wind and jumped into the entrepreneurial world feet first just weeks after getting married to start their software company.  In other words, these entrepreneurs had everything to lose.

So I’m constantly humbled by the risks entrepreneurs take and the choices they make.  Many do, in fact, have lots to lose, in term of money, time and family.

While risk-taking and tough decision making define all entrepreneurs, I love seeing their differences.  At least in the greater Boulder area, and in my experience, entrepreneurship is not limited or confined by stereotypes or bias: age, gender, ethnicity, country of origin, religion seem to play no role in the greater entrepreneurial community in and around Boulder.  What does play a role across all of these founders and entrepreneurs are the innate or learned qualities you’ve surely read elsewhere on this blog: a willingness to identify and fix a problem, and high risk threshold, a visceral perseverance to keep going in the face of and even after defeat.  While I’ll be the first to admit that the community could always be more diverse by many measures, I’m impressed by the general inclusiveness of the community. So to the extent I’m an entrepreneur in my own, little way, I’m proud to share that moniker with the truly imaginative, visionary, bighearted founders and entrepreneurs who make this community the wonderful place that it is.

Matt McKinney is a Partner at Stack McKinney Law Group.

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Bringing Angel Investing Out of the Shadows (Dave Mangum)

Silicon Flatirons is pleased to announce the release of its new report on Angel investing, available for download here.

The Silicon Flatirons Entrepreneurship Initiative put on dozens of great events this past school year, covering a wealth of topics and bringing, in aggregate, thousands of people to campus to better connect the entrepreneurial community to the CU-Boulder community.  One of this year’s highlights has been our work on illuminating the world of angel investing.  In addition to our Mile High Entrepreneurship conference on angel investing with Jeff Clavier, this past winter we conducted a private roundtable discussion on issues surrounding angel investing.  The fruits of that discussion, coupled with additional research, led to the recent publication of our report on angel investing.  Our report explores a handful of important issues:

• The Angel Investing Paradox
• Investments are made when uncertainty, information asymmetry, and the potential for agency costs are arguably highest, yet most angels obtain lighter and fewer contractual protections than do venture capitalists.  Roundtable discussion, however, suggests that a lack of such investor protections in an angel investment contract may in fact be evidence of unsophisticated investor behavior.
• Convertible Debt
• The use of convertible debt in angel deals is a topic spurring considerable investor interest with widely divergent opinions.  Some favor it, some do not, but all agree that it’s useful in at least one context: convertible debt enables parties to punt on the question of company valuation and quickly provide the company with capital.
• The Bridge to Nowhere Problem
• Angel investing in Colorado faces a “bridge to nowhere” problem: investing becomes riskier as the scarcity of Colorado-based VC funds means that more Colorado startups either fail or move to the location of the out-of-state VC that funds them.  Colorado may attract a lot of VC money, but some maintain that we need more Colorado-based VCs.
• Unreliable Data About Angel Investing as an Asset Class
• Little reliable public information exists about how angels impact the operational, strategic, and interpersonal aspects of the startup companies that they fund, and about how angel investments perform as an asset class.
• The Potential for Better Information Sharing
• Better information sharing among Colorado angels and would-be angels strikes many Roundtable participants as a useful way to improve the broader startup ecosystem in Colorado.

Although certain aspects of angel investing – in particular, finding ways to better measure the performance of angel investing as an asset class – merit further inquiry and research, the issues listed above have sparked many conversations among Colorado entrepreneurs and investors.  If you have thoughts of your own to share, please feel free to engage on this site or say hello at any of our upcoming events.

Dave Mangum is a Fellow at Silicon Flatirons Center and Executive Director of Startup Colorado. He hopes you like the photo of Angel Arch.

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Help Wanted: What Is It To Be the Nation’s Leading Public University for Entrepreneurship?

If you’ve heard me speak publicly over the last six months, it is likely you’ve heard my goal for CU-Boulder:  to be the nation’s leading public university for entrepreneurship.

It is time to create a blueprint for achieving this objective.  Your feedback on what needs to be in the blueprint is invited below.  I’ll get back to this topic in a moment.  Hang in with me for a bit.  I’m a professor.  I’ll eventually get to the point.

This is the time of the year when students on campus face exams.  It is also my test season.  The Silicon Flatirons Center Entrepreneurship Initiative Advisory Board’s twice annual meetings provide an accountability event.  It is a rambunctious board stocked with entrepreneurs, VCs, attorneys, and strong wills.  The Board’s candor and intellectual firepower gets the adrenaline pumping like a final exam.  Most important, there is usually a certain truth serum – for better and worse – associated with the Board meeting.  I sweat it.  I learn a ton.  And I love it.  The Board has been one the principle architects for our Entrepreneurship Initiative.

The Advisory Board met this week.  It delivered, as usual.  In particular, two items around the spring meeting caught my attention:

First, the numbers for the past year (June ’11 thru May ’12) are notable.  Here is the 2011-12 SFC Entrepreneurship Initiative by the numbers (assuming that our two remaining May events are not a disaster):

• 48 public-facing events presented or co-presented
• In-person event attendance = 6,648
• Average attendee feedback rating = 1.64 (1 = outstanding; 2 = valuable; 3 = mediocre; 4 = poor)
• 16 Clients served by Entrepreneurial Law Clinic; the ELC also supported TechStars teams during Summer term 2011 (tip of the hat to Mike Platt who leads the Summer ELC)
• Six outreach presentations by the ELC to micro-development entities such as Mi Casa and Centro San Juan, reaching over 200 individuals

In perspective, the three year trend is encouraging:

And note that this is only a portion of entrepreneurship activity across CU.   Surrounding the campus is a Front Range region that has long been a world-class place to start a business.  And this startup scene is increasingly propelled by an entrepreneurial university. CU just claimed the national championship at the Venture Capital Investment Competition. Indeed, there is a ton of entrepreneurial activity across the CU-Boulder campus, including work by the Deming Center, ATLAS, Tech Transfer Office, e-Space, CESR, Center for Music, CSUAC (in computer science), and others.  Not only do each of these organizations have interesting projects, but we frequently collaborate, including presentation of the New Venture Challenge, CU’s cross-campus entrepreneurship championships.

Second, related to CU becoming an entrepreneurial university, our Board chewed over the following question:  what would it look like for CU-Boulder to become the leading public university for entrepreneurship?  (See, I told you that I’d eventually get back to the point.)

This is an explosive question.  It forces us to think hard about what entrepreneurship is, how to define and measure it, and what the role of universities should be.  Your input is welcome.  The question can be addressed from at least three dimensions.  One, what factors genuinely matter because we think the cut to the core of the “leading public university for entrepreneurship”?  Two, what factors affect external rankings and should be focused upon, knowing that prospective students, employers, and others look to those rankings?  And three, what is going on at competitor public universities, including Texas, Washington, Michigan, North Carolina, and Cal-Berkeley?  What is CU-Boulder doing that outpaces or, in contrast, lags behind these other institutions?

Please leave your comments and suggestions.  I’ll then synthesize comments, feedback from our Board meeting, and my own thinking into a Blueprint strategy for CU-Boulder, which I’ll post here in the coming weeks.   I look forward to your ideas and insights.

Brad Bernthal is an Associate Professor at the University of Colorado Law School and Director of the Silicon Flatirons Entrepreneurship Initiative.

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Warren Buffett Gets in the Elevator with You… (Cindy Lindsay)

Entrepreneurs need to understand the importance of having an elevator pitch.  The ability to clearly and concisely explain your business and the opportunity is provides is a huge asset when meeting new people – especially if they are potential employees, investors and/or can introduce you to resources.

For a good laugh, check out “The World’s Worst Elevator Pitch”: http://elevatorspeech.com/index.cfm?fuseaction=home.

Here are a couple of key points for a good elevator pitch:

1. What is unique about your business?
• Why would someone care – what is the problem you are solving?
• How big is the market for your product(s)/service(s)?
2. What does your company do?
• What product(s)/service(s) do you make or offer?
• Who are your customers and how do you sell to them?
• What is your current status?
3. What is the value proposition – for your customers and investors?

Make the Pitch Interesting:

1. Tell a story – give interesting examples to explain the “so what“
2. Make it relevant to your listener
3. Get to the point quickly and clearly - avoid jargon at all costs

Now, check out a really good pitch:  http://www.youtube.com/watch?v=qT7WzDxwe5c.

Now, what happens after you do your great pitch to Warren?  He invites you to meet with him so he can hear more!  To create a really great presentation check out Guy Kawasaki’s - The 10/20/30 Rule of PowerPoint:   http://blog.guykawasaki.com/2005/12/the_102030_rule.html#axzz0j43SNzRs.

Mr. Kawasaki is the former chief evangelist for Apple.  Here is the Cliffs Notes version for his ‘rules’:  a PowerPoint presentation should have ten slides, last no more than twenty minutes and contain no font smaller than thirty points.  For an interesting presentation (that doesn’t follow the Kawasaki rules) and isn’t an investor pitch; but is fabulous at conveying the message, check out: http://www.slideshare.net/jbrenman/thirst?src=embed.

Cindy Lindsay is a strategic consultant at http://www.flsassociates.com/. 

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What Does It Take to Start a Startup? (Cindy Lindsay)

Taking a company from ‘gleam in the eye’ idea stage to fully functional company is a huge endeavor.  Here are a few things to have in place before you start:

1.    Don’t start unless you are obsessed and doing something you truly love.  It only gets harder and, sometimes, the love of it is the only thing that will keep you going.

2.    Focus on what you know and surround yourself with people who are smarter than you – employees, mentors, investors, etc.

3.    Concentrate on building the company.  If you are constantly thinking about your exit strategy, the company itself is not your obsession.

4.    Determine your business model early.  If you can’t clearly see how to make money, you will not be able to make your company successful.

5.    Keep things simple – create a flat organization, well-understood responsibilities, and clear goals & timelines.

6.    Hire people who have great skills/experience, also fit the company culture and will love working with you – make the job fun for employees.  A startup is a very stressful environment.  Look for opportunities to blow off the steam and build a sense of team at the same time.

7.    Take care of yourself.  You are the visionary and leader for the company – a VERY valuable asset.

Cindy Lindsay is a strategic consultant at http://www.flsassociates.com/. 

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